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for the firms in one document and clarifies that any prior guidance not included in the final guidance has been superseded.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
Previous ArticleESMA Publishes Regulatory Work Program for 2019
BCBS is consulting on two technical amendments to the rules on minimum haircut floors for securities financing transactions, or SFTs.
BIS launched a EUR-denominated, open-ended fund for green bond investments by central banks and official institutions, following the launch of the first BIS green bond fund denominated in USD in September 2019.
EBA announced that it will launch the 2021 EU-wide stress test exercise, with the publication of the macroeconomic scenarios on January 29, 2021.
BoE announced that the reporting entities are no longer required to report Form CX after the fourth quarter of 2020 reference period, with the last collection on January 29, 2021.
ECB published a letter in which the President Christine Lagarde answered questions, from a Member of the European Parliament, on the application of the EU taxonomy on sustainable finance.
PRA published a direction for modification by consent of 5.1 to 5.3 and 5.5 of the Capital Buffers Part of the PRA Rulebook.
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.