Guidance for Resolution Plan Submissions of Domestic Triennial Full Filers, 64626-64641 [2023-19267]
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Federal Register / Vol. 88, No. 180 / Tuesday, September 19, 2023 / Notices
FEDERAL RESERVE SYSTEM
[Docket No. OP–1816]
FEDERAL DEPOSIT INSURANCE
CORPORATION
RIN 3064–ZA37
Guidance for Resolution Plan
Submissions of Domestic Triennial
Full Filers
Board of Governors of the
Federal Reserve System (Board) and
Federal Deposit Insurance Corporation
(FDIC).
ACTION: Proposed guidance; request for
comments.
AGENCY:
The Board and the FDIC
(together, the agencies) are inviting
comments on proposed guidance for the
2024 and subsequent resolution plan
submissions by certain domestic
banking organizations. The proposed
guidance is meant to assist these firms
in developing their resolution plans,
which are required to be submitted
pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act, as
amended (the Dodd-Frank Act), and the
jointly issued implementing regulation
(the Rule). The scope of application of
the proposed guidance would be
domestic triennial full filers (specified
firms or firms), which are domestic
Category II and III banking
organizations. The proposed guidance is
based on the agencies’ review of the
specified firms’ 2021 and prior
resolution plan submissions, as well as
the agencies’ experiences resolving
several large domestic banking
organizations, and would describe the
agencies’ expectations regarding several
aspects of the specified firms’ plans for
an orderly resolution under the U.S.
Bankruptcy Code. The agencies invite
public comment on all aspects of the
proposed guidance.
DATES: Comments must be received by
November 30, 2023.
ADDRESSES: Interested parties are
encouraged to submit written comments
jointly to both agencies. Comments
should be directed to:
Board: You may submit comments,
identified by Docket No. OP–1816, by
any of the following methods:
• Agency Website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
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SUMMARY:
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• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Ann E. Misback, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551.
In general, all public comments will
be made available on the Board’s
website at www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, and will not be modified to
remove confidential, contact or any
identifiable information. Public
comments may also be viewed
electronically or in paper in Room M–
4365A, 2001 C St. NW, Washington, DC
20551, between 9:00 a.m. and 5:00 p.m.
during federal business weekdays.
FDIC: You may submit comments,
identified by RIN 3064–ZA37, by any of
the following methods:
• FDIC Website: https://
www.fdic.gov/resources/regulations/
federal-register-publications/. Follow
the instructions for submitting
comments on the FDIC’s website.
• Email: comments@fdic.gov. Include
‘‘RIN 3064–ZA37’’ on the subject line of
the message.
• Mail: James P. Sheesley, Assistant
Executive Secretary, Attention:
Comments-RIN 3064–ZA37, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery/Courier: Comments
may be hand delivered to the guard
station at the rear of the 550 17th Street
NW building (located on F Street NW)
on business days between 7 a.m. and 5
p.m.
• Public Inspection: Comments
received, including any personal
information provided, may be posted
without change to https://www.fdic.gov/
resources/regulations/federal-registerpublications/. Commenters should
submit only information that the
commenter wishes to make available
publicly. The FDIC may review, redact,
or refrain from posting all or any portion
of any comment that it may deem to be
inappropriate for publication, such as
irrelevant or obscene material. The FDIC
may post only a single representative
example of identical or substantially
identical comments, and in such cases
will generally identify the number of
identical or substantially identical
comments represented by the posted
example. All comments that have been
redacted, as well as those that have not
been posted, that contain comments on
the merits of this document will be
retained in the public comment file and
will be considered as required under all
applicable laws. All comments may be
accessible under the Freedom of
Information Act.
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FOR FURTHER INFORMATION CONTACT:
Board: Catherine Tilford, Deputy
Associate Director, (202) 452–5240,
Elizabeth MacDonald, Assistant
Director, (202) 475–6316, Tudor Rus,
Lead Financial Institution Analyst, (202)
475–6359, Division of Supervision and
Regulation; or Jay Schwarz, Assistant
General Counsel, (202) 452–2970;
Andrew Hartlage, Special Counsel, (202)
452–6483; Sarah Podrygula, Senior
Attorney, (202) 912–4658; or Brian
Kesten, Senior Attorney, (202) 843–
4079, Legal Division, Board of
Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
For users of TTY–TRS, please call 711
from any telephone, anywhere in the
United States.
FDIC: Robert C. Connors, Senior
Advisor, (202) 898–3834, Division of
Complex Financial Institution
Supervision and Resolution; Celia Van
Gorder, Senior Counsel, (202) 898–6749;
Esther Rabin, Counsel, (202) 898–6860,
erabin@fdic.gov, Legal Division.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Overview of the Proposed Guidance
III. Paperwork Reduction Act
Appendix: Text of the Proposed Guidance
I. Background
A. The Dodd-Frank Act and the Rule
Section 165(d) of the Dodd-Frank
Act 1 and the Rule 2 require certain
financial institutions to report
periodically to the Board and the FDIC
their plans for rapid and orderly
resolution under the U.S. Bankruptcy
Code (the Bankruptcy Code) in the event
of material financial distress or failure.
The Rule divides covered companies
into three groups of filers: (a) biennial
filers; (b) triennial full filers; and (c)
triennial reduced filers.3
Triennial full filers under the Rule are
required to file a resolution plan every
three years, alternating between full and
targeted resolution plans.4 The Rule
requires each covered company’s full
resolution plan to include, among other
things, a strategic analysis of the plan’s
components, a description of the range
of specific actions the covered company
proposes to take in resolution, and a
description of the covered company’s
organizational structure, material
1 12
U.S.C. 5365(d).
CFR parts 243 and 381.
3 12 CFR 243.4 and 12 CFR 381.4. The terms
‘‘covered company’’ and ‘‘triennial full filer’’ have
the meanings given in the Rule, as do other, similar
terms used throughout this proposal.
4 12 CFR 243.4(b) and 12 CFR 381.4(b).
2 12
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entities, and interconnections and
interdependencies.5 Targeted resolution
plans are required to include a subset of
information contained in a full plan.6 In
addition, the Rule requires that all
resolution plans consist of two parts: a
confidential section that contains any
confidential supervisory and proprietary
information submitted to the agencies
and a section that the agencies make
available to the public.7 Public sections
of resolution plans can be found on the
agencies’ websites.8
B. Recent Developments
Implementation of the Rule has been
an iterative process aimed at
strengthening the resolution planning
capabilities of financial institutions
subject to the Rule. To assist the
development of covered companies’
resolution planning capabilities and
plan submissions, the agencies have
provided feedback on individual plan
submissions, promulgated guidance to
certain groups of covered companies,
and issued answers to frequently asked
questions. The agencies believe that
guidance can help focus the efforts of
similarly situated covered companies to
improve their resolution capabilities
and clarify the agencies’ expectations
for those filers’ future progress. The
agencies have issued guidance to: (a)
U.S. global systemically important
banks (GSIBs); 9 which constitute the
biennial filer group; and (b) certain large
foreign banking organizations (FBOs)
that are triennial full filers.10 The
agencies have not, however, issued
guidance to the domestic firms and
additional FBOs that make up the
remainder of the triennial full filers.
As the agencies previously
indicated,11 they believe that it is now
appropriate to issue guidance to the
specified firms. The agencies’ review of
the 2021 targeted resolution plans
submitted by domestic triennial full
filers revealed significant
inconsistencies in the amount and
nature of information they provided on
critical informational elements required
5 12
CFR 243.5 and 12 CFR 381.5.
CFR 243.6(b) and 12 CFR 381.6(b).
7 12 CFR 243.11(c) and 12 CFR 381.11(c).
8 The public sections of resolution plans
submitted to the agencies are available at
www.federalreserve.gov/supervisionreg/resolutionplans.htm and www.fdic.gov/regulations/reform/
resplans/.
9 Guidance for § 165(d) Resolution Plan
Submissions by Domestic Covered Companies
applicable to the Eight Largest, Complex U.S.
Banking Organizations, 84 FR 1438 (Feb. 4, 2019)
(2019 GSIB Guidance).
10 Guidance for Resolution Plan Submissions of
Certain Foreign-Based Covered Companies, 85 FR
83557 (Dec. 22, 2020) (2020 FBO Guidance).
11 https://www.federalreserve.gov/newsevents/
pressreleases/bcreg20220930a.htm.
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by the Rule. In addition, some
resolution plans included optimistic
assumptions regarding the availability
of financial resources at the firm at the
time of a bankruptcy filing as well as the
ability of a firm to access financial
assistance prior to and during
resolution. The agencies believe that
future resolution plans from these firms
would benefit from guidance regarding
critical informational elements required
by the Rule as well as appropriate
assumptions.
The proposed guidance also reflects
the agencies’ recent experience with
Silicon Valley Bank (SVB), Signature
Bank (SB), and First Republic Bank
(First Republic). While SVB, SB, and
First Republic were not required to file
resolution plans under section 165(d) of
the Dodd-Frank Act and the Rule, the
effects of their failures illustrate that the
failure of a large insured depository
institution (IDI) may have serious
adverse effects on financial stability in
the United States.12 This experience
illustrates the importance of issuing
guidance to domestic triennial full filers
(many of which have large subsidiary
IDIs) to assist their progress in
developing plans for an orderly
resolution in the event of material
financial distress or failure.
C. Resolution Plan Strategy
The specified firms have adopted one
of two resolution strategies: a single
point of entry (SPOE) or multiple point
of entry (MPOE) strategy. The SPOE and
MPOE resolution plan strategies require
firms to consider different risks and
require different types of planning and
development of capabilities for the
execution of the respective strategies.
The agencies do not prescribe a specific
resolution strategy for any covered
company, nor do the agencies identify a
preferred strategy. The proposed
guidance is not intended to favor one
strategy or another. Specified filers may
continue to submit resolution plans
using the resolution strategies they
believe would be most effective in
achieving an orderly resolution of their
firms, but a resolution plan must
address the key vulnerabilities and
support the underlying assumptions
required to successfully execute the
chosen resolution strategy.
