Agencies Find No Deficiencies in Largest Banks’ ‘Living Wills’

The Federal Reserve and FDIC today determined that the nation’s eight largest banks did not have “deficiencies” in their July 2017 resolution plans, which detail how they would be resolved in the event of failure. Deficiencies would have required them to resubmit their plans and possibly face more stringent requirements.

Regulators did note that four firms — Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo — have “shortcomings” in their plans: less severe weaknesses that will need to be addressed in the next round of plan submissions, due July 1, 2019. The agencies did not identify shortcomings in the plans submitted by Bank of New York Mellon, Citigroup, J.P. Morgan Chase and State Street.

While acknowledging that significant progress has been made with respect to the living-will process, regulators highlighted a need for more focus by all the institutions on intra-group liquidity, internal loss-absorbing capacity, derivatives and payment, clearing and settlement activities.

ABA welcomed today’s announcement, noting that both regulators and banks have gained insights over several years of the iterative resolution planning process and that improvements have been made with each round of submissions. ABA added that the positive results also support moving to a biennial rather than annual schedule for living wills submissions — which regulators have previously said that they are contemplating. For more information, contact ABA’s Hu Benton.