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FDIC’s SR Advisory Committee to hold open meeting on SIFI resolution authority

The Federal Deposit Insurance Corp. will hold an open meeting on Dec. 10 in which it will provide advice and recommendations on a number of issues regarding the resolution of systemically important institutions.

The regulator’s Systemic Resolution Advisory Committee will discuss a number of issues related to its authority to liquidate systemically important financial institutions, or SIFIs, the failure of which would pose a threat to U.S. financial stability.

The FDIC was granted the authority by the 2010 Dodd-Frank Act following the recent financial crisis. Before the economic downturn, the regulator’s receivership authorities were limited to federally insured and thrift institutions, and there was no authority to place a bank-holding company or insured affiliates into receivership to avoid consequences to the financial system.

Additionally, the FDIC is in the process of determining how to ensure, as required by Dodd-Frank, that creditors receive as much in a resolution as they would in a Chapter 7 bankruptcy.

Dodd-Frank’s orderly liquidation authority has come under fire from critics who claim that provision is unconstitutional. In September, attorneys general from Michigan, Oklahoma and South Carolina joined in a lawsuit challenging the constitutionality of the Title II of Dodd-Frank, which grants resolution powers to the U.S. Treasury and FDIC.

“Title II empowers the FDIC to unilaterally violate the rights of financial companies’ creditors (and unilaterally choose favorites among similarly situated creditors) while carrying out [the] ‘liquidation,’” the amended complaint said. “All of this occurs without meaningful judicial review.”

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