Bank regulators vote to end debt program
U.S. regulators voted on Tuesday to end a government program that guarantees some debt issued by banks, but also to set up a 6-month safety net facility.
All five members of the Federal Deposit Insurance Corp panel of regulators voted to end the Temporary Liquidity Guarantee Program, or TLGP, on October 31, as planned.
Debt could be issued and guaranteed under that program up until the deadline. The guarantee on that debt would expire no later than December 31, 2012.
It should be clear that this is not a continuation of the program but an ending of the program, FDIC Chairman Sheila Bair said at an open meeting.
But the program leaves open a 6-month safety feature for institutions suffering from market disruptions beyond their control.
Under the 6-month facility, subject to approval, a bank's senior unsecured debt issued after October 31 would be guaranteed through April 30, 2010, the FDIC said.
In September, the FDIC voted to put out for public comment two approaches to ending the program. One would let the program expire at the end of the month. Another would include a limited 6-month emergency guarantee facility for some banks on a case-by-case basis.
The FDIC established the TLGP last October to boost confidence in the banking industry, add more liquidity and reduce the risk of bank runs.
It provides a government guarantee on some senior unsecured debt and mandatory convertible debt, and on banks' transaction deposit accounts.
Regulators want to phase out the program because conditions in the credit markets have eased, and officials do not want to promote reliance on the government aid.
The agency started to phase out the program in March by extending the deadline to issue guaranteed debt by four months to October 31, but also making it more expensive to participate in the program.
Participation under the 6-month safety net could also be more costly, depending on the risk level.
As of October 14, there was $309.4 billion in FDIC-guaranteed debt outstanding.
(Reporting by John Poirier, editing by Gerald E. McCormick)
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