FDIC approves “living wills” for banks

The FDIC approved a final rule on Tuesday that ensures the availability of funds to bank customers and depositors in the event of a financial institution's collapse.

Insured financial institutions with more than $50 billion in assets are required to submit periodic emergency collapse plans to the FDIC, the agency responsible for insuring bank and savings deposits. These plans inform the FDIC, as receiver, to resolve the institution in a way that ensures depositor access to their funds within one to two business days.

This rule allows the FDIC to function most efficiently, requiring the largest institutions to plan extensively, thereby reducing the most costly losses to the Deposit Insurance Fund.

The rule applies to 37 institutions with assets totaling about $4.14 trillion, “or nearly 61 percent of all insured deposits, as of Sept. 30, 2011.”

The rule is a complement to a separate rule that requires non-banks and bank holding companies to prepare plans to be implemented in the event of the institution's collapse.

Preceded by an interim rule effective Jan. 1, the final rule will be effective April 1 and includes the modifications made in response to feedback received over the comment period.

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