Board of Governors of the Federal Reserve System

The revised final guidance includes several improvements from the proposal. For example, it explicitly states that the agencies are not prescribing a preferred resolution strategy for any firm, instead preserving the role of each firm's management to adopt whatever strategy they deem appropriate based on the unique characteristics of the firm. The revised guidance also does not include expectations around derivatives and trading activities for specified firms that have limited derivatives and trading operations, acknowledging that the current rule sufficiently addresses this topic. Finally, the guidance also extends the resolution plan submission deadline for firms subject to the guidance from March 31, 2025 to October 1, 2025, with the goal of providing firms sufficient time to factor the revised guidance into their resolution plans.

While the final guidance is improved over the proposal, I continue to have several reservations, and would hope that the agencies revisit resolution planning rules and guidance over time as we learn more about the real-world utility of these plans.

As a threshold matter, I think we should ask whether a holding company-level resolution plan is needed for large banks that predominantly hold their assets in a bank subsidiary. Under the Federal Deposit Insurance Corporation's (FDIC) insured depository institution rule, large banks with more than $100 billion in assets are required to submit comprehensive resolution plans, with more limited resolution planning requirements for banks with between $50 billion and $100 billion in assets. I think we should revisit over time whether the incremental benefit of requiring a holding company-level resolution plan for a large bank that holds predominantly all of its assets in a bank subsidiary is worth the burden and expense to the firm in preparing the plan, and the allocation of resources by agency staff to review the plan.

At the time the agencies proposed this resolution planning guidance in 2023, they concurrently proposed a rule that would require certain holding companies and their bank subsidiaries to issue and maintain outstanding a minimum amount of long-term debt, debt that could be "bailed-in" to recapitalize the firm in the event of the firm's resolution. The agencies acknowledged that a long-term debt requirement could have a material impact on a firm's resolution strategy. Despite the link between these efforts, the agencies are finalizing resolution planning guidance without a clear path forward on the proposed long-term debt requirement. I am concerned that this bifurcated approach will be confusing to firms, and potentially waste resources as firms start working to prepare a 2025 resolution plan submission that need not address any new long-term debt requirements—even if such requirements are adopted before the plan is submitted. In addition to any new long-term debt requirement, also outstanding are plans to revise Basel III capital standards, standards that also may impact a firm's capital structure, preferred resolution strategy, and business plans over time. Coordinating these various rulemaking and guidance initiatives would have been more efficient and productive, and would likely have resulted in resolution plans that are more informative to regulators.

Lastly, I would note that the revised resolution plan guidance retains a scaled back expectation that some firms provide a "least-cost resolution" analysis. Under the final guidance, firms would not be required to conduct the same analysis that the FDIC would conduct during resolution proceedings. While the guidance provides some additional detail about supervisory expectations for what a firm's least-cost analysis should include, I remain concerned that firms may face challenges in producing reliable and useful information.

I would note that the FDIC considered this guidance at a public FDIC Board meeting on July 30. In my view, addressing important matters in a public forum helps promote transparency about the work of the agency. The process would have been much more transparent had the Board followed the lead of the FDIC in considering this matter during a public meeting.

Finally, I want to recognize and express my appreciation for the staffs of the Federal Reserve and the FDIC in reviewing public comments on the proposal, and working collaboratively to prepare the revised final resolution planning guidance.