Tarullo Urges Clear Wind-Down Plans So Banks Aren’t Shunned

Federal Reserve Governor Daniel Tarullo said creditors could penalize the largest banks with higher interest rates or desert them entirely if the government doesn’t clarify plans for winding down firms near collapse.

“Unless creditors and counterparties have well-grounded expectations as to how they will be treated in a resolution setting, they may need to charge a premium to compensate for the additional uncertainty,” Tarullo said today at a Washington conference on how to handle failing banks. “In periods of increasing stress in the financial system, they may be unwilling to deal with certain firms altogether.”