At an October 30^th open meeting, the Board of Governors of the Federal Reserve System (Federal Reserve) approved a proposed rule (Proposed Rule) that would impose Total Loss Absorbing Capacity (TLAC) and long-term debt (LTD) requirements for globally significant banks (G-SIBs). In so doing, it anticipated by ten days the Financial Stability Board (FSB), which finalized its template for TLAC on November 9^th. Although the Proposed Rule is consistent with important aspects of the FSB’s TLAC requirements, its LTD requirement is more onerous. In addition, the Proposed Rule would impose new “clean holding company” requirements on institutions subject to the rule, which would limit those companies’ business activities in a wholly new manner.
From the Proposed Rule, two principles are now clear:

• For a G-SIB, there is no higher regulatory priority than orderly resolution, and therefore, going forward, G-SIB balance sheets must be designed with this ultimate priority in mind.
• The Federal Reserve and other global bank regulators now believe that the international operations of G-SIBs must be supported in a crisis only by the G-SIB itself, and not host country stakeholders.S. operations of foreign G-SIBs are to become solely the responsibility of their foreign parents; similarly, under non-U.S regulatory regimes, the non-U.S. operations of U.S. G-SIBs should be assumed to become solely their U.S. parents’ responsibility.

The Proposed Rule is one of the most important parts of the revolution in bank regulation wrought by the Financial Crisis. Although the Proposed Rule sets forth the principal features of its new requirements, it leaves many details, and some fundamental questions – such as the extent of pre-positioning of domestic internal TLAC at material subsidiaries – open to public comment. Because of the significance of the proposal, one hopes that the Federal Reserve will receive, and give close consideration to, robust comments from all affected parties before the comment period ends on February 1, 2016.

 I. Approaches to G-SIB Resolution
To understand the Proposed Rule, it is first necessary to understand current approaches to systemically significant bank resolution. After the Financial Crisis, regulators globally have worked to create a structure under which losses at a failed G-SIB will not be borne by taxpayers and under which creditors will not be bailed out.
The structure that has been selected involves a recapitalization approach under which a failed firm’s operating subsidiaries (operating bank subsidiary, operating broker-dealer subsidiary, etc.) remain solvent and functioning, so that significant enterprise value may be maintained notwithstanding the firm’s failure. Because, in a failure, a G-SIB’s equity will have been wiped out, regulators have determined that losses must be imposed on other parties in order to promote a successful recapitalization. Given the issues raised by depositors’ shouldering losses, long-term debtholders have become seen as key to the solution. In the U.S., it is contemplated that loss absorption will be attained by converting the long-term debt instruments of a failed G-SIB into the equity of a “bridge” G-SIB organized by the FDIC under the Orderly Liquidation Authority, at pennies on the dollar.
In the United States and some European countries, the preferred strategy of implementing G-SIB resolution is called “Single Point of Entry” (SPOE). Under it, only the top-tier company in a consolidated banking group is put into resolution – for U.S. and some European institutions, the holding company (BHC) for the operating bank and nonbank subsidiaries. However, a number of significant non-U.S. banking organizations with global operations have chosen an alternative, “Multiple Point of Entry” strategy (MPOE). Under it, resolution is applied to multiple subsidiaries in multiple jurisdictions, since the G-SIBs that have selected the MPOE strategy tend to operate through separately capitalized subsidiaries throughout the world. Regardless of whether SPOE or MPOE is used, for a recapitalization in resolution to succeed, it is now thought to be critical that there be enough loss-absorbing capacity, including long-term debt, available prior to failure.
The concept of TLAC as key to the resolution process has thus been discussed by bank regulators for some time. At the St. Petersburg Summit in September 2013, the G20 leaders called on the FSB to “develop proposals on the adequacy of global systemically important financial institutions’ loss-absorbing capacity when they fail.”[1] As a result, over the past two years, the FSB has been debating TLAC and LTD requirements, and in 2014, it published draft TLAC principles and a draft TLAC term sheet.[2]

II. Proposed Rule: U.S. Covered BHCs
The Proposed Rule applies both to U.S. domestic G-SIBs and to certain U.S. holding companies (IHCs) controlled by non-U.S. G-SIBs. We will first discuss the Proposed Rule as it relates to U.S. G-SIBs. Currently, there are eight: J.P. Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, State Street, and BNY Mellon. Notably, no regional banks are included among these firms, since the defining nature of a G-SIB is global systemic importance.

