The Board of Governors of the Federal Reserve System ("FRB") and the FDIC (collectively, the "agencies") found no deficiencies in the revised resolution plans of eight of the largest and most complex U.S. banking institutions. Resolution plans (commonly known as living wills) are required by the Dodd-Frank Act to prepare for possible economic distress or failure of a company. These plans describe a company's strategy for "rapid and orderly resolution" under bankruptcy.
In April of 2016, the agencies provided feedback to eight institutions (Bank of New York Mellon, Citigroup, J.P. Morgan Chase, State Street, Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo) on their 2015 resolution plans. These institutions had until July 1, 2017 to address the shortcomings in their plans.
The eight firms submitted revised resolution plans in July (with engagement from the agencies). After reviewing the revised plans, the agencies determined that they did not find any deficiencies (or weaknesses that demand plan resubmission) in the revised plans. However, the agencies did identify certain "shortcomings" in the plans of four institutions. These shortcomings do not require resubmission and may be addressed in the next resolution plans prepared by the banks.
The agencies identified four areas in which all firms should work to improve their resolvability: (i) intra-group liquidity, (ii) internal loss-absorbing capacity, (iii) derivatives, and (iv) payment, clearing, and settlement activities.
The next resolution plans will be due by July 1, 2019.
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