Resolution Plans Required for Insured Depository Institutions With $100 Billion or More in Total Assets; Informational Filings Required for Insured Depository Institutions With at Least $50 Billion But Less Than $100 Billion in Total Assets

The Federal Deposit Insurance Corporation (FDIC) has launched and published in the Federal Register a consultation on proposed revisions to the resolution plan submission requirements of insured depository institutions (IDIs). The revisions would thereby include changes to the submission frequency, changes to the contents of the submission plans depending upon the size of an insured depository institution, and changes to the regulatory powers of the FDIC relating to submission plans in an effort to enhance the FDIC’s readiness to manage material distress and potential failures of large IDIs.
It may be worth noting in this context that the FDIC would lift a current moratorium on banks with assets ranging from US$50 billion to US$100 billion, which has exempted them from submitting resolution plans since 2018, making them subject to the proposed new resolution plan requirements.
#### The key proposed changes include the following:
The FDIC proposes to divide large IDIs into two categories: Group A IDIs with assets exceeding US$100 billion, and Group B IDIs with assets between US$50 billion and US$100 billion. Group A IDIs would be obliged to furnish comprehensive resolution plans that encompass all elements outlined in the proposal. This includes a detailed resolution strategy suitable for an orderly and efficient resolution as well as the capability to provide essential valuations necessary for conducting a least-cost analysis during an actual failure. In contrast, Group B IDIs would be required to submit informational filings, which would omit the resolution strategy and valuation capabilities, but include most other specified informational elements.
Furthermore, the FDIC would require that Group A IDIs incorporate an „identified strategy“ in their resolution plans, outlining how the FDIC could establish, stabilize, and exit from a Bridge Depository Institution (BDI) in the event of a failure. While the proposal designates the BDI strategy as the default approach, IDIs would have the option to propose an alternative strategy, provided the strategy meets specific criteria and offers meaningful execution options across various scenarios. Importantly, the proposal explicitly prohibits the use of a „closing weekend sale“ as the identified strategy.
The FDIC also plans to make revisions to the standards used for assessing the credibility of resolution plans. The first pillar, which exclusively applies to Group A IDIs, would specify that a submission would be deemed non-credible if it does not ensure timely access to insured deposits, maximize asset value, minimize losses for creditors, and address potential adverse effects on the U.S. economy and financial stability. The second pillar would apply to both Group A and Group B IDIs and establishes non-credibility, if a submission lacks observable and verifiable data, reasonable projections, or fails to comply materially with the proposal’s requirements.
The FDIC also plans to collect new data in the resolution plans including, among others, „off-balance sheet exposures; collateral pledged; trading, derivatives, and hedges; unconsolidated balance sheet and consolidated schedules; payment, clearing, and settlement systems; capital structure and funding sources; affiliate funding, transactions, accounts, exposures, and concentrations; and cross-border elements“.
Furthermore, the FDIC plans to set out rules for its engagement with IDIs. Thereafter, the proposal would grant discretion to the FDIC in determining the relevance of information and personnel access required for rule compliance. Additionally, it would empower the FDIC to request capabilities testing, ensuring IDIs can perform as described in their submissions, including the provision of necessary information, data, and analysis.
Finally, the FDIC proposes to modify the submission frequency from an annual cycle to a two-year cycle. IDIs would be required to submit either a comprehensive resolution plan (Group A IDIs) or an informational filing (Group B IDIs). An interim supplement in between the two years of the most recent comprehensive submissions would have to be provided by either Group IDIs. This supplement would provide updates to key information and a limited subset of required content items.
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The consultation will be open for public comment up to November 30, 2023.