A. General External TLAC and LTD Requirements
For the U.S. G-SIBs, referred to as “Covered BHCs” in the Proposed Rule, there would be two balance sheet requirements, one relating to TLAC, and one relating to LTD. For Covered BHCs, these requirements are “external” – that is, the instruments must be issued by the Covered BHC to third-party investors, so that, in the event of failure, the Covered BHC’s losses would be transferred to those investors.
Under the Proposed Rule’s external TLAC requirement, a Covered BHC would be required to maintain outstanding an amount of “eligible external TLAC” of at least the greater of:

• 18% of total risk-weighted assets, and

• 5% of total leverage exposure.

These requirements would be phased in, becoming fully effective only on January 1, 2022. From January 1, 2019 to December 31, 2021, the risk-weighted assets requirement would be only 16% of total risk-weighted assets, but the leverage exposure requirement would be fully in place.
Under the external LTD requirement, effective January 1, 2019, a Covered BHC would be required to maintain outstanding an amount of “eligible external long-term debt” of at least the greater of:

• The sum of 6% plus the percentage of any G-SIB surcharge under the Federal Reserve’s capital rules, times the Covered BHC’s total risk-weighted assets; and

• 5% of total leverage exposure.

Given the estimates of maximum G-SIB surcharges by the Federal Reserve, the external LTD requirement could total out at as much as 10.5% of risk-weighted assets.[3]

B. Significance of Buffer Requirements
The general requirements described above do not tell the whole story, however. Covered BHCs would also be subject to an external TLAC “buffer,” under which they would be limited in their ability to pay dividends and make bonus payments if their external eligible TLAC fell below the buffer. No Covered BHC will find such limitations palatable, and therefore the TLAC buffer should become the effective TLAC requirement for Covered BHCs.
The TLAC buffer is roughly analogous, and is applied in a manner similar, to the capital conservation buffer in the Federal Reserve’s Regulation Q. As proposed, the TLAC buffer would be equal to the sum of 2.5 percent plus the applicable G-SIB surcharge under method 1 of the Federal Reserve’s G-SIB surcharge rule, plus any countercyclical capital buffer.
In order to determine whether the “buffer” requirement was met, a Covered BHC would be required to calculate an “external TLAC buffer level.” The Covered BHC would do so by subtracting from its common equity Tier 1 capital ratio, expressed as a percentage, the greater of zero percent and the following percentage:

• the risk-weighted assets percentage component of the external TLAC requirement, minus its additional Tier 1 capital ratio, expressed as a percentage, minus the risk-weighted assets percentage amount of its eligible external LTD.

The Federal Reserve gave the following example:

• A covered BHC has a common equity Tier 1 capital ratio of 10 percent, an additional Tier 1 capital ratio of 2 percent, and an eligible external LTD amount equal to 8 percent of risk-weighted assets. It is subject to the 18 percent external TLAC requirement.[4] The Covered BHC’s external TLAC buffer is 5 percent of risk-weighted assets, as it is subject to a 2.5 percent G-SIB surcharge but not any countercyclical capital buffer.

In this example, the covered BHC has met its TLAC requirement, because it has a total TLAC amount of 20 percent of risk-weighted assets (10% + 2% + 8%), which is greater than 18 percent. However, the covered BHC would be subject to restrictions on dividends and bonus payments, because its external TLAC buffer level would be lower than the external TLAC buffer of 5%: 10% – (18% – 2% – 8%) = 2%.
The restrictions on dividends and bonus payments would disappear only in this example when the Covered BHC had additional TLAC of more than 3 percent of risk-weighted assets – so that in this example, the buffer requirement effectively results in a TLAC requirement of 23 percent of total risk-weighted assets. And in this example, the Covered BHC met its minimum common equity Tier 1 capital requirement, including the G-SIB surcharge.
The Federal Reserve justified the TLAC buffer on the grounds that it would provide “covered BHCs with incentives to hold sufficient capital to reduce the risk that their eligible external TLAC would fall below the minimum external TLAC requirement during a period of financial stress.”[5] On the example given, the buffer provides significant assurance that the minimum external TLAC requirement would not be breached, since losses at the Covered BHC would need to deplete its TLAC by over 20% (from 23% of risk-weighted assets to below 18%).

