Details on the New Federal Financial Stability Programs: CAP replaces CaPP, Stress Tests and amended TLGP


This week, regulators detailed a number of Financial Stability Plan programs. Economic assessments will be conducted on the 19 largest financial institutions – those with $100 billion or more of assets. Capital in the form of mandatory convertible preferred securities will be made available to financial institutions identified through economic assessments, or upon approved applications, through the new Capital Assistance Program (CAP). Eligible institutions will be able to issue FDIC-guaranteed senior unsecured mandatory convertible debt under an extension of the Federal Deposit Insurance Corporation’s (FDIC) temporary liquidity guarantee program (TLGP).

Below we discuss each program. Many questions remain unanswered for financial institutions and market participants; additional information will become available as regulators begin the economic assessments and the programs move into the implementation phase.

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