ABA raises concerns about FDIC’s proposed resolution plan changes

The FDIC’s proposed new requirements for resolution plans for certain banks contain several aspects that would be impractical to implement, the American Bankers Association said today in comments to the agency. The FDIC put forward the proposal in August partly in response to the Silicon Valley Bank and Signature Bank failures earlier this year and its decision to use the Deposit Insurance Fund to cover uninsured depositors at both institutions. Among the proposed changes, the FDIC would require banks with more than $100 billion in assets to submit a resolution plan that does not rely on an over-the-weekend sale in the event of a failure. The agency is also seeking additional information and analysis from banks with $50 billion to $100 billion in assets.

In its letter, ABA said that while resolution planning requires exhaustive work from both regulators and affected banks, “we acknowledge the enhanced resiliency, reduced systemic vulnerability and enhanced public confidence that those efforts have yielded.” However, the proposal risks compromising those efforts, it said. For example, the additional information that must be included in resolution plans would extend to information that institutions do not have or control. The proposal also would expand the FDIC’s criteria for what is considered a “credible” plan in a way that is unacceptably arbitrary, and it does not outline specific requirements concerning the agency’s expectations for a bank’s capabilities testing, ABA said.

ABA also urged that any individualized FDIC feedback on resolution plans should be treated as confidential supervisory information and not publicized, except to facilitate coordination between home and host country resolution planning where applicable. “Broad-based industry guidance, however, should be made publicly available with an opportunity for prior notice and comment,” the association added.