The largest, internationally active domestic banks have implemented significant structural and operational improvements that have enhanced their resolvability, exhibited by the fact that none of the large banks have yet had to put into effect their resolution plans, the chairman of the federal agency that insures bank deposits said Monday.
Jelena McWilliams, chairman of the Federal Deposit Insurance Corp. (FDIC), said in a video message that significant work has been done, but no U.S. global systemically important bank (G-SIB) has had to put its resolution plan into action – “fortunately,” she said. “Our work to address obstacles and strengthen the resolvability of these institutions continues.”
McWilliams was addressing in the video the Single Resolution Board (SRB) Conference in Brussels, Belgium. The SRB is the central resolution authority within the Banking Union (BU), an international agency set up by the European Union to ensure banks in the bloc are stronger and better supervised.
“U.S. agencies also have worked to develop strategies that would facilitate the resolution of failing financial institutions in an orderly fashion,” McWilliams said. “A primary goal is for losses to be absorbed by the shareholders and unsecured creditors of the holding company, thus avoiding the taxpayer bailouts and instability we faced in the most recent financial crisis.”
She said her agency and the SRB at the principal and senior staff levels have worked closely on cooperation and resolution planning for G-SIBs with assets and operations in the United States and the BU. “We have formed Crisis Management Groups that have brought together firms and ‘home and host’ authorities to discuss resolution planning,” she said. “We have developed information-sharing arrangements to support this work, and we have engaged in a number of international operational exercises to test and improve our readiness.
“This is a strong foundation that should allow us to address challenges together.”
In other comments, the FDIC leader noted that regulators should be “mindful” of the role of non-systemic banks. “In the United States, the FDIC and other banking agencies are actively working to further tailor our regulations to take into account the size and business models of institutions, while maintaining the ability of the agencies to ensure safety and soundness and resolve banks in an orderly way,” she said.
(In the video clip: McWilliams discusses ways that the agency is attempting to improve transparency , including surrounding the resolution process.)