Bank Holding Companies with $50 billion Assets to Submit Annual Resolution Plans to FDIC, Fed Reserve

  • By: Staff Editor
  • Date: November 18, 2011
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In October 2011, the Federal Reserve Board approved a final rule that will implement the resolution plan requirement, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule will come into effect from November 30, 2011.

The Dodd-Frank Act was enacted in 2010 as a result of the financial crisis that destabilized the world economy and the effects of which are still reverberating around the world. To improve financial stability, the Act included a provision that each nonbank financial company supervised by the Federal Reserve board and each bank holding company with total consolidated assets of $50 billion or more should periodically submit to the Board, the Federal Deposit Insurance Corporation (FDIC) and the Financial Stability Oversight Council a plan for its rapid and orderly resolution in the event of financial distress/bankruptcy.
What is a resolution plan?
A resolution plan or a “living will” should describe the company's strategy for rapid and orderly resolution in bankruptcy during times of financial distress.
A company’s resolution plan should include the following elements:
  • A strategic analysis describing the covered company’s plan for rapid and orderly resolution
  • A description of the range of specific actions the company proposes to take in resolution
  • Funding, liquidity and capital needs, and resources available mapped to critical operations and core business lines
  • A description of the company's:
    • Organizational structure,
    • Material entities,
    • Interconnections and interdependencies, and
    • Management information systems.
  • Time period needed to execute successfully execute each step of the resolution plan
  • How resolution planning is integrated into the corporate governance structure of the company
  • Policies, procedures, and internal controls governing preparation and approval of the resolution plan
  • Identity and position of senior management official in charge of designing and executing the resolution plan
  • Risk measures used by the company to report credit risk exposures both internally to its senior management and board of directors
Resolution plan approval
Before a company submits its resolution plan, the plan should be approved by:
  • The Board of Directors of the company and noted in the minutes
  • In case of a foreign based company that is covered by the rule, a delegee authorized by the Board of Directors can approve the resolution plan
Submission of resolution plans
Under the final rule, companies will submit their initial resolution plans on a staggered basis, i.e.:
Type of company
Deadline for submission of initial plans
Companies with $250 billion or more in non-bank assets
On or before July 1, 2012
Companies with $100 billion or more, but less than $250 billion, in total non-bank assets
On or before July 1, 2013
Remaining companies (Subject to the rule with less than $100 billion in total non-bank assets)
On or before December 31, 2013
After the initial resolution plan is submitted, each covered company is required to submit an updated resolution plan annually on or before the anniversary date of the date for submission of its initial plan.
Resolution plan preliminary review
When a covered company submits a resolution plan, the Federal Reserve Board and FDIC will preliminarily review a resolution plan for informational completeness within 60 days.
If the plan is judged to be incomplete, or needs additional information, the company will be informed and have to re-submit the revised resolution plan within 30 days of being notified.
Non-compliance with final rule
The Federal Reserve Board and FDIC will review the resolution plans for compliance with the final rule requirements. If the reviewers decide that the plan does not fulfill compliance requirements or will not facilitate an orderly resolution of the covered company under the Bankruptcy Code, the company will be notified.
A revised resolution should be re-submitted within 90 days of receiving notification. This revised resolution plan should detail:
  • The revisions made by the company to address the deficiencies
  • Any changes to the company’s business operations and corporate structure that it proposes to undertake to facilitate implementation of the revised resolution plan (including a timeline for the execution of such planned changes); and
  • Why the company believes that the revised resolution plan is credible and will result in its orderly resolution under the Bankruptcy Code.
Failure to submit a revised resolution plan could result in the Federal Reserve Board and FDIC subjecting the company or any of its subsidiaries to more stringent capital, leverage, or liquidity requirements or restrictions on growth, activities, or operations. These restrictions would remain in effect until the company has submitted its revised resolution plan.
If the company fails to submit this revised resolution plan within a two year period (beginning from the date on which the restrictions came into effect), the Federal Reserve Board, FDIC and the Financial Stability Oversight Council may direct it to divest its assets and operations.
Additional Resources
Read the Federal Reserve Board’s Final Rule Implementing the Resolution Plan Requirement


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