12 For
example, the FDIC—upon the
recommendation of two-thirds of each of the board
of directors of the FDIC and the Board, as well as
a determination by the Secretary of the Treasury, in
consultation with the President—resolved SVB and
SB using the systemic risk exception to the
statutory requirement to employ the least-costly
method to resolve a failed IDI. https://
www.federalreserve.gov/newsevents/pressreleases/
monetary20230312b.htm; https://www.fdic.gov/
news/press-releases/2023/pr23017.html.
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Under an SPOE strategy for a U.S.
firm, all material entity subsidiaries are
recapitalized and provided with
liquidity, if needed, so that only the top
tier bank holding company (BHC) enters
resolution. The MPOE approach entails
multiple U.S. material entities entering
separate resolution proceedings: any
top-tier U.S. material entity holding
company enters bankruptcy; any U.S.
material entity IDI subsidiary is resolved
separately under the Federal Deposit
Insurance Act of 1950, as amended (the
FDI Act); and other individual U.S.
material entity subsidiaries separately
enter bankruptcy (or another
appropriate resolution regime) or are
wound down. All of the specified firms
presented an MPOE strategy in their
2021 targeted resolution plan
submissions.
D. Long-Term Debt Rulemaking
The agencies, as well as the Office of
the Comptroller of the Currency, are
issuing a proposed rule for comment
that would require certain large IDI
holding companies, U.S. intermediate
holding companies of FBOs, and certain
IDIs, to issue and maintain outstanding
a minimum amount of long-term debt
(LTD), among other proposed
requirements.13 This proposed rule
would improve the resolvability of these
firms, and, in particular, their IDI
subsidiaries, in case of failure, reducing
costs to the Deposit Insurance Fund
(DIF), and mitigating financial stability
and contagion risks by reducing the risk
of loss to uninsured depositors. LTD
issued by the IDI could help support
resolution strategies by, among other
things, recapitalizing a bridge
depository institution and facilitating its
exit from resolution as a newly
chartered IDI that would have new
ownership. The agencies expect that a
final long-term debt rule could interact
with how the specified firms plan for
resolution under the Rule, and the
agencies anticipate ensuring that the
final resolution plan guidance for
domestic triennial full filers is
consistent with any final long-term debt
rule. Accordingly, the agencies welcome
comments that take the proposed longterm debt rulemaking into
consideration.14
II. Overview of the Proposed Guidance
The proposed guidance begins with
the proposed scope and then is
organized into several substantive
13 This proposed rulemaking is published
elsewhere in this Federal Register.
14 The public also may provide comments on the
proposed guidance that assume that no long-term
debt rule is finalized and that specified firms
remain subject to current capital rules.
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topical areas. Each substantive topic is
bifurcated, with separate guidance for
an SPOE resolution strategy and an
MPOE resolution strategy. As discussed,
each resolution strategy poses distinct
risks and requires its own type of
planning and capabilities development
for executing the strategy. Accordingly,
the proposed guidance would account
for the different challenges posed by
each approach.
The proposed guidance for firms that
adopt an SPOE resolution strategy is
generally based on the 2019 GSIB
Guidance, with certain modifications
that reflect the specific characteristics of
and potential risks posed by the failure
of the specified firms. Successful
execution of an SPOE strategy relies on
the ability to provide sufficient capital
and liquidity to material entities, a
governance structure that can identify
the onset of financial stress events, and
the ability to ensure the timely
execution of the strategy and to
maintain continuity of operations
throughout resolution.
The proposed guidance for firms that
utilize an MPOE resolution strategy
incorporates certain aspects of the 2019
GSIB Guidance that the agencies believe
are applicable to large banking
organizations, with modifications
appropriate to this strategy and
institutions with the characteristics
displayed by the specified firms. For
MPOE firms, the proposed guidance
also omits aspects of the 2019 GSIB
Guidance that would not apply in an
MPOE resolution. The agencies are,
however, proposing to clarify their
expectations for specified firms that
utilize an MPOE strategy that includes
the resolution of a material entity that
is a U.S. IDI. As discussed elsewhere in
this proposal, the resolution of a large
U.S. IDI under the FDI Act likely would
pose substantial operational and legal
challenges and complexities.
Accordingly, the agencies believe that
the resolution plans of firms whose
resolution plans contemplate the
separate resolution of a material entity
that is a U.S. IDI would benefit from
developing capabilities specific to and
considering legal requirements
regarding U.S. IDI resolution.
The agencies believe that each
substantive area of the proposed
guidance would play a part in helping
to ensure that the specified firms can be
resolved in an orderly manner. The
proposed guidance would describe the
agencies’ expectations for each of these
areas. In addition, the proposed
guidance would consolidate items of
feedback provided to a number of the
specified firms in the past, thereby
providing the public with one source of
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applicable guidance for the specified
firms. The proposed guidance is not,
however, intended to override the
obligation of an individual specified
firm to respond, in its next resolution
plan submission, to pending items of
individual feedback or any
shortcomings or deficiencies identified
or determined by the agencies in that
specified firm’s prior resolution plan
submission. The proposed guidance also
is not meant to limit specified firms’
consideration of additional
vulnerabilities or obstacles that might
arise based on a firm’s particular
structure, operations, or resolution
strategy, and that should be factored
into the specified firm’s resolution plan
submission.
The proposed guidance concludes
with information about the format and
structure of a plan that applies equally
to plans contemplating either an SPOE
strategy or an MPOE strategy.
A. Scope of Application
The agencies propose to apply the
guidance to all domestic triennial full
filers. The Board’s tailoring framework
provides clear, predictable scoping
based on publicly reported quantitative
data. As discussed above, the agencies
believe that it is appropriate to provide
resolution planning guidance to all
domestic triennial full filers given
issues identified in these firms’ 2021
targeted resolution plans and
considering lessons learned from recent
events.
The agencies would like the specified
firms to submit resolution plans that
take into consideration the final version
of the proposed guidance as soon as
practicable. However, the agencies
understand that the specified firms may
need time to take into consideration the
guidance when developing their
resolution plans. In light of the timing
of this proposal, the agencies are
considering providing a short extension
of the next resolution plan submission
date for the specified firms, with the
expectation that these plan submissions
would be due sooner than one year after
the proposed guidance is published in
final form.
The agencies seek comment on all
aspects of the proposed scope of
application.
Question 1: Should the agencies
provide more than 6 months for the
specified firms to take into
consideration the expectations in the
proposed guidance, once finalized? If
so, what time period should the
agencies provide?
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B. Capital
For specified firms with an SPOE
resolution strategy, the agencies propose
guidance substantially similar to the
2019 GSIB Guidance regarding capital.
The ability to provide sufficient capital
to material entities without disruption
from creditors is important in order to
ensure that material entities can
continue to maintain operations as the
firm is resolved. The proposal describes
expectations concerning the appropriate
positioning of capital and other lossabsorbing instruments (e.g., debt that a
parent holding company may choose to
forgive or convert to equity) among the
material entities within the firm
(resolution capital adequacy and
positioning, or RCAP). The positioning
of capital resources within the firm
should be consistent with any
applicable rules requiring prepositioned
resources in IDIs in the form of longterm debt. The proposal also describes
expectations regarding a methodology
for periodically estimating the amount
of capital that may be needed to support
each material entity after the bankruptcy
filing (resolution capital execution need,
or RCEN).
The agencies are not proposing
further expectations concerning capital
to firms whose plans contemplate an
MPOE resolution strategy, as an MPOE
strategy assumes most material entities
do not continue as going concerns upon
entry into resolution.
Question 2: In addition to the capitalrelated resolution plan requirements
under the Rule, are there other capitalrelated expectations that would
reasonably enhance the resolvability of
a specified firm that utilizes an MPOE
strategy in its resolution plan?
Question 3: Do the capital-related
resolution expectations in the proposed
guidance align with the provisions of
the interagency long-term debt
rulemaking proposal? Are there any
aspects of the proposed guidance that
should be revised, or additional
expectations added, in light of the
interagency long-term debt rulemaking
proposal?
Question 4: Is it appropriate for a
specified firm utilizing an SPOE
resolution strategy to assume, during the
transition period for any final long-term
debt rulemaking, that the entire amount
of debt required under the rule after the
transition period has been issued?
C. Liquidity
For firms that adopt an SPOE
resolution strategy, the agencies propose
guidance substantially similar to the
2019 GSIB Guidance regarding liquidity.
A firm’s ability to reliably estimate and
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meet its liquidity needs prior to, and in,
resolution is important to the execution
of a firm’s resolution strategy because it
enables the firm to respond quickly to
demands from stakeholders and
counterparties, including regulatory
authorities in other jurisdictions and
financial market utilities. Maintaining
sufficient and appropriately positioned
liquidity also allows the subsidiaries to
continue to operate while the firm is
being resolved in accordance with the
firm’s preferred resolution strategy.
For firms that adopt an MPOE
resolution strategy, the agencies propose
that a firm should have the liquidity
capabilities necessary to execute its
preferred resolution strategy, and its
plan should include analysis and
projections of a range of liquidity needs
during resolution.
Question 5: In addition to the
liquidity-related resolution plan
requirements under the Rule and the
liquidity-related expectations in the
proposed guidance, are there other
liquidity related expectations that
would reasonably enhance the
resolvability of a specified firm that
utilizes an MPOE resolution strategy?
Are there circumstances under which it
would be appropriate for a resolution
plan that utilizes an MPOE strategy to
include the movement of liquidity
among material entities that are in
resolution?
