Foreign Banks Get an Extra Year to File U.S. Living Wills

  • Barclays, Credit Suisse, Deutsche Bank, UBS Group given delay
  • Regulators acknowledge ‘significant restructuring’ by lenders

The Federal Reserve Board and the Federal Deposit Insurance Corporation granted four foreign banks an extra year to submit an update to their resolution plans, the blueprints all big banks operating in the U.S. must have for dealing with their failure in a crisis.

The banks, London-based Barclays Plc, Credit Suisse Group AG in Zurich, Frankfurt’s Deutsche Bank AG and Zurich-based UBS Group AG, were given to July 1, 2017, to make the submission, the Fed and FDIC said Wednesday in a statement.

The extension was granted “in light of the significant restructuring these companies are undertaking” to comply with the Fed’s Intermediate Holding Company requirement by the deadline of July 1 this year, the regulators said. The IHC requirement was set by the Fed in 2014 as part of tougher prudential standards.

Annually updated resolution plans, mandated by the 2010 Dodd-Frank Act for all banks with assets exceeding $50 billion, must include a bank’s proposals for managing a “rapid and orderly resolution in the event of material financial distress or failure of the company,” according to the Fed’s website.

Stress Test

Still, the change isn’t a substantive one given that regulators were likely to take a pragmatic approach to foreign banks’ efforts, said George Karamanos, a bank analyst at KBW Inc. The need for an extension does raise questions about the banks’ planning processes and how they’ll fare in the Fed’s annual stress test, said Chris Wheeler, an analyst at Atlantic Equities in London.

“The Fed has thrown their hands up in the air and said, ‘This isn’t good but we need them to do this correctly,”’ Wheeler said. “It tells you the challenges they’re facing in the new world of foreign banking rules in the U.S.”

When the agencies recently responded to the plans of eight of the largest U.S. banks -- rejecting five of those in April -- they left out the four big non-U.S. firms. Though those companies still haven’t heard what the regulators thought of their plans, the four will get the same follow-up deadline that the U.S. banks were given.

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