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U.S. regulators propose rule discouraging large banks from investing in competitors' debt

WASHINGTON, April 2 (Reuters) - U.S. bank regulators proposed a rule Tuesday that would discourage large banks from heavily investing in debt issued by other large banks by requiring them to hold additional capital against such investments.

The proposal from the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency is aimed at ensuring banks do not end up holding large amounts of "total loss-absorbing capacity" (TLAC) debt from fellow banks. Banks are required to issue TLAC debt under new rules established after the 2008 financial crisis, which were aimed at ensuring banks can quickly access more equity if pushed to bankruptcy. (Reporting by Pete Schroeder Editing by Chizu Nomiyama)