C. Definitions of External TLAC and LTD
For a Covered BHC, “Eligible External TLAC” is defined as the sum of:

• Tier 1 regulatory capital issued directly by the Covered BHC, and

• Eligible External LTD

The Proposed Rule defines “Eligible External LTD” as debt that is issued directly by the Covered BHC, is unsecured and not guaranteed by the covered BHC or a subsidiary of the covered BHC (or subject to any other credit enhancement), is “plain vanilla,” and is governed by U.S. law. As a result, both senior and subordinated debt instruments, including subordinated debt qualifying as Tier 2 capital, may count as Eligible External LTD and therefore as Eligible External TLAC.[6]
The “plain vanilla” requirement is intended to ensure that the Eligible External LTD can be used effectively to absorb losses in resolution by prohibiting exotic features that could diminish the prospects for orderly resolution. In addition, the Federal Reserve stated its view that “plain vanilla” instruments have a definite value that can be quickly determined in resolution.
The requirement would render ineligible the following types of debt instruments:

• debt instruments with credit-sensitive features;

• debt instruments that included a contractual provision for conversion into or exchange for equity in the Covered BHC (since this would result in more equity to be depleted on a failure); and

• debt instruments that contained acceleration provisions other than those occurring on one or more dates specified in the instrument, those occurring on insolvency; or those occurring on a failure to make a payment on the instrument when due.

In addition, a “plain vanilla” instrument could not include a “structured note,” which the Proposed Rule defines as a debt instrument that:

• has a principal amount, redemption amount, or stated maturity that is subject to reduction based on the performance on any asset, entity, index, or embedded derivative or similar embedded feature;

• has an embedded derivative or similar embedded feature that is linked to one or more equity securities, commodities, assets, or entities;

• does not specify a minimum principal amount due upon acceleration or early termination; or

• is not classified as debt under U.S. generally accepted accounting principles.

Structured notes would not, however, include otherwise qualifying instruments denominated in currencies other than dollars, or otherwise qualifying instruments whose interest payments were linked to “an interest rate index,” such as a floating rate note linked to LIBOR; those instruments could be Eligible External LTD.
Eligible External LTD with a remaining maturity of between one and two years would be subject to a 50 percent haircut for purposes of the External LTD requirement, but it would continue to count at full value for purposes of the External TLAC requirement. Eligible External LTD with a remaining maturity of less than one year would not count towards either the External LTD or the External TLAC requirement.
Eligible External LTD could contain a holder “put” right, subject to the foregoing remaining maturity provisions; however, Covered BHCs would be prohibited from redeeming or repurchasing Eligible External LTD prior to its stated maturity date without obtaining prior Federal Reserve approval if redemption or repurchase would result in a breach of the external LTD requirement.

D. Disclosure Requirements
Under the Proposed Rule, Covered BHCs would be required to disclose publicly a description of the financial consequences to unsecured debtholders of the Covered BHC’s entry into a SPOE resolution proceeding, and such a description would be required to be disclosed in the offering documents for all Eligible External LTD.   The Federal Reserve also stated that it intends to propose for comment a requirement that Covered BHCs and Covered IHCs report publicly their amounts of Eligible TLAC and LTD on a regular basis.

III.       Proposed Rule: Covered IHC Subsidiaries of Non-U.S. Banks
The Proposed Rule also applies to IHC subsidiaries of certain non-U.S. banks. Such “Covered IHCs” are defined as any U.S. intermediate holding company that is required to be formed under the Federal Reserve’s enhanced prudential standards rule, and is controlled by a non-U.S. bank that would be designated as a G-SIB under either the Basel Committee’s or the Federal Reserve’s G-SIB assessment methodology.
The Proposed Rule would therefore require each top-tier non-U.S. bank that controls a U.S. intermediate holding company to notify the Federal Reserve by January 1^st of each year whether its home country has adopted standards consistent with the Basel Committee methodology, whether it prepares or reports the information used by that methodology, and whether it has determined that it is a G-SIB under that methodology.
Because the threshold for the Federal Reserve’s intermediate holding company requirement is currently $50 billion in total consolidated U.S. non-branch/agency assets in the United States, a “Covered IHC” could have as little as $50 billion in total consolidated assets and be subject to the rule, although certain IHCs will be substantially larger.

