Gruenberg: Progress on Resolving SIFIs ‘Impressive,’ ‘Underappreciated’

In a speech today at a Washington, D.C., think tank, FDIC Chairman Martin Gruenberg described the “impressive” progress the FDIC and Federal Reserve have made toward building a regulatory structure to resolve a failing systemically important financial institution.

Gruenberg summarized progress thus far in implementing living wills, reducing interconnectedness, developing orderly liquidation authority and coordinating with regulators in other countries. Remaining on the to-do list, he said, are a Fed rule to codify compliance with a voluntary protocol on staying cross-border contracts, as well as “deepening cross-border relationships” more generally.

“There has been a transformational change in the United States and internationally since the financial crisis in regard to the resolution of systemically important financial institutions that perhaps has been underappreciated,” Gruenberg concluded, adding that should the FDIC have to use its OLA, “shareholders would lose their investments, unsecured creditors would suffer losses in accordance with the losses of the firm, culpable management would be replaced, and the firm would be wound down and liquidated in an orderly manner at no cost to taxpayers.”