D. Governance Mechanisms
For firms using an SPOE resolution
strategy, the agencies propose guidance
that is substantially similar to the 2019
GSIB Guidance regarding governance
mechanisms. An adequate governance
structure with triggers that identify the
onset, continuation, and increase of
financial stress is important to ensure
that there is sufficient time to allow
firms to prepare for resolution, and to
ensure the timely execution of the
resolution strategy. The governance
mechanisms section proposes
expectations that firms have playbooks
that describe the board and senior
management actions necessary to
execute the firm’s preferred strategy. In
addition, the proposal describes
expectations that these firms have
triggers that are linked to specific
actions outlined in these playbooks to
ensure the timely escalation of
information to senior management and
the board, to address the successful
recapitalization of subsidiaries prior to
the parent’s bankruptcy, and to address
how the firm would ensure the timely
execution of a bankruptcy filing. The
proposal also describes the expectations
that firms identify and analyze potential
legal challenges to the provision of
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capital and liquidity to subsidiaries that
would precede the parent’s bankruptcy
filing under an SPOE resolution
strategy, and any defenses and mitigants
to such challenges.
The agencies do not propose issuing
guidance on this topic to firms whose
resolution plans contemplate an MPOE
resolution strategy, as entry of many
types of material entities, including
IDIs, into resolution would be
determined by criteria prescribed in
statute or dependent to some extent on
actions taken by regulatory authorities
in implementing a statute.
Question 6: Should the agencies
consider applying aspects of the
governance mechanisms guidance
developed for an SPOE strategy to
resolution plans utilizing an MPOE
resolution strategy? If, so, what aspects
should be extended to resolution plans
utilizing an MPOE resolution strategy?
Should the agencies consider
developing new governance
mechanisms guidance specific to
resolution plans utilizing an MPOE
resolution strategy?
Question 7: If a specified firm chooses
to switch from utilizing an MPOE
resolution strategy to an SPOE
resolution strategy in its resolution plan,
should the agencies provide a transition
period for a firm to take into
consideration the SPOE-specific
guidance when developing its resolution
planning capabilities and its next
resolution plan? If so, are there aspects
that should have a shorter transition
period, and what period or periods
would be appropriate?
E. Operational
The development and maintenance of
operational capabilities is important to
support and enable execution of a firm’s
preferred resolution strategy, including
providing for the continuation of
identified critical operations and
preventing or mitigating adverse effects
on U.S. financial stability. For firms that
utilize an SPOE resolution strategy, the
agencies propose adopting portions of
the operational expectations of the 2019
GSIB Guidance and SR letter 14–1,15
with modifications that reflect the
specific characteristics and complexities
of the specified firms. Like the 2019
GSIB Guidance, the proposal contains
expectations on payment, clearing and
settlement activities, managing,
identifying and valuing collateral,
management information systems, and
shared and outsourced services. For
firms that utilize an MPOE resolution
strategy, the agencies propose adopting
expectations based on SR letter 14–1
and the 2019 GSIB Guidance that are
most relevant to an MPOE resolution
strategy. For example, the proposed
expectations regarding payment,
clearing and settlement activities are
those most likely to support resolution
in the MPOE context.
F. Legal Entity Rationalization &
Separability
For specified firms that utilize an
SPOE resolution strategy, the agencies
propose substantively adopting the 2019
GSIB Guidance regarding legal entity
rationalization and separability. It is
important that firms maintain a
structure that facilitates orderly
resolution. To achieve this, the proposal
states that a firm should develop and
describe in their plans criteria
supporting its resolution strategy and
integrate them into day-to-day decisionmaking processes. The criteria would be
expected to consider the best alignment
of legal entities and business lines and
facilitate resolvability as a firm’s
activities, technology, business models,
or geographic footprint change over
time. In addition, the proposed
guidance provides that the firm should
identify discrete operations that could
be sold or transferred in resolution to
provide meaningful optionality for the
resolution strategy under a range of
potential failure scenarios and include
this information in their plans.
For firms that utilize an MPOE
resolution strategy, the proposed
guidance would clarify that the firms
should have legal entity structures that
support their preferred resolution
strategy and describe those structures in
their plans. The proposal also provides
that to the extent a material entity IDI
relies upon other affiliates during
resolution, the firm should discuss its
rationale for the legal entity structure
and associated resolution risks and
potential mitigants. In addition, the
agencies propose that the firms include
options for the sale, transfer, or disposal
of significant assets, portfolios, legal
entities, or business lines in resolution.
Question 8: Are there other
separability related expectations that
would reasonably enhance resolution
plans that utilize an MPOE resolution
strategy?
15 SR letter 14–1, ‘‘Principles and Practices for
Recovery and Resolution Preparedness’’ (Jan. 24,
2014), available at https://www.federalreserve.gov/
supervisionreg/srletters/sr1401.htm.
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G. Insured Depository Institution (IDI)
Resolution 16
Background. When an IDI fails and
the FDIC is appointed receiver, the FDIC
generally must utilize the resolution
option for the failed IDI that is least
costly to the DIF of all possible methods
(the least-cost requirement).17 An
exception to this requirement is
provided where a determination is made
by the Secretary of the Treasury, in
consultation with the President and
after a written recommendation from
two-thirds of the FDIC’s Board of
Directors and two-thirds of the Board,
that complying with the least-cost
requirement would have serious adverse
effects on economic conditions or
financial stability and implementing
another resolution option would avoid
or mitigate such adverse effects.18 A
specified firm should not assume the
use of this systemic risk exception to the
least-cost requirement in its resolution
plan.
Purchase and Assumption
Transaction. The FDIC typically seeks
to resolve a failed IDI by identifying,
before the IDI’s failure, one or more
potential acquirers so that as many of
the IDI’s assets and deposit liabilities as
possible can be sold to and assumed by
the acquirer(s) instead of remaining in
the receivership created on the failure
date.19 This transaction form, termed a
‘‘purchase and assumption’’ or ‘‘P&A’’
transaction, has historically been the
resolution approach that is least costly
to the DIF, easiest for the FDIC to
execute, and least disruptive to the
depositors of the failed IDI—particularly
in the case of transactions involving the
assumption of all the failed IDI’s
deposits by the assuming institution (an
‘‘all-deposit transaction’’)—and
typically can be completed over the
weekend following the IDI’s closure by
its primary regulator but before business
16 The FDIC has a separate rule requiring
resolution plans from certain IDIs, 12 CFR 360.10,
‘‘Resolution Plans Required for Insured Depository
Institutions With $50 Billion or More in Total
Assets’’ (the IDI Rule). The Rule and the IDI Rule
each have different goals and the expected content
of the respective resolution plans accordingly also
is different. The Rule requires a covered company
to submit a resolution plan that would allow rapid
and orderly resolution of the covered company
under the Bankruptcy Code in the event of material
financial distress or failure. The purpose of the IDI
Rule is to ensure that the FDIC has access to all of
the material information it needs to efficiently
resolve an IDI in the event of its failure.
17 See 12 U.S.C. 1823(c)(4). A deposit payout and
liquidation of the failed IDI’s assets (payout
liquidation) is the general baseline the FDIC uses in
a least-cost requirement determination. See 12
U.S.C. 1823(c)(4)(D).
18 See 12 U.S.C. 1823(c)(4)(G).
19 See generally https://www.fdic.gov/resources/
resolutions/bank-failures/ for background about the
resolution of IDIs by the FDIC.
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ordinarily would commence the
following Monday (closing weekend).
The limited size and operational
complexity present in most small-bank
failures has allowed the FDIC to execute
a P&A transaction with a single acquirer
on numerous occasions. Resolving an
IDI via a P&A transaction over the
closing weekend, however, may not be
available to the FDIC, particularly in
failures involving large IDIs. P&A
transactions require lead time to
identify potential buyers and allow due
diligence on, and an auction of, the
failing IDI’s assets and banking
business, also termed its ‘‘franchise.’’
Additionally, larger banks can pose
significant, and potentially systemic,
challenges in resolutions. These
challenges include: a more limited pool
of potential acquirers as a failed IDI
increases in size, which makes a
transaction in which nearly all assets
and liabilities are transferred to one or
more acquirers increasingly less likely;
operational complexities which require
advance planning on the part of the IDI
and the FDIC and the development of
certain capabilities; potential market
concentration and antitrust
considerations; and potentially the need
to maintain the continuity of activities
conducted in whole or in part in the IDI
that are critical to U.S. financial
stability.
For example, the largest failed IDI in
U.S. history, Washington Mutual Bank,
had approximately $307 billion in
assets. The DIF did not incur a loss
associated with this failure in part
because it benefitted from the FDIC’s
sale of the institution to an acquirer
which had first engaged in exhaustive
due diligence of the institution during a
self-marketing effort conducted by the
IDI prior to its failure. A more recent
example, that of First Republic Bank,
which was also acquired in an alldeposit transaction, illustrates that such
a transaction can be difficult to
effectuate. The FDIC invited 21 banks
and 21 nonbanks to participate in the
bidding process and received bids from
only four bidders.20 The least costly bid
necessitated a loss-sharing agreement,
and the transaction is expected to result
in a significant loss to the DIF. In
addition, the FDIC received only one
20 See Remarks by Chairman Martin J. Gruenberg
on ‘‘Oversight of Prudential Regulators’’ before the
Committee on Financial Services, United States
House of Representatives available at https://
www.fdic.gov/news/speeches/2023/
spmay1523.html; see also Remarks by Chairman
Martin J. Gruenberg on ‘‘Recent Bank Failures and
the Federal Regulatory Response’’ before the
Committee on Banking, Housing, and Urban Affairs,
United States Senate available at https://
www.fdic.gov/news/speeches/2023/
spmar2723.html.
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viable bid for Silicon Valley Bank
during the weekend following its
failure, but this bid did not satisfy the
least-cost test. The FDIC received no
viable all-deposit bids for Signature
Bank at the time it failed.21
If no P&A transaction that meets the
least-cost requirement can be
accomplished at the time an IDI fails,
the FDIC must pursue an alternative
resolution strategy. The primary
alternative resolution strategies for a
failed IDI are: (1) a payout liquidation;
or (2) utilization of a BDI. The FDIC
conducts payout liquidations by paying
insured deposits in cash or transferring
the insured deposits to an existing
institution or a new institution
organized by the FDIC to assume the
insured deposits (generally, a Deposit
Insurance National Bank or DINB). In
payout liquidations, the FDIC as
receiver retains substantially all of the
failed IDI’s assets for later sale, and the
franchise value of the failed IDI is lost.
