Fed, FDIC Issue "Living Will" Rule
The Federal Reserve Board of Governors, along with the Federal Deposit Insurance Corporation (FDIC), has issued a final rule implementing the "living will" requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The rule establishes guidelines under which large banking companies and other systemically important financial firms must annually submit plans, to the Fed and FDIC, for rapid and orderly resolution in bankruptcy during times of financial distress. The rule applies to bank holding companies with assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Federal Reserve.
A firm’s resolution plan must include a strategic analysis of the plan's components, a description of the range of actions the company proposes to take in resolution, and a description of the company's organizational structure, management information systems, and its interconnections and interdependencies with other financial institutions.
Under the final "living will" rule, companies will submit their initial resolution plans on a staggered basis. The first group of companies, generally those with $250 billion or more in nonbank assets, must submit their initial plans by July 1, 2012. The second group of companies, generally those with $100 billion to $250 billion in nonbank assets, must submit initial plans by July 1, 2013. The remaining companies, generally those subject to the rule with less than $100 billion in total nonbank assets, must submit their initial plans on or before December 31, 2013.
The "living will" requirement is meant as a step toward addressing the too-big-to-fail issue.
October 28, 2011