8 large, complex banks to address COVID-19 response in ‘targeted’ resolution plans due in July 2021

The nation’s eight largest and most complex banks will be required to provide information about their response to events surrounding the coronavirus (COVID-19) in “targeted” resolution plans due to the Federal Reserve and Federal Deposit Insurance Corp. (FDIC) by July 1, 2021.

The two agencies, in an announcement Wednesday, said they had provided the information needed in the targeted plans. The targeted plans, provided for under rule changes adopted late last year, are a subset of a full resolution plan, or “living will,” describing the firms’ strategy for rapid and orderly resolution in bankruptcy should they experience material financial distress or failure.

The 2021 targeted plans will be the first such plans required under last year’s final rule.

As the agencies explained in their letters this week to covered institutions, the targeted plan must include core elements of a firm’s resolution plan – such as capital, liquidity, and recapitalization strategies – and show how the firm has integrated changes to and lessons learned from its response to the coronavirus into its resolution planning process.

Last year, regulators found shortcomings in the full resolution plans of Bank of America, Bank of New York Mellon, Citigroup, Morgan Stanley, State Street, and Wells Fargo. (Examples included measures of capital and liquidity at relevant subsidiaries.) The letters issued this week let certain unnamed banks (or bank) know that their action plan submitted this March addressing those shortcomings were “making progress.” Any remaining shortcomings would be reviewed in connection with review of the 2021 “targeted” plan, they said. (The plans of the other two banks in last year’s process – Goldman Sachs and J.P. Morgan Chase – exhibited no shortcomings, the agencies said then.)

Separately from the resolution plans, the FDIC and Fed this week said they also recently completed a review of “critical operations,” which are operations at certain firms whose failure or discontinuance would threaten U.S. financial stability, and informed the firms of their findings. The regulators said they plan to complete another such review by July 2022 that will include a “further, broader evaluation of the framework used to identify critical operations.”

Agencies Provide Largest Firms with Information for Next Resolution Plans

Letter outlining resolution planning info