SIFIs

In a surprise move, the Federal Reserve Board proposed significant changes to its stress testing regime, including dropping its Tier 1 Common Capital requirements and delay leverage and risk-based capital ratio requirements for banks with "advanced approaches" in risk-based modeling.

A recap of the informed opinions (and the discussions they generated) on BankThink this week, including ways to make megabanks pay for their “too big to fail” subsidy and how banks can help put an end to human trafficking.

Citigroup's second-quarter profit got a modest boost from Citi Holdings, a unit set up six years ago as a dumping ground for toxic assets. After losing billions for years, Citi Holdings has now become a minor profit source for its parent.

Final guidelines for dealing with failing institutions from the international Basel Committee include direct capital injections — something the Dodd-Frank Act tried to end in the U.S. — as a last-ditch option.

Wall Street's favored bank-resolution strategy would virtually guarantee future bailouts while imposing the costs on taxpayers and ordinary investors. At the very least, the damage can be mitigated with three key reforms.

Federal Reserve Board Chair Janet Yellen sounded at least open to the idea that new regulations have contributed to potential liquidity problems, but said more study is needed.

Nobody wants a big-bank bailout, but compared to the risk of contagion, it's the lesser of two evils.