A. General Internal TLAC and LTD Requirements
Covered IHCs would not have external TLAC/LTD requirements, but rather internal ones – that is, the instruments would be required to be issued internally from the Covered IHC to its non-U.S. parent.
Unlike the “Covered BHC” requirements, the amount of internal TLAC that would be required to be maintained would vary among Covered IHCs, depending on whether the non-U.S. G-SIB parent had an SPOE or MPOE resolution strategy.
If the non-U.S. G-SIB parent had an SPOE resolution strategy, then the internal TLAC requirement would be to maintain Eligible Internal TLAC of at least the greater of:

• 16% of the Covered IHC’s total risk-weighted assets; and

• 8% of the Covered IHC’s average total consolidated assets, as computed for the IHC’s Tier 1 leverage ratio; and

• for covered IHCs with total consolidated assets of $250 billion or more or on-balance-sheet foreign exposure of $10 billion or more, 6% of the Covered IHC’s total leverage exposure.

If the non-U.S. G-SIB parent had an MPOE resolution strategy, the requirement would be Eligible Internal TLAC of at least the greater of:

• 18% of the Covered IHC’s total risk-weighted assets; and

• 9% of the Covered IHC’s average total consolidated assets, as computed for the IHC’s Tier 1 leverage ratio; and

• for covered IHCs with total consolidated assets of $250 billion or more or on-balance-sheet foreign exposure of $10 billion or more, 6.75% of the Covered IHC’s total leverage exposure.

As with the TLAC requirement for Covered BHCs, these requirements would be phased in, becoming fully effective only on January 1, 2022. Between January 1, 2019 and December 31, 2021, the risk-weighted assets requirement would be 14% in the case of an SPOE strategy, and 16% in the case of an MPOE strategy, but the other TLAC requirements would be fully effective. Covered IHCs would similarly be subject to a TLAC buffer requirement, except that it would be only 2.5% plus any countercyclical capital surcharge.
As for the Internal LTD requirement, which would become effective on January 1, 2019, a covered IHC would be required to issue and maintain Eligible Internal LTD of at least the greater of:

• 7% of total risk-weighted assets;

• 4% of average total consolidated assets, as computed for purposes of the Tier 1 Leverage ratio; and

• for covered IHCs with total consolidated assets of $250 billion or more or on-balance-sheet foreign exposure of $10 billion or more, 3% of total leverage exposure.

 B. Definitions of Internal TLAC and LTD
Eligible Internal TLAC would be defined as the sum of (a) the Tier 1 regulatory capital issued by the Covered IHC to a foreign parent entity that controls the Covered IHC, and (b) the Covered IHC’s Eligible Internal LTD.
Eligible Internal LTD would have all of the features of Eligible External LTD, and several additional requirements:

• It would be required to be issued by the Covered IHC to a parent foreign entity that controls the Covered IHC;

• It would be required to be contractually subordinated to all third-party liabilities of the covered IHC;

• It would be required to include a contractual trigger pursuant to which the Federal Reserve could require the covered IHC to cancel the debt or convert or exchange it into Tier 1 common equity outside of resolution, if:

• the Federal Reserve were to determine that the covered IHC was “in default or in danger of default,” and

• the top-tier non-U.S. bank or any subsidiary outside the U.S. were placed into resolution, or
• the home country supervisory authority consented to the cancellation, exchange, or conversion, or did not object following 48 hours’ notice, or
• the Federal Reserve were to make a written recommendation to the Secretary of the Treasury that the FDIC should be appointed receiver of the Covered IHC.

At the October 30^th meeting, the Federal Reserve staff did not elaborate on the reason for the IHC requirements, but a speech by Governor Daniel Tarullo six days later made the rationale very clear:
“It is important to recognize, though, that even with the best of intentions and actions in home country regulatory and supervisory regimes, there will be limits to how much responsibility can appropriately be shared for international banking activities . . . . Even with the best of intentions, today’s home country regulators cannot effectively bind their successors’ response to the insolvency of one of their globally important banks when political and economic pressures are likely to be high.”[7]
Such political and economic pressures will also be high in the U.S., of course, and therefore the intent of the TLAC and LTD requirements for IHCs is to place the cost of resolution of such entities on their non-U.S. parents, and not on any U.S. stakeholders, even sophisticated ones. Nor is this solely an American point of view: the preamble to the Proposed Rule states with respect to the requirements of Eligible Internal LTD that “U.S. financial regulatory agencies are discussing the application of similar standards by foreign regulatory authorities in jurisdictions that host the operations of U.S. G-SIBs.”[8]

