The US Agencies (FED and FDIC) are adopting the final guidance for the 2019 and subsequent resolution plan submissions by the eight largest, complex U.S. banking organizations. The agencies also announced that the resolution plans of four foreign-based banks had weaknesses, but did not have "deficiencies," which are weaknesses severe enough to result in additional prudential requirements if not corrected. The agencies sent feedback letters to each firm detailing the shortcomings and specific actions that can be taken to address them. The firms must address the shortcomings in their next resolution plans, which are due July 01, 2020, and are expected to implement certain resolution projects in the interim.
The agencies determined that the plans of the four firms—Barclays, Credit Suisse, Deutsche Bank, and UBS—have "shortcomings," which are less severe weaknesses that require additional work in their next plan. These shortcomings in the four firms' plans include weaknesses in how each firm communicates and coordinates between its U.S. operations and its foreign parent in stress. Credit Suisse also had a shortcoming related to estimating the liquidity needs of its U.S. intermediate holding company in a resolution. For foreign banking organizations, resolution plans are focused on their U.S. operations; however, the agencies acknowledge that the preferred outcome for these four foreign-based banks is a successful home country resolution using a single point of entry resolution strategy. Since the 2007 financial crisis, the four firms have improved their resolvability by significantly reducing the size and risk profiles of their U.S. operations and increasing their capital and liquidity levels. The resolvability of firms will change, as both the firms and markets continue to evolve. The agencies expect the firms to remain vigilant in assessing their resolvability.
The finalized resolution plan guidance for the eight largest and most complex domestic banking organizations is largely similar to the proposal issued in June 2018 and provides additional information for the firms regarding their resolution planning capabilities in areas such as capital, liquidity, and payment, clearing, and settlement activities. While the capital and liquidity sections of the final guidance remain largely unchanged from the proposed guidance and the guidance from 2016, the agencies intend to provide additional information on resolution liquidity and internal loss absorbing capacity in the future.
- Joint Press Release
- Final Guidance (PDF)
- Letter to Barclays (PDF)
- Letter to Credit Suisse (PDF)
- Letter to Deutsche Bank (PDF)
- Letter to UBS (PDF)
Keywords: Americas, US, Banking, Resolution Plans, Guidance, Dodd Frank Act, FED
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.