U.S. Agencies Provide Feedback on Resolution Plans of Domestic Systemically Important Banks

April 13, 2016

The Federal Deposit Insurance Corporation and the Federal Reserve Board on Wednesday, April 13, 2016, announced determinations and provided firm-specific feedback on the 2015 resolution plans (“Living Wills”) of eight systemically important, domestic banking institutions.

The agencies have jointly determined that each of the 2015 resolution plans of Bank of America, Bank of New York Mellon, JP Morgan Chase, State Street, and Wells Fargo was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, the statutory standard established in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The agencies have issued joint notices of deficiencies to these five firms detailing the deficiencies in their plans and the actions the firms must take to address them. Each firm must remediate its deficiencies by October 1, 2016. If a firm has not done so, it may be subject to more stringent prudential requirements.

The prudential requirements may include more stringent capital, leverage, or liquidity requirements, as well as restrictions on growth, activities, or operations of the firm, or its subsidiaries. If, following a two-year period beginning on the date of the imposition of such requirements, a firm still has failed to adequately remediate any deficiencies, the agencies, in consultation with the FSOC, may jointly require the firm to divest certain assets or operations to facilitate an orderly resolution of the firm in bankruptcy.

Section 165(d) of the Dodd-Frank Act requires bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for supervision by the Federal Reserve periodically submit resolution plans to the Federal Reserve and the Federal Deposit Insurance Corporation. Each plan, commonly known as a living will, must describe the company’s strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company.

The agencies also announced that they are continuing to assess the plans for the four foreign banking organizations that filed resolution plans on July 1, 2015–Barclays PLC, Credit Suisse Group, Deutsche Bank AG, and UBS.

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