IV. “Clean Holding Company” Requirement
The Federal Reserve’s focus on resolution concerns may also be seen in the Proposed Rule’s “clean holding company” requirement, which is intended to prohibit Covered BHCs and Covered IHCs (Covered Holding Companies) from “directly entering into certain financial arrangements that could impede an entity’s orderly resolution.”[9]

A Covered Holding Company would be prohibited from entering into the following transactions:

• Issuing debt instruments to third parties with an original maturity of less than one year;

• Entering into “qualified financial contracts” (QFCs) with third parties;

• Having liabilities that are subject to “upstream guarantees” from subsidiaries or to contractual offset rights for subsidiary creditors; and

• Issuing guarantees of subsidiary liabilities, if the Covered Holding Company’s insolvency or entry into resolution would operate as a default event on the part of the subsidiary.

In addition, the Proposed Rule would place a cap on the value of a Covered BHC’s non-TLAC-related third party liabilities that can be pari passu with or junior to its Eligible External LTD at 5 percent of the value of its Eligible External TLAC.
Because structured notes (that is, notes sold to investors that contain an embedded derivative) are generally pari passu with senior unsecured long-term debt, if this cap survives into a final rule, it will limit the amount of such products that can be sold off of a holding company’s balance sheet. Indeed, the preamble to the Proposed Rule states that “[i]n particular, several covered BHCs may need to limit the value of structured notes they have outstanding.”[10] The limitation would not apply to such notes if sold by an operating subsidiary of a Covered BHC, such as in a bank offering exempt under Section 3(a)(2) of the Securities Act.
In addition to structured notes, the proposed cap would also apply to vendor liabilities, obligations to employees, and liabilities arising other than through contracts, such as court judgments. Covered IHCs would not be subject to an analogous 5 percent limitation because of the requirement that their Eligible Internal LTD be subordinated to all third-party debt claims.

 V. Prepositioning of TLAC
The Proposed Rule does not set forth a program with respect to the prepositioning of TLAC at a covered company’s material subsidiaries, but rather outlines the Federal Reserve’s current thinking on a framework for prepositioning. The reason for prepositioning TLAC (what the Federal Reserve calls “domestic internal TLAC”) is to ensure that Covered Holding Companies have in place adequate mechanisms in place to transfer severe losses from operating subsidiaries like banks and broker-dealers up to the holding company.
Under the framework under consideration, Covered Holding Companies would be required to identify their material operating subsidiaries, and have a domestic internal TLAC requirement with respect to those subsidiaries. Domestic internal TLAC would be divided into two categories: “contributable resources” and “prepositioned resources.” The former would be assets held by the Covered Holding Company that could be contributed to material subsidiaries in the event they suffered severe losses, and the Federal Reserve expressed a preference for High-Quality Liquid Assets as defined in its Liquidity Coverage Ratio rule. The latter would be the equity and long-term debt investments by the Covered Holding Company in each material subsidiary, with the debt proposed to be subordinated to third-party claims.
The Federal Reserve sought comment on all aspects of this framework.

 VI. Capital Deduction for Investments in Covered BHC Debt
Finally, the Federal Reserve proposed a regulatory capital deduction for all institutions subject to its regulatory jurisdiction for the amount of any investment in, or exposure to, unsecured debt issued by a Covered BHC. Such a proposed deduction is not unexpected, given the interconnectedness risk created by such investments, but it will of course narrow the universe of parties who will be able to purchase the significant amount of additional debt that will be required to be issued by Covered BHCs.

VII.      Principal Differences with FSB Final Term Sheet        
The Proposed Rule is more demanding on U.S. G-SIBs than the final term sheet on TLAC released by the FSB on November 9^th. In particular, the FSB’s TLAC requirement with respect to a percentage of leverage exposure is only 6.75% when fully phased-in, as opposed to 9.5% in the Proposed Rule, and the FSB would permit eligible external TLAC to be issued under the laws of a jurisdiction other than the jurisdiction of the G-SIB if, under those laws, the application of resolution tools by the relevant resolution authority is effective and enforceable.

In addition, the final term sheet does not impose a specific long-term debt requirement (but rather an expectation that long-term debt would be at least 33% of minimum requirements), and it leaves it to particular national regulators to determine whether to impose a TLAC buffer. (If a national regulator does impose a TLAC buffer, the consequences of a G-SIB’s breaching it are similar to those in the Proposed Rule.) The term sheet takes a more detailed approach to internal TLAC pre-positioning, and so one should expect the Federal Reserve to fill in the details of its proposed framework for internal TLAC in the coming months.

