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    FDIC Modifies Approach for Implementation of Resolution Planning Rule

    June 25, 2021

    FDIC issued a statement outlining the modified approach to implement the FDIC rule requiring certain insured depository institutions to submit resolution plans to facilitate resolution under the Federal Deposit Insurance Act. This rule is included in the electronic code of federal regulations 12 CFR Part 360 on resolution and receivership rules. Under the rule, resolution plans are required for insured depository institutions with USD 50 billion or more in total assets. The modified approach applies to insured depository institutions with USD 100 billion or more in total assets, extends the submission frequency to a three-year cycle, streamlines content requirements, and places enhanced emphasis on engagement with firms. Each filer covered under the statement will receive a letter from FDIC that specifies exempted plan content and the due date for the next filing.

    Resolution plans will be submitted in two groups, with the first group whose top tier parent company is not a U.S. global systemically important bank (G-SIBs) or a category II banking organization. The second group will be all other institutions with USD 100 billion or more in total assets. For institutions with less than USD 100 billion in total assets, the moratorium on submission of plans announced in November 2018 remains in effect. The modified approach preserves key content requirements that have helped FDIC develop resolution strategies for insured depository institutions, but exempts filers from other content requirements that have been less useful or are obtainable through other supervisory channels. On a case-by-case basis, FDIC also plans to exempt filers from certain content requirements based on its evaluation of how useful or material the information would be in planning to resolve each insured depository institution. The modified approach also places greater focus on engagement and capabilities testing by FDIC staff. The approach to implementing the rule is designed to assist FDIC in meeting the operational challenges of resolving a specified insured depository institution in a way that best preserves value and minimizes disruption.

    Under this approach, FDIC focused its expectations with respect to plan content on the information and analysis most useful to the the development of its strategic options and its readiness to execute a resolution, if necessary. The statement offers additional clarity about the following key resolution plan content areas under the FDIC resolution planning rule:

    • Strategy to separate from parent company’s organization. FDIC expects a resolution plan to describe the actions necessary to separate an institution and its subsidiaries from the organizational structure of its parent company in a cost-effective and timely manner. FDIC also expects a resolution plan to address any need for cooperation with the parent company or any parent company affiliate, including foreign companies, or any resolution authority; describe any significant cross-default or default rights arising from the separation from the parent company’s organization; and address any loss of access to financial market utilities and other impact arising from the separation from the parent company’s organization. 
    • Interconnectedness to parent company's organization; potential barriers or material obstacles to orderly resolution. FDIC expects a resolution plan to address the impact of the institutions' separation from its parent company’s organizational structure on inter-affiliate funding, parent support, and the continued operation of the institution.
    • Strategy for the sale or disposition of deposit franchise, business lines, and assets. FDIC expects a resolution plan to describe the drivers of value of each franchise component on a going-concern basis and provide metrics that depict the size and significance of each franchise component. FDIC also expects a resolution plan to present the approach to resolution that, in the view of the institution, would maximize the net present value return from the sale or disposition of its assets and minimize the amount of loss realized by the creditors in the resolution of the institution by presenting a sequence and process to sell or dispose of one or more combinations of franchise components that maximizes return through their sale or disposition.
    • Critical Services. FDIC expects a resolution plan to describe an institution's process for identifying critical services, which may include how this process has been developed in comparison with other internal recovery, resiliency, and continuity processes. FDIC also expects a resolution plant to identify the critical services that may be at risk of interruption and the criteria used to make this determination; describe any actions that FDIC as receiver may need to take to continue critical services in the event of failure; describe current service-level agreements or other arrangements for the provision of these services among affiliates and third parties; and describe the services that would be covered by those contractual arrangements in certain cases.
    • Identification and retention of key personnel. FDIC expects a resolution plan to describe the institution's process for identifying key personnel. In developing its process, an institution may consider how key personnel align with those identified in internal recovery and resiliency plans, and the substitutability of other employees or contractors. 
    • Management information systems. FDIC expects a resolution plan to describe an institution's current systems and applications for contract management, including the degree to which contracts are accessible and searchable digitally; asset management; deposit management; and human resources management. 
    • Asset valuation and sales. FDIC expects a resolution plan to describe any key metrics an institution employs for determining the current market values and marketability of its core business lines and material asset holdings; for the deposit franchise, this may include deposit characteristics and behaviors. The objective is to understand the drivers of value and potential risks to that value. 
    • Capital structure and funding sources. FDIC expects a resolution plan to describe an institution's current processes for determining the drivers of liquidity needs.
    • Trading, derivatives, and hedges. FDIC expects institutions to provide a narrative description of how the products and asset classes in which they are active are used to hedge the risks associated with key elements in the core business lines, such as a mortgage servicing rights portfolio, a portfolio of loans, or foreign currency transactions.


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    Keywords: Americas, US, Banking, Basel, Insured Depository Institutions, Federal Deposit Insurance Act, G-SIBs, Resolution Planning, Resolution Framework, FDIC 

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