Fed, FDIC provide more info for resolution plans due Dec. 17, final guidance for certain FBOs

More information for the 15 banks due to submit targeted resolution plans, or “living wills,” by Dec. 17 plus final guidance for the resolution plans of certain large foreign banking organizations (FBOs) were issued jointly Wednesday by the Federal Reserve and Federal Deposit Insurance Corp. (FDIC).

The Fed and FDIC also published a template “feedback” letter noting that weaknesses cited in 2018 in resolution plans for Barclays, Credit Suisse, Deutsche Bank, and UBS “have been remediated” in the 2020 plans submitted this fall.

For the 15 large foreign and domestic banks due to submit plans Dec. 17 (next Thursday), the agencies said these targeted plans will be required to include core elements of a firm’s resolution strategy – such as capital, liquidity, and recapitalization strategies – as well as how each firm has integrated changes to and lessons learned from its response to the coronavirus into its resolution planning process. The information applies to foreign and domestic banks in categories II and III of the large bank regulatory framework, they said.

The 15 banks due to submit the plans next week include Barclays, Bank of Montreal, BNP Paribas, Capital One Financial Corporation, Credit Suisse, Deutsche Bank, HSBC Holdings plc, Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc., Northern Trust Corporation, The PNC Financial Services Group Inc., Sumitomo Mitsui Financial Group Inc., The Toronto-Dominion Bank, UBS, and U.S. Bancorp.

The final guidance issued Wednesday is for the resolution plans of certain large foreign banks – those that are Category II firms according to their combined U.S. operations under the Fed’s tailoring rule and are required to have a U.S. intermediate holding company (IHC) under the Fed’s Regulation YY. This final guidance, the agencies said, includes several modifications from the March proposal.

“The agencies tailored their expectations around resolution capital and liquidity, derivatives and trading activity, as well as payment, clearing, and settlement activities,” they said in Wednesday’s release. “The scope of the guidance was also modified to generally cover foreign banks in category II of the agencies’ large bank regulatory framework. As a result, the guidance will apply to the 2021 resolution plans from Barclays, Credit Suisse, and Deutsche Bank, and also to MUFG for its full plan due in 2024.”

The final guidance, according to the joint notice, becomes effective upon its publication in the Federal Register.

Agencies announce several resolution plan actions