Washington – The Federal Deposit Insurance Corporation (FDIC) has approved a landmark final guidance to strengthen resolution planning at a select group of large banks.
The new guidelines, resembling the August 2023 proposal with key adjustments, are developed in tandem with the Federal Reserve. These resolution plans, or ‘living wills,’ outline a bank’s strategy for quick and orderly resolution under bankruptcy in the event of significant financial distress or failure.
The guidance primarily targets domestic and foreign banks exceeding $250 billion in assets but not deemed the most complex ones. It zeroes in on specific risks associated with this segment, focusing on areas like capital, liquidity, and operational capabilities vital for resolution. Differing from the largest banks’ guidance, this new framework sets agency expectations for both single-point and multi-point entry resolution strategies.
In addition to addressing these strategies, the guidance acknowledges that the ideal resolution outcome for foreign banks is typically a successful home country-led process. It provides foreign banks with guidance on integrating their global resolution plans into their U.S.-specific ones.
The FDIC has also extended the deadline for banks subject to this guidance to submit their resolution plans until October 1, 2025. The extension aims to provide ample time for banks to thoroughly consider the final guidance as they develop their plan submissions.
This move marks a significant step in ensuring the financial stability and preparedness of large banks, potentially preventing systemic risks that could arise from unresolved bank failures.
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Key Facts
- Agency: FDIC
- Category: Fraud & Financial Crimes|Banking
- Source: Official Source ↗
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