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FDIC, Federal Reserve issue guidance on banks’ “living wills”

126px-US-FederalReserveSystem-Seal.svgThe FDIC and Federal Reserve announced on Monday the release of extra guidance and clarification for financial institutions required to submit resolution plans as mandated by the Dodd-Frank Act.

Last year, 11 institutions, including Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS, filed “living wills”—emergency plans that would allow regulators to wind down the institutions in the event of their failure.

Plans are generally required for U.S. bank holding firms with $250 billion or more in nonbank assets and for foreign-based bank holding companies with $250 billion or more in U.S. nonbank assets.

After reviewing the initial plans submitted last year, regulators have revised instructions regarding what kind of information is required in this year’s resolution plans. The guidance includes requests for more detailed information and analysis of obstacles to resolvability and requires institutions to provide analysis to support the assumptions and strategies laid out in the plans.

The Fed and the FDIC also extended an exemption for submission of the plans, allowing institutions additional time to develop their resolution plans under the new instructions. Resolution plans are now due Oct. 1.

Regulators will review each plan to determine whether the plan is credible and if the plan would “facilitate an orderly resolution…under the Bankruptcy Code.” If the plan is not approved, regulators will notify the institution and request the submission of new plan that addresses the issues present in the first.

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