On August 5, 2014, the Federal Reserve Board (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) announced they has completed their reviews of the 2013 resolution plans submitted by eleven large, complex banking organizations. The Agencies identified what they jointly termed to be “shortcomings” in the 2013 resolution plans for these eleven firms (referred to as the First-Wave Filers – please see explanation in the Background section) and indicated they will need to be addressed in the firms’ 2015 plans to be submitted in July of that year (the 2014 submissions have already been completed). In particular, the Agencies state the July 2015 plans must demonstrate that the firms are making “significant progress” to address all of the shortcomings identified by the Agencies, and that the firms are taking actions to improve their resolvability under the U.S. Bankruptcy Code.
Each of the firms received a letter from the Agencies that addressed shortcomings specific to their own resolution plan. Although the shortcomings of the plans varied across the individual firms, common features identified by the Agencies included:
The Agencies have “agreed that in the event that the [F]irst-[W]ave [F]ilers have not, on or before July 1, 2015, submitted plans responsive to the identified shortcomings, the [A]gencies expect to use their authority under [S]ection 165(d) to determine that a resolution plan does not meet the requirements of the Dodd-Frank Act” (Dodd-Frank Wall Street Reform and Consumer Protection Act). Such authority permits the Agencies, following a joint determination, to require resubmission of the resolution plan, and, in the event an acceptable plan is not submitted in a timely manner, to impose more stringent capital, leverage, or liquidity requirements, or restrictions on the growth, activities, or operations of the company, and to order divestitures, if the deficiencies remain uncured.