US Agencies (FDIC and FED) are providing information to the eight largest and most complex domestic banking organizations to guide their next resolution plans, which are due by July 01, 2021. The 2021 plans will be required to include core elements of a resolution plan, such as capital, liquidity, and recapitalization strategies, in addition to covering how each firm has integrated changes to, and lessons learned from, its response to the COVID-19 pandemic into its resolution planning process. This will be the first targeted resolution plan, a type of plan introduced in the revisions to the agencies' resolution plan rule finalized last year.
FED has published an indicative version of the letter that will be sent to firms in the context of the targeted resolution plans. The letter details the targeted information being requested, with focus on the Covered Company’s actions in response to events surrounding the COVID-19 pandemic. The Agencies intend to use the response to the stress caused by the COVID-19 to inform their assessment of the Covered Company’s resolution-related capabilities and infrastructure. Among other aspects, the letter specifies that the plan should discuss linkages between the Covered Company’s coronavirus response and resolution-related capabilities through December 31, 2020, along with the lessons learned, including whether such lessons have been, or will be, incorporated into the Covered Company’s resolution planning infrastructure.
Separately, the agencies recently completed a review of critical operations, which are operations at certain firms whose failure or discontinuance would threaten U.S. financial stability, and informed the firms of their findings. The agencies plan to complete another such review by July 2022 and this review will include a further, broader evaluation of the framework used to identify critical operations. Resolution plans, commonly known as living wills, must describe the firm's strategy for rapid and orderly resolution in bankruptcy in the event of material financial distress or failure of the firm.
Keywords: Americas, US, Banking, Large Banks, Targeted Resolution Plans, Resolution Planning, Basel, COVID-19, Resolution Framework, US Agencies
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