Agencies Finalizes Resolution Plan Guidance for Certain FBOs

The FDIC and Federal Reserve today finalized guidance for the resolution plans submitted by certain foreign banking organizations starting with the 2021 round of “living wills.” The final guidance—which was significantly revised from the proposal issued in March– is the first issued since the agencies last fall tailored the process for submitting resolution plans required under Section 165(d) of the Dodd-Frank Act.

The final guidance includes tailored expectations around resolution capital and liquidity, derivatives and trading activity, as well as payment, clearing and settlement activities. The scope of the guidance was also modified to generally cover foreign banks in category II of the agencies’ large bank regulatory framework. Accordingly, three FBOs would be subject to the guidance for their plan submissions for 2021, and an additional FBO would be subject to the guidance for its full plan due in 2024.

The agencies also announced today that weaknesses previously identified in the resolution plans for Barclays, Credit Suisse, Deutsche Bank and UBS have been remediated. They also provided information for large foreign and domestic banks that will inform the content of their next resolution plans, which now are due Dec. 17, 2021.

The agencies are asking Category II and III banks filing targeted resolution plans in December 2021 to address capital, liquidity, and the banks’ plans for executing any contemplated recapitalization. Firms will also be asked to describe linkages between the bank’s coronavirus response and resolution-related capabilities and lessons learned, including their relevance for ongoing resolution planning.

Specifically, they should address several factors including: the reporting and escalation of information, including pandemic-related reporting challenges; the pandemic’s effects on operational continuity; and, for foreign banking organizations, the extent to which financial or operational resources were provided by the parent company and/or by other non-U.S. affiliates to U.S. subsidiaries, the agencies said.