Bridge Depository Institution. If the
FDIC determines that temporarily
continuing the operations of the failed
IDI is less costly than a payout
liquidation, it may organize a BDI to
purchase certain assets and assume
certain liabilities of the failed IDI.22
Generally, a BDI would continue the
failed bank’s operations according to
business plans and budgets approved by
the FDIC and carried out by FDICselected leadership of the BDI. In
addition to providing depositors access
to deposits and banking services, the
BDI would conduct any necessary
restructuring required to rationalize the
failed IDI’s operations and maximize
value to be achieved in an eventual sale.
Subject to the least-cost requirement,
the initial structure of the BDI may be
based upon an all-deposit transaction, a
transaction in which the BDI assumes
only the insured deposits, or a
transaction in which the BDI assumes
all insured deposits and a portion of the
uninsured deposits. Once a BDI is
established, the FDIC seeks to stabilize
the institution while simultaneously
planning for the eventual termination of
21 To protect depositors and preserve the value of
the assets and operations of each of SVB and SB
following failure—which can improve recoveries
for creditors and the DIF—the FDIC ultimately
transferred all the deposits and substantially all of
the assets of each failed bank to a full-service bridge
depository institution (BDI) operated by the FDIC
while the FDIC marketed the institutions to
potential bidders.
22 Before a BDI may be chartered, the chartering
conditions set forth in 12 U.S.C. 1821(n)(2) must
also be satisfied. For purposes of this guidance, if
the Plan provides appropriate analysis concerning
the feasibility of the BDI strategy, there is no
expectation that the resolution plan also
demonstrate separately that the conditions for
chartering the BDI have been satisfied.
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the BDI. In exiting and terminating a
BDI, the FDIC may merge or consolidate
the BDI with another depository
institution, issue and sell a majority of
the capital stock in the BDI, or effect the
assumption of the deposits or
acquisition of the assets of the BDI.23
However, many of the same factors that
challenge the feasibility of a traditional
P&A transaction also complicate
planning for the termination of a BDI
through a sale of the whole entity or its
constituent parts. The proposed
guidance would clarify the expectations
for a firm adopting an MPOE resolution
strategy with a material entity IDI to
demonstrate how the IDI can be
resolved in a manner that is consistent
with the overall objective of the Plan to
substantially mitigate the risk that the
failure of the specified firm would have
serious adverse effects on financial
stability in the United States, while also
adhering to the requirements of the FDI
Act regarding failed bank resolutions
without relying on the assumption that
a systemic risk exception will be
available. These expectations would not
be applicable to firms adopting an SPOE
resolution strategy because U.S. IDI
subsidiaries of such firms would not be
expected to enter resolution.
Question 9: Should the guidance
indicate that if a specified filer proposes
a strategy using a BDI to resolve its
subsidiary material entity IDI, the plan
should include a detailed description of
the balance sheet components that
would transfer to the BDI and of the
process the specified filer believes is
most appropriate to value the
transferred components, inclusive of pro
forma balance sheet and income
statements?
Question 10: Should the guidance
indicate that if a specified filer proposes
a strategy using a BDI to resolve its
subsidiary material entity IDI, the plan
should describe and quantify:
• The amounts to be realized through
liquidating the failed IDI’s assets and
any expected premiums associated with
selling the institution’s deposits;
• Any franchise value bid premiums
expected to be realized through
maintaining certain ongoing business
operations in a BDI; and
• A comparison of the loss to the DIF
realized from a payout liquidation and
from utilizing a BDI so as to support the
conclusion that a BDI would result in
the least costly resolution?
H. Derivatives and Trading Activities
The agencies request comment on
whether to provide guidance on
derivatives and trading activities for
23 12
U.S.C. 1821(n)(10).
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specified firms that utilize an SPOE
resolution strategy. Although the
specified firms have limited derivatives
and trading operations compared to the
U.S. GSIBs, it remains important that
their derivatives and trading activities
can be stabilized and de-risked during
resolution without causing significant
disruption to U.S. markets. If the
agencies were to provide guidance on
derivatives and trading activities, the
agencies likely would adopt aspects of
the 2019 GSIB Guidance. The agencies
do not anticipate providing derivatives
and trading activities guidance to
specified firms that utilize an MPOE
resolution strategy.
In the 2019 GSIB Guidance, the
agencies specified the particular
covered companies to which the
derivatives and trading activities
guidance was directed. The agencies
recognize that covered companies may
move in and out of the triennial full filer
category and want to ensure that the
proposal would remain applicable and
relevant regardless of which covered
companies are considered triennial full
filers at any moment in time.
Question 11: Should the agencies
provide resolution plan guidance on
derivatives and trading activities for
specified firms that utilize an SPOE
resolution strategy? If so, what should
be the content of that guidance, what
methodology should the agencies use to
determine the scope of specified firms to
be subject to that guidance, and would
it be appropriate to adopt all or some of
the expectations contained in the 2019
GSIB Guidance? What other derivatives
and trading activities-related
expectations would reasonably enhance
resolution plans that utilize an SPOE
resolution strategy?
Question 12: Should the agencies
provide resolution plan guidance on
derivatives and trading activities for
specified firms that utilize an MPOE
resolution strategy? If so, what should
be the content of that guidance and
what methodology should the agencies
use to determine the scope of specified
firms to be subject to that guidance?
I. Format and Structure of Plans;
Assumptions
This section states the agencies’
preferred presentation regarding the
format, assumptions, and structure of
resolution plans. Plans should contain
an executive summary, a narrative of the
firm’s resolution strategy, relevant
technical appendices, and a public
section as detailed in the Rule. The
proposed format, structure, and
assumptions are generally similar to
those in the 2019 GSIB Guidance,
except that the proposed guidance
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64631
reflects the expectation that a firm
should support any assumptions that it
will have access to the Discount
Window and/or other borrowings
during the period immediately prior to
entering bankruptcy and clarifies
expectations around such assumptions
and that firms should not assume the
use of the systemic risk exception to the
least-cost test in the event of a failure of
an IDI requiring resolution under the
FDI Act. In addition, for firms that adopt
an MPOE resolution strategy, the
proposal includes the expectation that a
plan should demonstrate and describe
how the failure event(s) results in
material financial distress, including
consideration of the likelihood of the
diminution the firm’s liquidity and
capital levels prior to bankruptcy.
Question 13: Certain firms’ plans rely
on lending facilities, including the
Discount Window or other governmentsponsored facilities in the period
immediately preceding a bankruptcy
filing. Should the guidance include
additional clarifications related to
assumptions regarding these lending
facilities? Should the guidance contain
clarifications relating to other
assumptions discussed in the guidance
or additional appropriate assumptions?
Question 14: The agencies included in
the 2019 GSIB Guidance and 2020 FBO
Guidance answers that had been
previously published to frequently asked
questions (FAQs) the agencies received
from the guidance recipients about the
topics in resolution plan guidance (e.g.,
capital, liquidity, etc.); however, there
was no FAQ process for the specified
firms given the limited number of
common questions received. Should the
agencies include in resolution guidance
for the specified firms answers to FAQs
similar to those contained in the 2019
GSIB Guidance and 2020 FBO
Guidance? If so, which answers to FAQs
should the final guidance contain, and
what changes, if any, should the
agencies make to the answers to FAQs
in the 2019 GSIB Guidance and 2020
FBO Guidance?
III. Paperwork Reduction Act
Certain provisions of the proposed
guidance contain ‘‘collections of
information’’ within the meaning of the
Paperwork Reduction Act of 1995 (PRA)
(44 U.S.C. 3501–3521). In accordance
with the requirements of the PRA, the
agencies may not conduct or sponsor,
and a respondent is not required to
respond to, an information collection
unless it displays a currently valid
Office of Management and Budget
(OMB) control number. The agencies
reviewed the proposed guidance and
determined that it would revise the
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reporting revisions that have been
previously approved by OMB under the
Board’s OMB control number 7100–
0346 (Reporting Requirements
Associated with Regulation QQ; FR QQ)
and the FDIC’s control number 3064–
0210 (Reporting Requirements Associate
with Resolution Planning). The Board
has reviewed the proposed guidance
under the authority delegated to the
Board by OMB.
Comments are invited on the
following:
(A) Whether the collections of
information are necessary for the proper
performance of the agencies’ functions,
including whether the information has
practical utility;
(B) the accuracy of the agencies’
estimates of the burden of the
information collections, including the
validity of the methodology and
assumptions used;
(C) ways to enhance the quality,
utility, and clarity of the information to
be collected;
(D) ways to minimize the burden of
the information collections on
respondents, including through the use
of automated collection techniques or
other forms of information technology;
and
(E) estimates of capital or start-up
costs and costs of operation,
maintenance, and purchase of services
to provide information.
Comments on aspects of this
document that may affect reporting,
recordkeeping, or disclosure
requirements and burden estimates
should be sent to the addresses listed in
the ADDRESSES section of the
Supplementary Information. A copy of
the comments may also be submitted to
the OMB desk officer for the Agencies:
By mail to U.S. Office of Management
and Budget, 725 17th Street NW,
#10235, Washington, DC 20503 or by
facsimile to (202) 395–5806, Attention,
Federal Banking Agency Desk Officer.
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Proposed Revisions, With Extension, of
the Following Information Collections
Board
Collection title: Reporting
Requirements Associated with
Regulation QQ.
Collection identifier: FR QQ.
OMB control number: 7100–0346.
Frequency: Triennial, Biennial, and
on occasion.
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Respondents: Bank holding
companies (including any foreign bank
or company that is, or is treated as, a
bank holding company under section
8(a) of the International Banking Act of
1978 and meets the relevant total
consolidated assets threshold) with total
consolidated assets of $250 billion or
more, bank holding companies with
$100 billion or more in total
consolidated assets with certain
characteristics, and nonbank financial
firms designated by the Financial
Stability Oversight Council for
supervision by the Board.
