UPDATED: Revised ‘living will’ guidance for 8 biggest U.S. banks out for comment

Revised resolution plan, or “living will,” guidance for the eight largest, most complex U.S. banks was released by the Federal Reserve Board and Federal Deposit Insurance Corp. (FDIC) Friday for a 60-day public comment period that begins upon its publication in the Federal Register.

The living will requirement, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), currently applies to Bank of America Corporation, The Bank of New York Mellon Corporation, Citigroup Inc., the Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corporation and Wells Fargo & Company.

The proposed guidance would apply beginning with the July 1, 2019, resolution plan submissions by the firms. It’s largely similar to guidance issued in April 2016, the agencies said, with updates to the regulators’ expectations for how a firm’s resolution strategy should address derivatives and trading activities, and the firm’s payment, clearing, and settlement (PCS) activities.

The update to the derivatives guidance sets expectations for firms regarding their capability to book, monitor, and identify their derivatives exposures, including for exposures that transfer risks between affiliates. The proposed guidance, the agencies noted, also reduces burden by eliminating certain information requirements. “The proposed PCS update directs firms in their resolution planning to take account of both the firm’s role as a user of PCS services and as a provider of PCS services for clients,” they said.

A bank’s resolution plan must describe the company’s strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company. “The resolution planning process helps ensure that a firm’s failure would not have serious adverse effects on the financial stability of the United States,” the agencies said.

Joint Fed/FDIC proposal for comment (Federal Register notice)

Agencies seek comment on proposed 2019 resolution plan guidance