Capital Group lobbies against bank debt plan

24 December 2012

Capital Group is standing in opposition to a proposal aiming to simplify the process by which large banks facing financial difficulties are dealt with.

The asset manager has been quietly lobbying against the US Federal Reserve plan, which is expected to be unveiled in 2013, the Financial Times reports.

As part of the proposed change, it is expected that the biggest financial groups may be forced to issue significant amounts of debt at holding company level, as opposed to being held in operating businesses.

Dan Tarullo, a Federal Reserve governor, said that to improve financial stability, the minimum long-term debt plan "did not immediately suggest any unfavourable unintended consequences, thereby perhaps strengthening its appeal as a near-term policy priority".

Capital Group has been involved in private meetings with members of the Senate banking committee, claiming the proposal would result in future earnings being reduced, while profitability will decrease due to the move leading to the funding costs faced by banks being increased.

By Asim Shah

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