Big Banks Submit New Round of ‘Living Wills’ to U.S. Regulators

The largest banks have begun submitting a second round of plans to U.S. regulators outlining how they could be safely taken apart if they fail.

Eleven banks including JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) faced a deadline today to submit so-called living wills, and some have started to file, said Andrew Gray, a Federal Deposit Insurance Corp. spokesman. The plans required by the 2010 Dodd-Frank Act must describe hypothetical orderly bankruptcies for the global financial giants. The FDIC and Federal Reserve will assess the plans for credibility.

The financial overhaul included this process to counter the market perception that some banks are so big that their failure would demand a government rescue. A bank that can’t show how it could pass through bankruptcy without threatening the wider financial system could be forced by regulators to restructure and sell off units. The FDIC was also given power to take a firm over and wind it down if its failure would still pose too great a threat.

As the two agencies gather the plans today, they are preparing to release limited public portions on their websites. The rest of the documents will remain private.

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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