FDIC
Collection title: Reporting
Requirements Associated with
Resolution Planning.
OMB control number: 3064–0210.
Current Actions: The proposed
guidance would apply to all triennial
full filers, but expectations would differ
based on whether a firm adopts an
SPOE or an MPOE resolution strategy
and whether it is foreign or domestic.
The proposed guidance is intended to
clarify the agencies’ expectations
concerning the resolution plans
required pursuant to the Rule. The
document does not have the force and
effect of law. Rather, it describes the
agencies’ expectations and priorities
regarding these the resolution plans of
triennial full filers and the agencies’
general views regarding specific areas
where additional detail should be
provided and where certain capabilities
or optionality should be developed and
maintained to demonstrate that each
firm has considered fully, and is able to
mitigate, obstacles to the successful
implementation of its preferred
resolution strategy.
The proposed guidance for triennial
full filers using an SPOE strategy is
based on the 2019 GSIB guidance (for
domestic firms) and the 2020 FBO
guidance (for foreign firms). It would
clarify the agencies’ expectations
around capital, liquidity, governance
mechanisms, and operations. The
proposed guidance also would clarify
expectations concerning management
information systems capabilities and the
identification of discrete separability
options appropriate to the resolution
strategy. Additionally, if finalized, the
foreign banking organizations that adopt
an SPOE resolution strategy should
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address how their U.S. resolution plan
aligns with their group resolution plan.
The proposed guidance for triennial
full filers using an MPOE resolution
strategy addresses similar topics but
reflects the risks of and capabilities
needed for an MPOE resolution. The
proposed guidance explains the
agencies’ expectations around liquidity
and operational capabilities, and legal
entity rationalization. The proposed
guidance also provides clarified
expectations related to the separate
resolution of a U.S. IDI and to
identification of discrete separability
options. Foreign banking organizations
that adopt an MPOE resolution strategy
would have expectations related to
governance mechanisms; the role of
branches; and the group resolution plan.
The proposed guidance does not
specify expectations around derivatives
and trading activities.
Historically, the Board and the FDIC
have split the respondents for purposes
of PRA clearances. As such, the agencies
will split the change in burden as well.
As a result of this split and the proposed
revisions, there is a proposed net
increase in the overall estimated burden
hours of 13,386 hours for the Board and
17,610 hours for the FDIC. Therefore,
the total Board estimated burden for its
entire information collection would be
216,853 hours and the total FDIC
estimate burden for its entire
information collection would be
211,300 hours.
The following table presents only the
change in the estimated burden hours,
as amended if the guidance were
finalized, broken out by agency. The
table does not include a discussion of
the remaining estimated burden hours,
which remain unchanged.24 As shown
in the table, the Triennial Full filing
types would be estimated more
granularly according to SPOE and
MPOE resolution strategies.
24 In addition to the proposed revisions to the
estimations for Triennial Full filings, the agencies
have revised the estimation for Biennial Full filings
from 40,115 hours per response to 39,550 hours per
response to align the burden estimation
methodology with what was used for Triennial Full
filings under the proposed guidance. Specifically,
the agencies removed a component for a biennial
full filer’s analysis of its critical operations as part
of its submission of targeted and full resolution
plans, because this critical operations analysis is
integrated in the preparation of such plans.
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TABLE 1—BURDEN HOUR ESTIMATES UNDER CURRENT REGULATIONS AND UNDER THE PROPOSED GUIDANCE
Estimated
number of
respondents
FR QQ
Estimated
average
hours per
response
Estimated
annual
frequency
Estimated
annual
burden hours
Board Burdens
Current
Triennial Full:
Complex Foreign ...............................................................................
Foreign and Domestic .......................................................................
1
7
1
1
9,777
4,667
9,777
32,669
Current Total ..............................................................................
Proposed
Triennial Full:
FBO SPOE * ......................................................................................
FBO MPOE .......................................................................................
Domestic MPOE ................................................................................
........................
........................
........................
42,446
2
3
3
1
1
........................
11,848
5,939
5,513
23,696
17,817
16,539
Proposed Total ...........................................................................
........................
........................
........................
58,052
0
7
1
1
9,777
4,667
0
32,669
Current Total ..............................................................................
Proposed
Triennial Full:
FBO SPOE * ......................................................................................
FBO MPOE .......................................................................................
Domestic MPOE ................................................................................
........................
........................
........................
32,669
2
3
2
1
1
1
11,848
5,939
5,513
23,696
17,817
11,026
Proposed Total ...........................................................................
........................
........................
........................
52,539
FDIC Burdens
Current
Triennial Full:
Complex Foreign ...............................................................................
Foreign and Domestic .......................................................................
* There are currently no domestic triennial full filers utilizing a SPOE strategy. Estimated hours per response for a domestic SPOE triennial full
filer would be 11,235 hours.
Section 165(d) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act
(12 U.S.C. 5365(d)) requires certain financial
companies to report periodically to the Board
of Governors of the Federal Reserve System
(the Board) and the Federal Deposit
Insurance Corporation (the FDIC) (together,
the agencies) their plans for rapid and
orderly resolution in the event of material
financial distress or failure. On November 1,
2011, the agencies promulgated a joint rule
implementing the provisions of Section
165(d).1 Subsequently, in November 2019,
the agencies finalized amendments to the
joint rule addressing amendments to the
Dodd-Frank Act made by the Economic
Growth, Regulatory Relief, and Consumer
Protection Act and improving certain aspects
of the joint rule based on the agencies’
experience implementing the joint rule since
its adoption.2 Financial companies meeting
criteria set out in the Rule must file a
resolution plan (Plan) according to the
schedule specified in the Rule.
This document is intended to provide
guidance to certain domestic financial
companies required to submit Plans to assist
their further development of a Plan for their
2024 and subsequent Plan submissions.
Specifically, the guidance applies to any
domestic covered company that is a triennial
full filer under the Rule (specified firms).3
The Plan for a specified firm would address
the subsidiaries and operations that are
domiciled in the United States as well as the
foreign subsidiaries, offices, and operations
of the covered company.
In general, this document is organized
around a number of key challenges in
resolution (capital; liquidity; governance
mechanisms; operational; legal entity
rationalization and separability; and insured
depository institution resolution, if
applicable) that apply across resolution
plans, depending on their strategy.
Additional challenges or obstacles may arise
based on a firm’s particular structure,
operations, or resolution strategy. Each firm
is expected to satisfactorily address these
vulnerabilities in its Plan. In addition, each
1 Resolution Plans Required, 76 FR 67323 (Nov.
1, 2011).
2 Resolution Plans Required, 84 FR 59194 (Nov.
1, 2019). The amendments became effective
December 31, 2019. ‘‘Rule’’ means the joint rule as
amended in 2019. Terms not defined herein have
the meanings set forth in the Rule.
3 See 12 CFR 243.4(b)(1) and 12 CFR 381.4(b)(1).
Appendix: Text of the Proposed
Guidance
Guidance for Resolution Plan
Submissions of Domestic Triennial Full
Filers
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I. Introduction
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topic of this guidance is separated into
expectations for a specified firm that utilizes
a single point of entry (SPOE) resolution
strategy for its Plan and expectations for a
specified firm that utilizes a multiple point
of entry (MPOE) resolution strategy for its
Plan.
Under the Rule, the agencies will review a
Plan to determine if it satisfactorily addresses
key potential challenges, including those
specified below. If the agencies jointly decide
that an aspect of a Plan presents a weakness
that individually or in conjunction with
other aspects could undermine the feasibility
of the Plan, the agencies may determine
jointly that the Plan is not credible or would
not facilitate an orderly resolution under the
U.S. Bankruptcy Code.
II. Capital
SPOE
The firm should have the capital
capabilities necessary to execute its
resolution strategy, including the modeling
and estimation process described below.
Resolution Capital Adequacy and
Positioning (RCAP). In order to help ensure
that a firm’s material entities 4 could operate
while the parent company is in bankruptcy,
the firm should have an adequate amount of
4 The terms ‘‘material entities,’’ ‘‘identified
critical operations,’’ and ‘‘core business lines’’ have
the same meaning as in the Rule.
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loss-absorbing capacity to recapitalize those
material entities. Thus, a firm should have
outstanding a minimum amount of lossabsorbing capacity, including long-term debt,
to help ensure that the firm has adequate
capacity to meet that need at a consolidated
level (external LAC).
A firm’s external LAC should be
complemented by appropriate positioning of
loss-absorbing capacity within the firm (i.e.,
internal LAC), consistent with any applicable
rules requiring prepositioned resources at
IDIs in the form of long-term debt. After
adhering to any requirements related to
prepositioning long-term debt at IDIs, the
positioning of a firm’s remaining resources
should balance the certainty associated with
pre-positioning resources directly at material
entities with the flexibility provided by
holding recapitalization resources at the
parent (contributable resources) to meet
unanticipated losses at material entities. That
balance should take account of both prepositioning at material entities and holding
resources at the parent, and the obstacles
associated with each. With respect to
material entities that are not U.S. IDIs subject
to pre-positioned long-term debt
requirements, the firm should not rely
exclusively on either full pre-positioning or
parent contributable resources to recapitalize
such entities. The Plan should describe the
positioning of resources within the firm,
along with analysis supporting such
positioning.
Finally, to the extent that pre-positioned
resources at a material entity are in the form
of intercompany debt and there are one or
more entities between that material entity
and the parent, the firm should structure the
instruments so as to ensure that the material
entity can be recapitalized.
Resolution Capital Execution Need
(RCEN). To support the execution of the
firm’s resolution strategy, material entities
need to be recapitalized to a level that allows
them to operate or be wound down in an
orderly manner following the parent
company’s bankruptcy filing. The firm
should have a methodology for periodically
estimating the amount of capital that may be
needed to support each material entity after
the bankruptcy filing (RCEN). The firm’s
positioning of resources should be able to
support the RCEN estimates. In addition, the
RCEN estimates should be incorporated into
the firm’s governance framework to ensure
that the parent company files for bankruptcy
at a time that enables execution of the
preferred strategy.
