FDIC joins Fed in issuing proposal on resolving large banks; proposes guidelines for appeals of material supervisory determinations

An advance notice of proposed rulemaking (ANPR) on resolving large banking institutions, as well as proposed guidelines for appeals of material supervisory determinations and including accounting standards updates on troubled debt restructurings (TDRs) under a final rule of deposit insurance assessments, were all approved by the federal bank deposit insurance fund board Tuesday.

The Federal Deposit Insurance Corp. (FDIC) Board approved all three actions during its meeting Tuesday. More specifically:

  • ANPR on resolving large banking institutions: The FDIC became the second of the three federal banking agencies to issue the ANPR (for 60 days of comment), following action the previous week by the Federal Reserve. The proposal is designed to boost banking regulators’ abilities to resolve non-global systemically important banks (GSIBs) “in an orderly way” should they fail. The proposal includes potential new requirements – including a long-term debt requirements – and resources that would be used for an orderly resolution of large institution. The proposal was partly spurred by merger activity among the banks (those with more than $100 billion in assets) and asset growth increasing the size of large banking organizations. The regulators note a concern that, If they were to fail, their large size could complicate efforts by regulators to resolve the firms without disruption to customers and counterparties.
    In a statement, acting FDIC Board Chair Martin Gruenberg said the proposal “is the first step in developing an approach, in conjunction with the Federal Reserve, to address the risks associated with the resolution of large banks, including the risks to the Deposit Insurance Fund, to the customers and counterparties of the banks, to local communities, and to the safety and soundness and stability of the banking system.”
  • Including accounting standards updates on TDRs under final rule on assessments: The agency said the final assessment regulation (also issued Tuesday and which raises deposit insured assessments by 2%) defines restructured loans through a new term, “modifications to borrowers experiencing financial difficulty.” It uses two financial measures to do that – the underperforming assets ratio and the higher-risk assets ratio – that will be used to determine deposit insurance assessments for large and highly complex insured depository institutions.
  • Proposed guidelines for appeals of material supervisory determinations: The agency said the proposal would expand and clarify the role of the agency’s ombudsman in the supervisory appeals process, require that materials considered by the Supervision Appeals Review Committee (SARC) be shared with both parties to the appeal (subject to applicable legal limitations on disclosure); and allow insured depository institutions to request a stay of a material supervisory determination while an appeal is pending. The notice requests comment within thirty (30) days of publication in the Federal Register.

FDIC Board of Directors Approves Advance Notice of Proposed Rulemaking Regarding Resolution–Related Resource Requirements for Large Banking Organizations

Final Rule on Assessments – Amendments to Incorporate Troubled Debt Restructuring Accounting Standards Update

Proposed Amendments to the Guidelines for Appeals of Material Supervisory Determinations