Major

Economics

Second Major

Political Science

Minor(s)

Leadership Studies

Advisor

Eichacker, Nina Q

Advisor Department

Economics

Date

5-2023

Keywords

Financial Regulation; Too Big To Fail; Risk Management

Abstract

In the fallout of the 2008 Global Financial Crisis, governments were tasked in aiding banks that were bloated by troubled assets and deeply integrated into financial markets, effectively described as “Too Big To Fail.” Moving forward following the crisis, governments were obligated to rebuild a system that would prevent the need for financial industry bailouts at such a massive scale and scope. One specific regulation introduced at the international level posed a set of regulations requiring that banks hold specific amounts of equity and debt instruments earmarked to absorb future financial losses, allowing for either continued function or limited resolution proceedings. These required holdings are known as Total Loss Absorbing Capacity (TLAC) instruments. This project will investigate the United States’s regulatory implementation of TLAC and resultant Long Term Debt (LTD) standards on a domestic scale. It will explore the initial international ruling from the Financial Stability Board, as well as the U.S.’s proposed and final TLAC rulings. In doing so, it will examine the U.S.’s regulatory strategy, including delineations from international policy, consideration of U.S.-specific firm requirements, and overarching U.S. attitudes towards resolution strategies within the banking sector. In addition, it will consider the effectiveness of U.S. implementation by examining firm level compliance data with TLAC and LTD holdings in recent years. This research finds that the U.S. took a tailored approach in implementing these standards, focusing on the complex nature of large firms and a desired Single Point of Entry resolution strategy.

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