The firm’s RCEN methodology should use
conservative forecasts for losses and riskweighted assets and incorporate estimates of
potential additional capital needs through
the resolution period,5 consistent with the
firm’s resolution strategy. The RCEN
methodology should be calibrated such that
recapitalized material entities will have
sufficient capital to maintain market
confidence as required under the preferred
resolution strategy. Capital levels should
5 The resolution period begins immediately after
the parent company bankruptcy filing and extends
through the completion of the preferred resolution
strategy.
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meet or exceed all applicable regulatory
capital requirements for ‘‘well-capitalized’’
status and meet estimated additional capital
needs throughout resolution. Material
entities that are not subject to capital
requirements may be considered sufficiently
recapitalized when they have achieved
capital levels typically required to obtain an
investment-grade credit rating or, if the entity
is not rated, an equivalent level of financial
soundness. Finally, the methodology should
be independently reviewed, consistent with
the firm’s corporate governance processes
and controls for the use of models and
methodologies.
MPOE
The agencies do not propose issuing
guidance on this topic to firms whose Plans
contemplate a MPOE resolution strategy.
III. Liquidity
SPOE
The firm should have the liquidity
capabilities necessary to execute its preferred
resolution strategy. For resolution purposes,
these capabilities should include having an
appropriate model and process for estimating
and maintaining sufficient liquidity at or
readily available to material entities and a
methodology for estimating the liquidity
needed to successfully execute the resolution
strategy, as described below.
Resolution Liquidity Adequacy and
Positioning (RLAP). With respect to RLAP,
the firm should be able to measure the standalone liquidity position of each material
entity (including material entities that are
non-U.S. branches)—i.e., the high-quality
liquid assets (HQLA) at the material entity
less net outflows to third parties and
affiliates—and ensure that liquidity is readily
available to meet any deficits. The RLAP
model should cover a period of at least 30
days and reflect the idiosyncratic liquidity
profile and risk of the firm. The model
should balance the reduction in frictions
associated with holding liquidity directly at
material entities with the flexibility provided
by holding HQLA at the parent available to
meet unanticipated outflows at material
entities. Thus, the firm should not rely
exclusively on either full pre-positioning or
an expected contribution of liquid resources
from the parent. The model 6 should ensure
that the parent holding company holds
sufficient HQLA (inclusive of its deposits at
the U.S. branch of the lead bank subsidiary)
to cover the sum of all stand-alone material
entity net liquidity deficits. The stand-alone
net liquidity position of each material entity
(HQLA less net outflows) should be
measured using the firm’s internal liquidity
stress test assumptions and should treat
inter-affiliate exposures in the same manner
as third-party exposures. For example, an
overnight unsecured exposure to an affiliate
should be assumed to mature. Finally, the
firm should not assume that a net liquidity
6 ‘‘Model’’ refers to the set of calculations
estimating the net liquidity surplus/deficit at each
legal entity and for the firm in aggregate based on
assumptions regarding available liquidity, e.g.,
HQLA, and third-party and interaffiliate net
outflows.
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surplus at one material entity could be
moved to meet net liquidity deficits at other
material entities or to augment parent
resources.
Additionally, the RLAP methodology
should take into account: (A) the daily
contractual mismatches between inflows and
outflows; (B) the daily flows from movement
of cash and collateral for all inter-affiliate
transactions; and (C) the daily stressed
liquidity flows and trapped liquidity as a
result of actions taken by clients,
counterparties, key FMUs, and foreign
supervisors, among others.
Resolution Liquidity Execution Need
(RLEN). The firm should have a methodology
for estimating the liquidity needed after the
parent’s bankruptcy filing to stabilize the
surviving material entities and to allow those
entities to operate post-filing. The RLEN
estimate should be incorporated into the
firm’s governance framework to ensure that
the firm files for bankruptcy in a timely way,
i.e., prior to the firm’s HQLA falling below
the RLEN estimate.
The firm’s RLEN methodology should:
(A) Estimate the minimum operating
liquidity (MOL) needed at each material
entity to ensure those entities could continue
to operate post-parent’s bankruptcy filing
and/or to support a wind-down strategy;
(B) Provide daily cash flow forecasts by
material entity to support estimation of peak
funding needs to stabilize each entity under
resolution;
(C) Provide a comprehensive breakout of
all inter-affiliate transactions and
arrangements that could impact the MOL or
peak funding needs estimates; and
(D) Estimate the minimum amount of
liquidity required at each material entity to
meet the MOL and peak needs noted above,
which would inform the firm’s board(s) of
directors of when they need to take
resolution-related actions.
The MOL estimates should capture
material entities’ intraday liquidity
requirements, operating expenses, working
capital needs, and inter-affiliate funding
frictions to ensure that material entities could
operate without disruption during the
resolution. The peak funding needs estimates
should be projected for each material entity
and cover the length of time the firm expects
it would take to stabilize that material entity.
Inter-affiliate funding frictions should be
taken into account in the estimation process.
The firm’s forecasts of MOL and peak
funding needs should ensure that material
entities could operate post-filing consistent
with regulatory requirements, market
expectations, and the firm’s post-failure
strategy. These forecasts should inform the
RLEN estimate, i.e., the minimum amount of
HQLA required to facilitate the execution of
the firm’s strategy. The RLEN estimate
should be tied to the firm’s governance
mechanisms and be incorporated into the
playbooks as discussed below to assist the
board of directors in taking timely resolutionrelated actions.
MPOE
The firm should have the liquidity
capabilities necessary to execute its preferred
resolution strategy. A Plan with an MPOE
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strategy should include analysis and
projections of a range of liquidity needs
during resolution, including intraday; reflect
likely failure and resolution scenarios; and
consider the guidance on assumptions
provided in Section VIII, Format and
Structure of Plans; Assumptions.
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IV. Governance Mechanisms
SPOE
Playbooks and Triggers. A firm should
identify the governance mechanisms that
would ensure execution of required board
actions at the appropriate time (as
anticipated under the firm’s preferred
strategy) and include pre-action triggers and
existing agreements for such actions.
Governance playbooks should detail the
board and senior management actions
necessary to facilitate the firm’s preferred
strategy and to mitigate vulnerabilities, and
should incorporate the triggers identified
below. The governance playbooks should
also include a discussion of: (A) the firm’s
proposed communications strategy, both
internal and external; 7 (B) the boards of
directors’ fiduciary responsibilities and how
planned actions would be consistent with
such responsibilities applicable at the time
actions are expected to be taken; (C) potential
conflicts of interest, including interlocking
boards of directors; and (D) any employee
retention policy. All responsible parties and
timeframes for action should be identified.
Governance playbooks should be updated
periodically for all entities whose boards of
directors would need to act in advance of the
commencement of resolution proceedings
under the firm’s preferred strategy.
The firm should demonstrate that key
actions will be taken at the appropriate time
in order to mitigate financial, operational,
legal, and regulatory vulnerabilities. To
ensure that these actions will occur, the firm
should establish clearly identified triggers
linked to specific actions for:
(A) The escalation of information to senior
management and the board(s) to potentially
take the corresponding actions at each stage
of distress leading eventually to the decision
to file for bankruptcy;
(B) Successful recapitalization of
subsidiaries prior to the parent’s filing for
bankruptcy and funding of such entities
during the parent company’s bankruptcy to
the extent the preferred strategy relies on
such actions or support; and
(C) The timely execution of a bankruptcy
filing and related pre-filing actions.8
These triggers should be based, at a
minimum, on capital, liquidity, and market
metrics, and should incorporate the firm’s
methodologies for forecasting the liquidity
and capital needed to operate as required by
the preferred strategy following a parent
company’s bankruptcy filing. Additionally,
the triggers and related actions should be
specific.
7 External communications include those with
U.S. and foreign authorities and other external
stakeholders, such as large depositors and
shareholders.
8 Key pre-filing actions include the preparation of
any emergency motion required to be decided on
the first day of the firm’s bankruptcy.
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Triggers linked to firm actions as
contemplated by the firm’s preferred strategy
should identify when and under what
conditions the firm, including the parent
company and its material entities, would
transition from business-as-usual conditions
to a stress period and from a stress period to
the recapitalization/resolution periods.
Corresponding escalation procedures,
actions, and timeframes should be
constructed so that breach of the triggers will
allow prerequisite actions to be completed.
For example, breach of the triggers needs to
occur early enough to ensure that resources
are available and can be downstreamed, if
anticipated by the firm’s strategy, and with
adequate time for the preparation of the
bankruptcy petition and first-day motions,
necessary stakeholder communications, and
requisite board actions. Triggers identifying
the onset of stress and recapitalization/
resolution periods, and the associated
escalation procedures and actions, should be
discussed directly in the governance
playbooks.
Pre-Bankruptcy Parent Support. The Plan
should include a detailed legal analysis of
the potential state law and bankruptcy law
challenges and mitigants to planned
provision of capital and liquidity to the
subsidiaries prior to the parent’s bankruptcy
filing (Support). Specifically, the analysis
should identify potential legal obstacles and
explain how the firm would seek to ensure
that Support would be provided as planned.
Legal obstacles include claims of fraudulent
transfer, preference, breach of fiduciary duty,
and any other applicable legal theory
identified by the firm. The analysis also
should include related claims that may
prevent or delay an effective recapitalization,
such as equitable claims to enjoin the transfer
(e.g., imposition of a constructive trust by the
court). The analysis should apply the actions
contemplated in the Plan regarding each
element of the claim, the anticipated timing
for commencement and resolution of the
claims, and the extent to which adjudication
of such claim could affect execution of the
firm’s preferred resolution strategy.
