Resolution Plan Assessment Framework and Firm Determinations (2016)
PrintThe Resolution Planning Process to Date
In October 2011, the Federal Reserve Board (Board) and the Federal Deposit Insurance Corporation (FDIC) issued a final rule to implement section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).5 The resolution plan rule established an iterative process mandating that firms submit resolution plans and requiring each plan to describe the company's strategy for rapid and orderly resolution in bankruptcy during times of financial distress.
The rule requires each firm's resolution plan to include a strategic analysis of the plan's components, a description of the range of specific actions the company proposes to take in resolution, and a description of the company's organizational structure, material entities, interconnections and interdependencies, and management information systems. The rule also provides that resolution plans are made up of a confidential section that contains confidential supervisory and proprietary information submitted to the agencies, and a section that the agencies make available to the public. Public sections of resolution plans can be found on the agencies' websites.6
Companies subject to the rule were generally divided into three groups: first-wave filers 7 (companies with $250 billion or more in nonbank assets); second-wave filers (companies with nonbank assets between $100 billion and $250 billion); and third-wave filers (all other companies with total consolidated assets of $50 billion or more).
By statute, the Board and the FDIC each review the resolution plans, and may jointly determine that a plan is not credible or would not facilitate an orderly resolution of the company under the U.S. Bankruptcy Code. If the Board and the FDIC make such a joint determination, they must jointly notify the firm of the plan's deficiencies. After receiving a joint notice of deficiencies, a company must submit a revised resolution plan that addresses the jointly identified deficiencies, and otherwise complies with the requirements of the implementing rule. The implementing rule generally requires that the revised resolution plan explain how the firm has remediated the jointly identified deficiencies including any associated changes to operations or structure the firm proposes to make. As described earlier, the agencies are requiring the firms that received a joint determination for their July 2015 plans to file a targeted submission, not a full resolution plan, by October 1, 2016. That targeted submission will be treated as the revised resolution plan as described in the implementing rule.
If the company fails to submit a revised resolution plan within the required time period or if the Board and the FDIC jointly determine that a revised resolution plan does not adequately remedy the deficiencies, the agencies may jointly determine that the company or its subsidiary shall be subject to more stringent capital, leverage, or liquidity requirements, or restrictions on the growth, activities, or operations of the firm.
These requirements or restrictions can be lifted when the Board and the FDIC jointly determine the company has submitted a revised resolution plan that adequately remedies the deficiencies. If, after two years from the joint imposition of more stringent requirements, a company still has not adequately addressed the joint deficiencies, the Board and the FDIC, in consultation with the Financial Stability Oversight Council, may jointly, by order, direct the company to divest assets or operations.
References
5. See the agencies' resolution plan final rule (Board: 12 CFR 243; FDIC: 12 CFR 381): www.gpo.gov/fdsys/pkg/FR-2011-11-01/html/2011-27377.htm. Return to text
6. See the public sections of resolution plans submitted to the agencies at www.federalreserve.gov/bankinforeg/resolution-plans.htm and www.fdic.gov/regulations/reform/resplans/. Return to text
7. The first-wave filers for this document are Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and State Street. Wells Fargo was originally a second-wave filer but, having received guidance that was also provided to the first-wave firms, is now being reviewed as part of the first-wave group. Return to text
