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Financial Institution Letter
Notice of Proposed Rulemaking to Impose a Long-Term Debt Requirement for Certain Insured Depository Institutions


The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB), and the Office of the Comptroller of the Currency jointly issued a proposal to require insured depository institutions (IDIs) that are not consolidated subsidiaries of U.S. global systemically important banks (GSIBs) and that (i) have at least $100 billion in consolidated assets or (ii) are affiliated with IDIs that have $100 billion in consolidated assets (covered IDIs) to have outstanding a minimum amount of eligible long-term debt (LTD). In addition to the IDI-level requirement, the FRB is proposing to require the covered entities of such IDIs to also maintain outstanding a prescribed amount of LTD and to comply with specified clean holding company requirements akin to those required of GSIBs.

Statement of Applicability: IDIs that are not consolidated subsidiaries of U.S. GSIBs and that (i) have at least $100 billion in consolidated assets or (ii) are affiliated with IDIs that have $100 billion in consolidated assets.


  • Under the proposal, covered IDIs that are consolidated subsidiaries of certain bank holding companies and savings and loan holding companies (covered entities) would be required to issue LTD internally to their covered entity parents, or another entity that consolidates the covered IDI. Covered IDIs that are not consolidated subsidiaries of covered entities would be permitted to issue their LTD to affiliates or to non-affiliates.
  • The calibration of LTD under the proposed rule would be based on the covered IDI’s total risk-weighted assets; total leverage exposure, if it is required to maintain a minimum supplementary leverage ratio; and average total consolidated assets.
  • Only debt instruments with certain features (related to, for example, subordination, term, and acceleration) that make them better able to absorb losses in a resolution proceeding or provide stable funding would qualify as eligible LTD under the proposal.
  • The proposal would improve the resolvability of covered entities and covered IDIs by ensuring that LTD would be available to absorb losses ahead of the depositor class in the event of a covered entity’s or covered IDI’s failure. By augmenting loss-absorbing capacity, LTD would provide the FDIC a broader range of options for resolving a covered IDI.
  • The proposal would reduce the costs to the Deposit Insurance Fund by reducing the risk of loss to depositors, and may decrease the likelihood and speed of deposit withdrawals by uninsured depositors in the event of stress, which would mitigate financial stability and contagion risks.
  • The LTD requirement would come into full effect three years after the date on which a covered IDI first becomes subject to the proposed rule. The full amount of LTD covered IDIs would be required to hold, however, would be phased in over this three-year period to reduce the potential for market disruption.
  • Comments on the proposal are due by November 30, 2023.
Last Updated: August 29, 2023