The analysis should include mitigants to
the potential challenges to the planned
Support. The Plan should identify the
mitigant(s) to such challenges that the firm
considers most effective. In identifying
appropriate mitigants, the firm should
consider the effectiveness of a contractually
binding mechanism (CBM), pre-positioning
of financial resources in material entities,
and the creation of an intermediate holding
company. Moreover, if the Plan includes a
CBM, the firm should consider whether it is
appropriate that the CBM should have the
following:
(A) Clearly defined triggers;
(B) Triggers that are synchronized to the
firm’s liquidity and capital methodologies;
(C) Perfected security interests in specified
collateral sufficient to fully secure all
Support obligations on a continuous basis
(including mechanisms for adjusting the
amount of collateral as the value of
obligations under the agreement or collateral
assets fluctuates); and
(D) Liquidated damages provisions or other
features designed to make the CBM more
enforceable.
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The firm also should consider related
actions or agreements that may enhance the
effectiveness of a CBM. A copy of any
agreement and documents referenced therein
(e.g., evidence of security interest perfection)
should be included in the Plan.
The governance playbooks included in the
Plan should incorporate any developments
from the firm’s analysis of potential legal
challenges regarding the Support, including
any Support approach(es) the firm has
implemented. If the firm analyzed and
addressed an issue noted in this section in
a prior plan submission, the Plan may
reproduce that analysis and arguments and
should build upon it to at least the extent
described above. In preparing the analysis of
these issues, firms may consult with law
firms and other experts on these matters. The
agencies do not object to appropriate
collaboration between firms, including
through trade organizations and with the
academic community, to develop analysis of
common legal challenges and available
mitigants.
MPOE
The agencies do not propose issuing
guidance on this topic to firms whose Plans
utilize a MPOE resolution strategy.
V. Operational
SPOE
Payment, Clearing, and Settlement
Activities Framework. Maintaining
continuity of payment, clearing, and
settlement (PCS) services is critical for the
orderly resolution of firms that are either
users or providers,9 or both, of PCS services.
A firm should demonstrate capabilities for
continued access to PCS services essential to
an orderly resolution through a framework to
support such access by:
• Identifying clients,10 FMUs, and agent
banks as key from the firm’s perspective,
using both quantitative (volume and value) 11
and qualitative criteria;
• Mapping material entities, identified
critical operations, core business lines, and
key clients to both key FMUs and key agent
banks; and
9 A firm is a user of PCS services if it accesses
PCS services through an agent bank or it uses the
services of a financial market utility (FMU) through
its membership in that FMU or through an agent
bank. A firm is a provider of PCS services if it
provides PCS services to clients as an agent bank
or it provides clients with access to an FMU or
agent bank through the firm’s membership in or
relationship with that service provider. A firm is
also a provider if it provides clients with PCS
services through the firm’s own operations (e.g.,
payment services or custody services).
10 For purposes of this section, a client is an
individual or entity, including affiliates of the firm,
to whom the firm provides PCS services and any
related credit or liquidity offered in connection
with those services.
11 In identifying entities as key, examples of
quantitative criteria may include: for a client,
transaction volume/value, market value of
exposures, assets under custody, usage of PCS
services, and any extension of related intraday
credit or liquidity; for an FMU, the aggregate
volumes and values of all transactions processed
through such FMU; and for an agent bank, assets
under custody, the value of cash and securities
settled, and extensions of intraday credit.
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• Developing a playbook for each key FMU
and key agent bank reflecting the firm’s
role(s) as a user and/or provider of PCS
services.
The framework should address direct
relationships (e.g., a firm’s direct
membership in an FMU, a firm’s provision of
clients with PCS services through its own
operations, or a firm’s contractual
relationship with an agent bank) and indirect
relationships (e.g., a firm’s provision of
clients with access to the relevant FMU or
agent bank through the firm’s membership in
or relationship with that FMU or agent bank).
Playbooks for Continued Access to PCS
Services. The firm is expected to provide a
playbook for each key FMU and key agent
bank that addresses considerations that
would assist the firm and its key clients in
maintaining continued access to PCS services
in the period leading up to and including the
firm’s resolution. Each playbook should
provide analysis of the financial and
operational impact to the firm’s material
entities and key clients due to adverse
actions that may be taken by a key FMU or
a key agent bank and contingency actions
that may be taken by the firm. Each playbook
also should discuss any possible alternative
arrangements that would allow continued
access to PCS services for the firm’s material
entities, identified critical operations and
core business lines, and key clients, while
the firm is in resolution. The firm is not
expected to incorporate a scenario in which
it loses key FMU or key agent bank access
into its preferred resolution strategy or its
RLEN and RCEN estimates. The firm should
continue to engage with key FMUs, key agent
banks, and key clients, and playbooks should
reflect any feedback received during such
ongoing outreach.
Content Related to Users of PCS Services.
Individual key FMU and key agent bank
playbooks should include:
• Description of the firm’s relationship as
a user with the key FMU or key agent bank
and the identification and mapping of PCS
services to material entities, identified
critical operations, and core business lines
that use those PCS services;
• Discussion of the potential range of
adverse actions that may be taken by that key
FMU or key agent bank when the firm is in
resolution,12 the operational and financial
impact of such actions on each material
entity, and contingency arrangements that
may be initiated by the firm in response to
potential adverse actions by the key FMU or
key agent bank; and
• Discussion of PCS-related liquidity
sources and uses in business-as-usual (BAU),
in stress, and in the resolution period,
presented by currency type (with U.S. dollar
equivalent) and by material entity.
Æ PCS Liquidity Sources: These may
include the amounts of intraday extensions
of credit, liquidity buffer, inflows from FMU
participants, and key client prefunded
amounts in BAU, in stress, and in the
resolution period. The playbook also should
12 Examples of potential adverse actions may
include increased collateral and margin
requirements and enhanced reporting and
monitoring.
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describe intraday credit arrangements (e.g.,
facilities of the key FMU, key agent bank, or
a central bank) and any similar custodial
arrangements that allow ready access to a
firm’s funds for PCS-related key FMU and
key agent bank obligations (including margin
requirements) in various currencies,
including placements of firm liquidity at
central banks, key FMUs, and key agent
banks.
Æ PCS Liquidity Uses: These may include
firm and key client margin and prefunding
and intraday extensions of credit, including
incremental amounts required during
resolution.
Æ Intraday Liquidity Inflows and Outflows:
The playbook should describe the firm’s
ability to control intraday liquidity inflows
and outflows and to identify and prioritize
time-specific payments. The playbook also
should describe any account features that
might restrict the firm’s ready access to its
liquidity sources.
Content Related to Providers of PCS
Services.13 Individual key FMU and key
agent bank playbooks should include:
• Identification and mapping of PCS
services to the material entities, identified
critical operations, and core business lines
that provide those PCS services, and a
description of the scale and the way in which
each provides PCS services;
• Identification and mapping of PCS
services to key clients to whom the firm
provides such PCS services and any related
credit or liquidity offered in connection with
such services;
• Discussion of the potential range of firm
contingency arrangements available to
minimize disruption to the provision of PCS
services to its key clients, including the
viability of transferring key client activity
and any related assets, as well as any
alternative arrangements that would allow
the firm’s key clients continued access to
PCS services if the firm could no longer
provide such access (e.g., due to the firm’s
loss of key FMU or key agent bank access),
and the financial and operational impacts of
such arrangements from the firm’s
perspective;
• Descriptions of the range of contingency
actions that the firm may take concerning its
provision of intraday credit to key clients,
including analysis quantifying the potential
liquidity the firm could generate by taking
such actions in stress and in the resolution
period, such as: (i) requiring key clients to
designate or appropriately pre-position
liquidity, including through prefunding of
settlement activity, for PCS-related key FMU
and key agent bank obligations at specific
material entities of the firm (e.g., direct
members of key FMUs) or any similar
custodial arrangements that allow ready
access to key clients’ funds for such
obligations in various currencies; (ii)
13 Where a firm is a provider of PCS services
through the firm’s own operations, the firm is
expected to produce a playbook for the material
entities that provide those services, addressing each
of the items described under ‘‘Content Related to
Providers of PCS Services,’’ which include
contingency arrangements to permit the firm’s key
clients to maintain continued access to PCS
services.
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delaying or restricting key client PCS
activity; and (iii) restricting, imposing
conditions upon (e.g., requiring collateral), or
eliminating the provision of intraday credit
or liquidity to key clients; and
• Descriptions of how the firm will
communicate to its key clients the potential
impacts of implementation of any identified
contingency arrangements or alternatives,
including a description of the firm’s
methodology for determining whether any
additional communication should be
provided to some or all key clients (e.g., due
to the key client’s BAU usage of that access
and/or related intraday credit or liquidity),
and the expected timing and form of such
communication.
Capabilities. The firm is expected to have
and describe capabilities to understand, for
each material entity, the obligations and
exposures associated with PCS activities,
including contractual obligations and
commitments. The firm should be able to:
• Track the following items by: (i) material
entity; and (ii) with respect to customers,
counterparties, and agents and service
providers, location and jurisdiction:
Æ PCS activities, with each activity
mapped to the relevant material entities,
identified critical operations, and core
business lines; 14
Æ Customers and counterparties for PCS
activities, including values and volumes of
various transaction types, as well as used and
unused capacity for all lines of credit; 15
Æ Exposures to and volumes transacted
with FMUs, nostro agents, and custodians;
and 16
Æ Services provided and service level
agreements, as applicable, for other current
agents and service providers (internal and
external).17
• Assess the potential effects of adverse
actions by FMUs, nostro agents, custodians,
and other agents and service providers,
including suspension or termination of
membership or services, on the firm’s
operations and customers and counterparties
of those operations; 18
• Develop contingency arrangements in
the event of such adverse actions; 19 and
• Quantify the liquidity needs and
operational capacity required to meet all PCS
obligations, including any change in demand
for and sources of liquidity needed to meet
such obligations.
Managing, Identifying, and Valuing
Collateral. The firm is expected to have and
describe its capabilities to manage, identify
and value the collateral that it receives from
and posts to external parties and affiliates.
