General Information & Client Services
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
February 16, 2018

The FDIC Chairman Martin J. Gruenberg spoke about the progress toward resolving systemically important financial institutions or SIFIs, at The Wharton School, University of Pennsylvania. He highlighted the importance of remaining focused on addressing the critical issue of the resolution of SIFIs. He noted that a central objective of his efforts has been on developing the capability for the orderly failure of a SIFI, without taxpayer support, and with accountability for the shareholders, creditors, and management of the failed firm.

Since the financial crisis, orderly resolution of firms has been a top priority for the FDIC, as per Mr. Gruenberg. The framework for resolution of SIFIs, under the Dodd-Frank Act, introduced a new dimension to the regulation of financial institutions in the United States. The Act provided the Title I living will resolution plan process as a tool to require systemic institutions to make real-time changes in their structure and operations to facilitate orderly failure under bankruptcy. In addition, the Title II Orderly Liquidation Authority gave the FDIC new authority to manage the orderly failure of any financial institution whose failure in bankruptcy could pose a risk to the financial system. He also described the evolution of the living will process and the joint work done by FED and FDIC (US Agencies).

He then outlined the progress made through the living will resolution plan process in bringing about tangible changes to the structure and operations of the eight U.S. global systemically important banks (G-SIBs) to enhance the resolvability of these firms. With regard to the most recent resolution plans that the firms filed in July 2017, he noted that G-SIBs in the United States have made substantial progress in the following areas:

  • Established clean holding companies with pre-funded loss absorbing capacity
  • Rationalized their legal entity structures to align those structures and support their preferred resolution strategy
  • Established frameworks for estimating and positioning the capital and liquidity required to execute their preferred resolution strategy
  • Implemented internal escalation triggers, playbooks, and other governance mechanisms to facilitate the timely execution of recovery and resolution actions by the board of directors and senior management
  • Adhered to the ISDA 2015 Universal Resolution Stay Protocol, which provides for temporary stays on certain default and early termination rights for ISDA and other standard derivatives contracts
  • Developed strategies and playbooks to maintain access to payment, clearing, and settlement services
  • Took steps to ensure that inter-company services shared by multiple affiliates will continue to be available in resolution
  • Modified service contracts with key vendors to ensure the continuation of services as long as the firm continues to meet its obligations under the terms of the contract
  • Developed options for sale of discrete businesses and assets under different market conditions to increase the flexibility of a firm's execution of its preferred resolution strategy

The FDIC Chairman concluded that the living wills process has been enormously helpful to firms and regulators by facilitating significant structural and operational improvements to improve resolvability of firms. However, the resolvability of firms will change as markets change and as firms’ activities, structures, and risk profiles change. Thus, US Agencies expect firms to remain vigilant in considering the resolution consequences of their management decisions.

 

Related Link: Speech

Keywords: Americas, US, Banking, SIFI, Dodd Frank Act, Living Will, Resolution Plan, Systemic Risk, FDIC

Related Insights
News

IAIS Publishes Drafts of Revised ICP 8, ICP 15, ICP 16, and ICP 20

IAIS published the drafts of revised Insurance Core Principles on Public Disclosure (ICP 20), Investments (ICP 15), Enterprise Risk Management for Solvency Purposes (ICP 16), and Risk Management and Internal Controls (ICP 8), along with a revised draft of the glossary on enterprise risk management (ERM).

November 14, 2018 WebPage Regulatory News
News

MAS Amends Notice 637 on Capital Adequacy Requirements in Singapore

MAS published the final, revised Notice 637 on the risk-based capital adequacy requirements in Singapore.

November 13, 2018 WebPage Regulatory News
News

ESMA Updates Q&A on Implementation of CSD Regulation and MAR

ESMA updated questions and answers (Q&A) documents on the implementation of the Central Securities Depository (CSD) Regulation and Market Abuse Regulation (MAR).

November 12, 2018 WebPage Regulatory News
News

FSB Finalizes and Publishes the Cyber Lexicon

FSB published a cyber lexicon, following the public consultation earlier this year.

November 12, 2018 WebPage Regulatory News
News

SRB Updates Liability Data Reporting Template for 2019

SRB published version 2.7.1 of the Liability Data Reporting (LDR) Template.

November 12, 2018 WebPage Regulatory News
News

ECB to Conduct Comprehensive Assessment of Six Bulgarian Banks

ECB will undertake a comprehensive assessment of six Bulgarian banks. The exercise, comprising an asset quality review and a stress test, follows Bulgaria’s submission of a request to establish close cooperation with ECB on July 18, 2018.

November 12, 2018 WebPage Regulatory News
News

IMF Publishes Reports on the 2018 Article IV Consultation with Chile

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Chile.

November 09, 2018 WebPage Regulatory News
News

PRA Issues PS27/18 on Implementing the Extension of SM&CR to Insurers

PRA published the policy statement PS27/18, which provides feedback to responses to the consultation paper CP20/18, on implementing the extension of the Senior Managers and Certification Regime (SM&CR) to insurers (Part 2).

November 09, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for November 2018

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

November 09, 2018 WebPage Regulatory News
News

FED Finalizes the Large Financial Institution Rating System

FED finalized the new supervisory rating system for Large Financial Institutions (LFIs), to better align with the current supervisory programs and practices for these firms.

November 09, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2204