VIII.    Some Questions on the Proposal
Given the broad acceptance of TLAC as a key to G-SIB resolution by the global regulatory community, one should expect the main principles of the Proposed Rule to survive the comment process. Certain outcomes are now therefore predictable: holding companies will be subject to restrictions on their business activities, and will be required to raise additional – in some cases, substantial – amounts of long-term debt. External debt issuances by G-SIB operating companies – with the exception of structured note issuances by certain regulated banks – should correspondingly decrease.

In addition, under the TLAC pre-positioning framework outlined in the Proposed Rule, it appears that Covered Holding Companies may be required to hold additional amounts of low-yielding High Quality Liquid Assets at the holding company level. The finalization of the Proposed Rule should therefore result in G-SIBs taking an even closer look than currently at their business activities’ returns on equity.

Within the general outlines of the TLAC proposal, however, there are still many questions to be answered, such as:

• Could there be more calibration based on the risk profile of particular G-SIB balance sheets? At the moment, calibration occurs only with respect to the application of G-SIB surcharges in the External LTD and TLAC buffer requirements, in that institutions with lower G-SIB surcharges are permitted to issue less LTD and have a lower TLAC buffer. It is certainly possible, however, that differences in G-SIB risk profiles will not be appropriately reflected by differences in G-SIB surcharges. The Federal Reserve should consider whether G-SIBs with particularly safe funding profiles should have general External LTD and buffer requirements that are lower than proposed.
• Similarly, could there be more calibration with respect to IHC subsidiaries of non-U.S. G-SIBs, particularly those with fewer than $250 billion in U.S. nonbranch assets? How is the Internal TLAC and LTD proposal consistent with the requirements that Section 165 of the Dodd-Frank Act imposes on the Federal Reserve when promulgating enhanced prudential standards for non-U.S. banks? The Proposed Rule notes that, under Section 165, “enhanced prudential standards must increase in stringency based on the systemic footprint and risk characteristics of individual covered firms,”[11] and yet offers no basis at all for the similarity in its treatment of all U.S. IHCs and U.S. G-SIBs.[12]
• What is the correct approach to acceleration rights in Eligible External LTD, particularly with respect to payment defaults?
• Is it practicable to subject “liabilities created by court judgments” to the 5 percent cap on other third-party liabilities for Covered BHCs?
• Should there be more leeway for Federal Reserve-regulated institutions to hold Covered BHC debt in connection with underwriting and market making activities without incurring a capital deduction? Would the proposal as drafted impede the issuance of the necessary additional amounts of long-term debt by Covered BHCs?
• Should there by some leeway for existing external long-term debt instruments issued by Covered BHCs to vary from the requirements of a final rule and still count as Eligible External LTD and TLAC if they are outstanding when the requirements become effective?

ENDNOTES

   [1]  See Financial Stability Board, Consultative Document, Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution (10 November 2014).
   [2]  Id.
   [3]  Federal Reserve, Press Release, July 20, 2015 (“Under the final rule and using the most recent available data, estimated surcharges for the eight GSIBs range from 1.0 to 4.5 percent of each firm’s total risk-weighted assets.”).
   [4]  The example assumes that the calculation is made on or after January 1, 2022; for the three years prior, the buffer would be calculated using the 16% external TLAC requirement.
   [5]  Proposed Rule, at 33.
   [6]  The reason for the lack of an express subordination requirement in the Proposed Rule is that holding company senior debt is structurally subordinated to claims on operating subsidiaries, and the “clean holding company” provisions limit the amount of other liabilities that can be pari passu with senior debt.
   [7]  Governor Daniel K. Tarullo, “Shared Responsibility for the Regulation of International Banks,” November 5, 2015.
   [8]  Proposed Rule, at 68.
   [9]  Id. at 18.
  [10]  Id. at 83.
  [11]  Proposed Rule, at 22.
  [12]  It seems that because U.S. IHCs are, by definition, not top-tier holding companies, the Federal Reserve should not have felt itself constrained by the 16% minimum TLAC requirement decided by the FSB for top-tier G-SIBs.

This post was initially published by Gibson Dunn on November 18, 2015 and is available here.