FRB, FDIC release public sections of 2016 Resolution Plans of eight US G-SIBs

On October 4, 2016, the Federal Reserve Board (FRB) and Federal Deposit Insurance Corporation (FDIC) (collectively, “the Agencies”) released the public sections of the “targeted submissions” that fulfill the 2016 resolution planning requirement for each of the eight US global systemically important banks (G-SIBs).1 Although these public sections are, on balance, slightly shorter than the 2015 public sections submitted in connection with the last full submissions, they contain significant new details about completed and forthcoming enhancements to resolution planning capabilities to address regulatory concerns.

In April 2016, the Agencies determined that the 2015 plans submitted by five of the eight US G-SIBs were “not credible or would not facilitate an order resolution under the Bankruptcy Code.” These institutions were required to remediate the identified deficiencies by October 1, 2016.2 In addition, the Agencies identified shortcomings in the plans submitted by the remaining three US G-SIBs, which were required to submit plans to address these issues by October 1, 2016.3 The next full plan submissions for all eight US G-SIBs are due by July 1, 2017.

The Agencies have not yet reviewed the confidential or public portions of the 2016 submissions, but have initiated their review process after releasing the public portions.  If an institution does not remediate an identified deficiency, the Agencies can impose more stringent capital, leverage, or liquidity requirements, or restrictions on the growth, activities, or operations until a plan is submitted that remediates the deficiency.  The regulators may issue feedback on the 2016 submissions before the institutions submit their next full resolution plans in July 2017.

Key takeaways from public sections

  • Greater transparency: The US G-SIBs have provided greater transparency on key components of their resolution plans in the public domain than previously provided.  Institutions provided sufficient detail on the steps taken to remediate any deficiencies and progress to date to remediate shortcomings.  The approach institutions took to include more information in the public section stems from the Agencies publically releasing redacted feedback letters in April 2016 outlining deficiencies and shortcomings identified in each institution’s resolution plan.
  • Departure of previous public section structure: The structure of the public section differs from the standard table of contents used by institutions since the first resolution plan submission in 2012.  Prior to the October 2016 Resolution Plan Submission, institutions were focused on structuring the public section based on the requirements outlined in Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  For the October 2016 public section, the Section 165(d) requirements were considered as a starting point however institutions were more focused on addressing the Agencies’ April 2016 Resolution Plan feedback directly.  Institutions were direct in acknowledging the Agencies’ April 2016 feedback and clearly explained actions and steps taken to address the Agencies’ feedback.
  •  The countdown to July 2017 continues:  Institutions with 2015 Resolution Plans that were deemed “not credible” have allocated significant time and resources to meet the expectations of the October 2016 submission.  In the public section, institutions provided insight not only on progress made to enhance resolvability, but also provided insight on progress made to remediate shortcomings and address the additional 2017 Guidance.  Although progress has been made, additional works remains to meet the July 2017 expectations.

Please refer to the attached presentation for additional details on the responses and key capabilities, by theme, that were discussed in the October 2016 Public Plan sections.

Next steps

All eight US G-SIBs should assess their completed and planned actions to understand where they stand relative to one another.  The public section does not disclose specific details of individual actions or capabilities but institutions can review peer public sections to understand the types of capabilities and approach taken to address the regulatory expectations.

In addition, senior management should continue to be proactive in providing appropriate oversight in responding to identified shortcomings such that the shortcomings do not evolve into additional deficiencies.

Finally, institutions should continue to communicate with the FRB and FDIC to determine that strategies implemented are in line with regulatory expectations as they prepare to submit their next full plans by July 1, 2017.

For more information, refer to our high level summary here.

1 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, “Agencies Post Public Sections of ‘Targeted Submissions’ for Eight Firms,” (October 4, 2016), available at http://www.federalreserve.gov/newsevents/press/bcreg/20161004a.htm
2 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, “Agencies Announce Determinations and Provide Feedback on Resolution Plans of Eight Systemically Important, Domestic Banking Institutions,” (April 13, 2016), available at http://www.federalreserve.gov/newsevents/press/bcreg/20160413a.htm
3 Id.

Posted by Marlo Karp, Advisory Partner, Deloitte & Touche LLP on October 14, 2016.

 

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