February 04, 2019

US Agencies (FED and FDIC) are adopting final guidance for the 2019 and subsequent resolution plan submissions by the eight largest, complex U.S. banking organizations. The final guidance is meant to assist these firms in developing their resolution plans, which are required to be submitted pursuant to the Dodd-Frank Act.

The final guidance is largely based on prior guidance issued to these covered companies. The guidance describes the Agencies' expectations regarding a number of key vulnerabilities in plans for an orderly resolution under the U.S. Bankruptcy Code and covers capital, liquidity, governance mechanisms, operational, legal entity rationalization and separability, and derivatives and trading activities. The final guidance also updates certain aspects of prior guidance based on the Agencies' review of these firms' most recent resolution plan submissions. While the capital and liquidity sections of the final guidance remain largely unchanged from the proposed guidance and the 2016 Guidance, the Agencies intend to provide additional information on resolution liquidity and internal loss-absorbing capacity in the future. 

Additionally, the payment, clearing, and settlement (PCS) and the derivatives and trading activities sections of the final guidance contain several changes based on the suggestions received, while retaining the same key principles embodied in the proposed guidance. These principles include streamlining the firms' submissions; facilitating continuity of PCS services in resolution; and helping ensure that a firm's derivatives and trading activities can be stabilized and de-risked during resolution without causing significant market disruption that could cause risks to the financial stability of the United States. In addition, the final guidance consolidates all prior resolution planning guidance for the firms in one document and clarifies that any prior guidance not included in the final guidance has been superseded.

Resolution plans 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 resolution planning process helps ensure that a firm's failure would not have serious adverse effects on the financial stability of the United States.

 

Related Link: Guidance in Federal Register

Keywords: Americas, US, Banking, Dodd Frank Act, TLAC, Guidance, Resolution Planning, FED, FDIC, US Agencies

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