(Reuters) Six big U.S. banks need to raise an additional $120 billion, most likely in long-term debt, under a rule proposed on Friday by the Federal Reserve.
The requirements are aimed at ensuring that some of the biggest and most interconnected banks, which include Goldman Sachs Group Inc, (GS.N), JPMorgan Chase & Co, (JPM.N), and Wells Fargo & Co (WFC.N), can better withstand another crisis by turning some of their debt, particularly debt issued by their holding companies, into equity without disrupting markets or requiring a government bailout.
The banks are expected to meet the $120 billion shortfall by issuing debt, which is usually more cost-effective than issuing equity, according to Federal Reserve officials speaking at a background press briefing Friday. The rule proposed Friday, largely in line with banks' expectations, concerns the lenders' total loss-absorbing capacity.
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