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December 19, 2017

US Agencies (FDIC and FED) announced joint determinations for resolutions plans. The agencies announced that the resolution plans of the eight largest and most complex domestic banking organizations did not have deficiencies, which are weaknesses severe enough to trigger a resubmission process that could result in more stringent requirements. The agencies also jointly determined that the plans of four firms—namely Bank of America, Goldman Sachs, Morgan Stanley, and Wells Fargo—have shortcomings, which are less-severe weaknesses that require additional work in their next plan. The US Agencies did not identify specific shortcomings in the resolution plans from Bank of New York Mellon, Citigroup, J.P. Morgan Chase, and State Street. The next resolution plans for all eight firms are required by July 01, 2019.

Resolution plans, which are required by the Dodd-Frank Act and commonly known as living wills, must describe a company's strategy for rapid and orderly resolution under bankruptcy, in the event of material financial distress or failure of the company. While significant progress has been made, there are still inherent challenges and uncertainties associated with the resolution of a systemically important financial institution. To that end, the agencies identified four areas in which more work needs to be done by all firms to continue to improve their resolvability. The areas in which additional work is required are intra-group liquidity; internal loss-absorbing capacity; derivatives; and payment, clearing, and settlement activities. Moreover, the resolvability of firms will change as markets change and as firms' activities, structures, and risk profiles change. As noted in the feedback letters that were issued to each firm, the agencies expect the firms to remain vigilant in considering the resolution consequences of their day-to-day management decisions. The US Agencies continue to explore ways to improve the resolution planning process and are considering extending the cycle for resolution plan submissions from annual to once every two years, reflecting the agencies' experience regarding the time needed to prepare and review the plans.

 

Related Link: Press Release

 

Keywords: Americas, US, Banking, Resolution Plans, Dodd Frank Act, US Agencies

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