Changes in insured-bank resolution plan requirements contemplated in FDIC ANPR

The federal insurer of bank deposits is inviting input on possible changes to its resolution planning requirements for insured depository institutions (IDIs), including a potential change in the $50 billion asset threshold for covered institutions, through an advance notice of proposed rulemaking (ANPR).

The Federal Deposit Insurance Corp. (FDIC) IDI rules on resolution planning arise from the Federal Deposit Insurance Act and focus on the agency’s ability to resolve bank failures in a way that ensures depositors access to their funds, maximizes the return from the sale of assets and minimizes losses to creditors. The possible changes out for comment are based on the FDIC’s experience with its IDI rule and with resolving bank failures. Given last year’s changes in Dodd-Frank Act resolution plan requirements for bank holding companies (BHCs) implemented under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) – in particular, the asset thresholds for institutions subject to such requirements – the FDIC says that a review of the IDI rule’s $50 billion assets threshold is also warranted.

Different approaches are being considered. Under one alternative, FDIC said it is considering categorizing IDIs subject to the IDI rule into three groups: Group A, including the largest and most complex IDIs, which would be required to submit resolution plans with content requirements that would be streamlined compared to the current IDI rule; Group B, including larger, more complex regional IDIs, which would be required to submit resolution plans that are more streamlined and involve less content; and Group C, including IDIs that are smaller and less complex, which would no longer be required to submit resolution plans. The agency would follow up with all the institutions periodically regarding specific items that are related to resolution planning; these IDIs also would continue to be subject to periodic testing of certain capabilities relating to resolution planning and implementation.

The second alternative, the agency says, would categorize IDIs into two groups: larger IDIs (comprising Group A and Group B IDIs) and Group C IDIs. Larger IDIs would be required to submit resolution plans with streamlined content requirements individually targeted to each institution’s size, complexity, and other factors related to resolvability. Group C IDIs would no longer be required to submit resolution plans.

The FDIC said it has served as receiver for more than 525 failed insured depository institutions since 2008 (the height of the financial crisis). “These failures caused the [Deposit Insurance Fund] temporarily to become insolvent and threatened its liquidity, yet the FDIC remained able to discharge its duties through collection of prepaid and special assessments and recoveries from failed bank receiverships,” it said. “Appropriate resolution planning is important to ensure that the FDIC maintains the capabilities required to ensure depositors have access to insured deposits as soon as possible and to minimize potential losses to the DIF and other creditors.”

The ANPR is out for a 60-day comment period that begins upon its publication in the Federal Register, scheduled Monday.

Resolution Plans Required for Insured Depository Institutions with $50 Billion or More in Total Assets