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Board of Governors of the Federal Reserve System
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Resolution Plan Assessment Framework and Firm Determinations (2016)

Progress to Date

Important changes have been made to the structure and operations of the largest financial firms, which may improve resolvability. In particular:

  • Each of the firms, including affiliates, has adhered to the International Swaps and Derivatives Association (ISDA) 2015 Universal Resolution Stay Protocol. The protocol is intended to provide for temporary stays on certain default and early termination rights within ISDA and other standard derivatives contracts.2 The temporary stays may mitigate certain contagion effects that were seen during the financial crisis.
  • Many of the firms maintain substantial amounts of long-term debt issued from their holding companies that could potentially be used to absorb losses following entry into bankruptcy proceedings. The Board has issued a proposed regulation requiring firms to maintain sufficient amounts of long-term debt, which would provide a source of private capital, to support the firms' critical operations during resolution.3
  • Many firms have taken steps to ensure that intercompany services shared by multiple affiliates will continue to be available to those affiliates in resolution. This will reduce the potential that failure of one subsidiary within a firm will disrupt the operations of its affiliates and will enhance the ability to separate affiliates within a firm for resolution.
  • Many firms have modified their service contracts with key vendors to provide for the continuation of services as long as the firm continues to perform its obligations under the terms of the contract.
  • Many firms have developed proposals to further rationalize their legal entity structure and some have taken steps to develop options for the sale of discrete businesses under different market conditions, which will increase the flexibility of the firm during resolution.
  • Firms have enhanced their capability to monitor and track liquidity needs under normal and stressed conditions at both the consolidated and material entity level.

References

2. For more information, see the press release on the Board's public website: www.federalreserve.gov/newsevents/press/bcreg/20141011a.htm and on the FDIC's public website: www.fdic.gov/news/news/press/2014/pr14083.html. Return to text

3. For more information, see the press release on the Board's public website: www.federalreserve.gov/newsevents/press/bcreg/20151030a.htm. Return to text

Last update: June 30, 2016

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