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