28 Jun FDIC – Outlines Modified Approach for Insured Depository Institution Resolution Planning Rule
June 28, 2021 – FDIC adopted a tailored resolution plan approach to banks with at least $100 Billion in total assets. Extends submission frequency to a three-year cycle, streamlines content requirements. Places more emphasis on engagement with firms, using existing supervisory processes. Exempts filers from less useful content requirements or if available from other sources. Allows specified banks, which are affiliates, to submit a single combined submission. FDIC has the discretion to exempt filer from content requirements if not useful or material. Examples of exempted content include counterparty interdependency, material entities’ financial statements, systemic risk analysis of a bank, and the disaster recovery plan. The approach places a greater focus on engagement, and capabilities testing by FDIC staff.
Scope and Background
Applies to covered insured depository institutions with $100 Billion or more in total assets. Assets are an average of four most recent call report Reports of condition and income. The firm is not required to submit a plan when four consecutive filings under $100 Billion in total assets. For banks below $100 Billion, the November 2018 moratorium of filing remains in effect. The new approach fulfills provisions of the Federal deposit insurance act (12 USC 1828). Provisions distinct from resolution mandate under Dodd-Frank Act, (12 USC 5365(d)).
Tailored Resolution Approach
Goals are to revise the submission cycle to three years, omit redundancies with parent company filing under Dodd-Frank, and consolidate affiliate filings into one submission.
Use focused expectations to help guide the determination of strategic options in resolution. Allows for resolution from a parent, third-party acquisition, or the development of bridge depository institution (BDI) to prepare for bank default and (12 USC 1813).
The plan must articulate dealings with foreign firms and resolution authorities to address wind-down, as well as FDIC and/or BDI action plans to ensure critical core services.
Describe interconnectedness or interdependencies of the legal entities and contractual obligations of the specified bank with the parent, that would complicate ease of resolution.
Includes identifying potential barriers or other material obstacles to orderly resolution. The plan must also address inter-affiliate considerations of entity separation from a parent, as well as actions regarding the sale or disposition of deposit franchise, branches, and business lines. Critical services map outlining providers, material entities, and core business lines. With consideration to alignments for business continuity, resiliency, and contract default.
Next Steps and FDIC Communication
FDIC will notify each firm covered, on exempted plan content, and the due date for filing. Resolution plans will be filed in two groups, first banks whose top tier parent company is not a U.S. global systemically important bank or a category II banking organization. The second group of filers will be all other banks with $100 Billion or more in total assets. Net filing will be required no earlier than 12 months after the date of communication, and FDIC expects will be required by the first business day in December of an applicable year.
FDIC will complete plan review, and provide a conclusion letter, within 12 months of receipt. The letter may identify areas for attention, more information, or further engagement. Unless the bank is experiencing stress, FDIC expects engagement to occur not more than once in each resolution plan submission cycle, and in ordinary supervisory processes.
For more information, visit www.fdic.gov.