U.S. Banking Agencies Issue Template for Bank ‘Living Wills’

U.S. regulators released a template to help certain banks with more than $50 billion in assets write initial plans for their own liquidation with minimal disruption to the financial system in case they fail.

The template issued today by the Federal Reserve and Federal Deposit Insurance Corp. is meant to guide banks with at least $50 billion in total consolidated assets but less than $100 billion in nonbank assets through filing their opening round of “living wills” by a Dec. 31 deadline. The more than 130 banks in that category include U.S. Bancorp (USB) and SunTrust Banks Inc. (STI) and foreign banks with limited U.S. operations.

Smaller and less complex firms among the under-$100 billion banks -- those unlikely to shake the financial system in a collapse -- can follow the template to write tailored resolution plans focusing on nonbank operations and their connection to banking operations, the agencies said.

The 2010 Dodd-Frank Act required banks with assets greater than $50 billion to file living wills outlining how they could be dismantled in bankruptcy without threatening the financial system or needing a taxpayer bailout. The law aimed to lessen the impact of big-bank failures such as the 2008 collapse of Lehman Brothers Holdings Inc. Banks with more than $100 billion in nonbank assets already filed the annual plans, with JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and others among the biggest firms filing last year.

The optional, 27-page template simplifies the process that had produced massive documents from the largest institutions. Foreign-based banks with less than $100 billion in U.S. nonbank assets and non-bank financial institutions designated systemically important by the Financial Stability Oversight Council will be included among those who can consider the template.

Wells Fargo & Co. (WFC) and HSBC Holdings Plc (HSBA) were among four banks filing their first plans in July. Eleven of the biggest banks are approaching the deadline for their second plans on Oct. 1.

To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net.

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