Big U.S. Banks Get Three-Month Extension for ‘Living Wills’Rick Green and Jesse Hamilton
The Federal Reserve and Federal Deposit Insurance Corp. gave large U.S. banks an additional three months to draw up “living wills” to assist regulators in winding them down in case of a future insolvency.
The agencies also provided new detail on what information the living wills should contain, including obstacles that might arise from taking the banks apart safely under the bankruptcy code, according to a statement today from the regulators. The documents, originally due July 1, are now due Oct. 1.
Institutions with non-bank assets greater than $250 billion had to file plans last year. Those 11 banks, including JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc., must now provide a second version of the living will, and a group of the next largest banks must file for the first time.
Regulators are looking for more detailed information on “global issues, financial market utility interconnections, and funding and liquidity, as well as to provide analysis to support the strategies and assumptions contained in the firms’ resolution plans,” according to the statement.
The resolution plans, designed to ease the fallout from a credit crisis similar to the one in 2008, were mandated by the 2010 Dodd-Frank Act. The aim of the living wills is to give regulators a plan for shutting down complex financial firms in the bankruptcy courts, without resorting to taxpayer bailouts.
FDIC Chairman Martin Gruenberg said last month that in the second round, regulators will press banks over any credibility gaps in their plans.
Gruenberg promised the banks as recently as last month they would get further guidance on what the agencies expect in the second round. Those working on the massive documents had been asking the agencies for more information as the deadline approached.