GAO study outlines liquidation authority for dealing with failed big banking firms

A report that looks at current options for winding down a failed, systemically important banking firm (GSIB) in an orderly fashion was released Tuesday by the Government Accountability Office (GAO).

The report, as directed under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), focuses on the effectiveness of the bankruptcy code in facilitating the orderly liquidation or reorganization of financial companies and ways to make the orderly liquidation process under the code more effective. In this study, the GAO reviewed proposed legislation, regulations, prior GAO reports, and agency reports and presentations on financial company bankruptcies, the orderly liquidation authority (OLA) created under Dodd-Frank as an alternative to bankruptcy for resolving failed GSIBs, and resolution planning; and it reviewed comments received by regulators on resolution planning rules adopted last year by the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board under the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA).

The GAO report makes no new recommendations but summarizes the numerous vehicles available to regulators to dealing with filing GSIBs and other large firms. A table that summarizes categories and filing requirements under the FDIC and Fed’s resolution plans rule begins on p. 13.

The report was submitted to the chairs and ranking members of the House Financial Services Committee, Senate Banking Committee, and House and Senate Judiciary committees; the director of the Administrative Office of the United States Courts: and the chairs of the FDIC and Fed Board (among others).

Financial Company Bankruptcies: Congress and Regulators Have Updated Resolution Planning Requirements (GAO-20-608R)