On March 24, 2017, the Federal Reserve Board (FRB) and Federal Deposit Insurance Corporation (FDIC)1 (collectively, the “agencies”) issued guidance to four foreign banking organizations (FBOs) for their next resolution planning submissions (the “2018 Guidance”) and announced credibility determinations for 16 resolution plans submitted by US bank holding companies (BHCs) in 2015.2
Notably, the agencies extended—from July 1, 2017 to July 1, 2018—the date by which the FBOs must submit their next resolution plans, but did not release credibility determinations for the FBOs’ 2015 resolution plans.
The agencies did not identify deficiencies in any of the plans submitted by the 16 US BHCs, but did identify shortcomings in one of the plans.
For a more detailed analysis of the credibility determinations for the resolution plans submitted by the 16 US BHCs, please click here.
Key takeaways for FBOs
For the four FBOs in the FRB’s Large Institution Supervision Coordinating Committee (LISCC) portfolio—Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, and UBS AG—the agencies provided guidance on key areas, including capital, liquidity, governance, operational capabilities, branches, the group resolution plan, legal entity rationalization and separability, derivatives and trading activities, and the public section of the plan.
There is now an increased expectation for capabilities established through the build out of the governance, risk management, capital, and liquidity stress testing capabilities that may need to be further extended to meet the 2018 Guidance.
The four LISCC FBOs should assess their previous resolution planning submissions and analyze the 2018 Guidance to determine what changes they may need to make. In addition, these FBOs should carefully review the identified shortcomings and deficiencies among US BHCs and seek to avoid similar issues in these areas.
Finally, institutions should continue to communicate with the FRB and FDIC to determine that the strategies implemented are in line with regulatory expectations as they prepare to submit their next resolution plans.
As further developments occur, Deloitte will issue additional updates as appropriate.
1Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, “Agencies complete resolution plan evaluation of 16 domestic firms; provide resolution plan guidance to four foreign banking organizations,” (March 24, 2017), available here.
2On August 2, 2016, the FRB and FDIC extended, from December 31, 2016 to December 31, 2017, the deadline for these 16 US BHCs—as well as 20 FBOs and two nonbank financial companies designated by the Financial Stability Oversight Council for enhanced supervision by the FRB—to file their next resolution plans. See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, “Agencies extend deadline for 38 resolution plan submissions,” (August 2, 2016), available here.
3Board 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 here.
4Board of Governors of the Federal Reserve System, “Heightened Supervisory Expectations for Recovery and Resolution Preparedness for Certain Large Bank Holding Companies – Supplemental Guidance on Consolidated Supervision Framework for Large Financial Institutions (SR letter 12-17/CA letter 12-14)”, (January 24, 2014), available here.