Specifically, the firm should:
• Be able to query and provide aggregate
statistics for all qualified financial contracts
concerning cross-default clauses, downgrade
triggers, and other key collateral-related
contract terms—not just those terms that may
be impacted in an adverse economic
environment—across contract types, business
lines, legal entities, and jurisdictions;
14 12
CFR 243.5(e)(12) and 12 CFR 381.5(e)(12).
15 Id.
16 12
CFR 252.34(h).
CFR 243.5(f)(l)(i) and 12 CFR 381.5(f)(1)(i).
18 12 CFR 252.34(f).
19 Id.
17 12
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• Be able to track both collateral sources
(i.e., counterparties that have pledged
collateral) and uses (i.e., counterparties to
whom collateral has been pledged) at the
CUSIP level on at least a t+1 basis;
• Have robust risk measurements for crossentity and cross-contract netting, including
consideration of where collateral is held and
pledged;
• Be able to identify CUSIP and asset class
level information on collateral pledged to
specific central counterparties by legal entity
on at least a t+1 basis;
• Be able to track and report on interbranch collateral pledged and received on at
least a t+1 basis and have clear policies
explaining the rationale for such inter-branch
pledges, including any regulatory
considerations; and
• Have a comprehensive collateral
management policy that outlines how the
firm as a whole approaches collateral and
serves as a single source for governance.20
Management Information Systems. The
firm should have the management
information systems (MIS) capabilities to
readily produce data on a legal entity basis
and have controls to ensure data integrity
and reliability. The firm also should perform
a detailed analysis of the specific types of
financial and risk data that would be
required to execute the preferred resolution
strategy and how frequently the firm would
need to produce the information, with the
appropriate level of granularity. The firm
should have the capabilities to produce the
following types of information in a timely
manner and describe these capabilities in the
Plan:
• Financial statements for each material
entity (at least monthly);
• External and inter-affiliate credit
exposures, both on- and off-balance sheet, by
type of exposure, counterparty, maturity, and
gross payable and receivable;
• Gross and net risk positions with
internal and external counterparties;
• Guarantees, cross holdings, financial
commitments and other transactions between
material entities;
• Data to facilitate third-party valuation of
assets and businesses, including risk metrics;
• Key third-party contracts, including the
provider, provider’s location, service(s)
provided, legal entities that are a party to or
a beneficiary of the contract, and key
contractual rights (for example, termination
and change in control clauses);
• Legal agreement information, including
parties to the agreement and key terms and
interdependencies (for example, change in
control, collateralization, governing law,
termination events, guarantees, and crossdefault provisions);
• Service level agreements between
affiliates, including the service(s) provided,
the legal entity providing the service, legal
entities receiving the service, and any
termination/transferability provisions;
• Licenses and memberships to all
exchanges and value transfer networks,
including FMUs;
20 The policy may reference subsidiary or related
policies already in place, as implementation may
differ based on business line or other factors.
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• Key management and support personnel,
including dual-hatted employees, and any
associated retention agreements;
• Agreements and other legal documents
related to property, including facilities,
technology systems, software, and
intellectual property rights. The information
should include ownership, physical location,
where the property is managed and names of
legal entities and lines of business that the
property supports; and
• Updated legal records for domestic and
foreign entities, including entity type and
purpose (for example, holding company,
bank, broker dealer, and service entity),
jurisdiction(s), ownership, and regulator(s).
Shared and Outsourced Services. The firm
should maintain a fully actionable
implementation plan to ensure the continuity
of shared services that support identified
critical operations or core business lines and
robust arrangements to support the
continuity of shared and outsourced services,
including, without limitation appropriate
plans to retain key personnel relevant to the
execution of the firm’s strategy. For example,
specified firms should evaluate internal and
external dependencies and develop
documented strategies and contingency
arrangements for the continuity or
replacement of the shared and outsourced
services that are necessary to maintain
identified critical operations or core business
lines. Examples may include personnel,
facilities, systems, data warehouses, and
intellectual property. Specified firms also
should maintain current cost estimates for
implementing such strategies and
contingency arrangements.
The firm should (A) maintain an
identification of all shared services that
support identified critical operations or core
business lines; 21 (B) maintain a mapping of
how/where these services support its core
business lines and identified critical
operations; (C) incorporate such mapping
into legal entity rationalization criteria and
implementation efforts; and (D) mitigate
identified continuity risks through
establishment of service-level agreements
(SLAs) for all shared services that support
identified critical operations or core business
lines.
SLAs should fully describe the services
provided, reflect pricing considerations on an
arm’s-length basis where appropriate, and
incorporate appropriate terms and conditions
to (A) prevent automatic termination upon
certain resolution-related events and (B)
achieve continued provision of such services
during resolution. The firm should also store
SLAs in a central repository or repositories
in a searchable format, develop and
document contingency strategies and
arrangements for replacement of critical
shared services, and complete re-alignment
or restructuring of activities within its
corporate structure. In addition, the firm
should ensure the financial resilience of
internal shared service providers by
maintaining working capital for six months
(or through the period of stabilization as
required in the firm’s preferred strategy) in
21 This should be interpreted to include data
access and intellectual property rights.
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such entities sufficient to cover contract
costs, consistent with the preferred
resolution strategy.
The firm should identify all critical service
providers and outsourced services that
support identified critical operations or core
business lines and identify any that could not
be promptly substituted. The firm should (A)
evaluate the agreements governing these
services to determine whether there are any
that could be terminated despite continued
performance upon the parent’s bankruptcy
filing, and (B) update contracts to incorporate
appropriate terms and conditions to prevent
automatic termination upon commencement
of any resolution proceeding and facilitate
continued provision of such services. Relying
on entities projected to survive during
resolution to avoid contract termination is
insufficient to ensure continuity. In the Plan,
the firm should document the amendment of
any such agreements governing these
services.
Qualified Financial Contracts. The Plan
should reflect how the early termination of
qualified financial contracts triggered by the
parent company’s bankruptcy filing could
impact the resolution of the firm’s
operations, including potential termination
of any contracts that are not subject to
statutory, contractual or regulatory stays of
direct default or cross-default rights. A Plan
should explain and support the firm’s
strategy for addressing the potential
disruptive effects in resolution of early
termination provisions and cross-default
rights in existing qualified financial contracts
at both the parent company and material
entity subsidiaries. This discussion should
address, to the extent relevant for the firm,
qualified financial contracts that include
limitations of standard contractual direct
default and cross default rights by agreement
of the parties.
MPOE
Payment, Clearing and Settlement (PCS)
Capabilities. Firms are expected to have and
describe capabilities to understand, for each
material entity, its obligations and exposures
associated with PCS activities, including
contractual obligations and commitments.
For example, firms should be able to:
• As users of PCS services:
Æ Track the following items by: (i) material
entity; and (ii) with respect to customers,
counterparties, and agents and service
providers, location and jurisdiction:
D PCS activities, with each activity
mapped to the relevant material entities,
identified critical operations, and core
business lines;
D Customers and counterparties for PCS
activities, including values and volumes of
various transaction types, as well as used and
unused capacity for all lines of credit;
D Exposures to and volumes transacted
with FMUs, nostro agents, and custodians;
and
D Services provided and service level
agreements, as applicable, for other current
agents and service providers (internal and
external).
Æ Assess the potential effects of adverse
actions by FMUs, nostro agents, custodians,
and other agents and service providers,
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including suspension or termination of
membership or services, on the firm and its
customers and counterparties;
Æ Develop contingency arrangements in
the event of such adverse actions; and
Æ Quantify the liquidity needs and
operational capacity required to meet all PCS
obligations, including intraday requirements.
• As providers of PCS services:
Æ Identify their PCS clients and the
services they provide to these clients,
including volumes and values of
transactions;
Æ Quantify and explain time-sensitive
payments; and
Æ Quantify and explain intraday credit
provided.
Managing, Identifying and Valuing
Collateral. The firm should have appropriate
capabilities related to managing, identifying,
and valuing the collateral that it receives
from and posts to external parties and its
affiliates, including tracking collateral
received, pledged, and available at the CUSIP
level and measuring exposures.
Management Information Systems. The
firm should have the management
information systems (MIS) capabilities to
readily produce data on a legal entity basis
and have controls to ensure data integrity
and reliability. The firm also should perform
a detailed analysis of the specific types of
financial and risk data that would be
required to execute the preferred resolution
strategy. The firm should have the
capabilities to produce the following types of
information, as appropriate for its resolution
strategy, in a timely manner and describe
these capabilities in the Plan:
• Financial statements for each material
entity (at least monthly);
• External and inter-affiliate credit
exposures, both on- and off-balance sheet, by
type of exposure, counterparty, maturity, and
gross payable and receivable;
• Gross and net risk positions with
internal and external counterparties;
• Guarantees, cross holdings, financial
commitments and other transactions between
material entities;
• Data to facilitate third-party valuation of
assets and businesses, including risk metrics;
• Key third-party contracts, including the
provider, provider’s location, service(s)
provided, legal entities that are a party to or
a beneficiary of the contract, and key
contractual rights (for example, termination
and change in control clauses);
• Legal agreement information, including
parties to the agreement and key terms and
interdependencies (for example, change in
control, collateralization, governing law,
termination events, guarantees, and crossdefault provisions);
• Service level agreements between
affiliates, including the service(s) provided,
the legal entity providing the service, legal
entities receiving the service, and any
termination/transferability provisions;
• Licenses and memberships to all
exchanges and value transfer networks,
including FMUs;
• Key management and support personnel,
including dual-hatted employees, and any
associated retention agreements;
• Agreements and other legal documents
related to property, including facilities,
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VI. Legal Entity Rationalization &
Separability
implement legal entity rationalization criteria
that support the firm’s preferred resolution
strategy and minimize risk to U.S. financial
stability in the event of the firm’s failure. LER
Criteria should consider the best alignment of
legal entities and business lines to improve
the firm’s resolvability under different
market conditions. LER Criteria should
govern the firm’s corporate structure and
arrangements between legal entities in a way
that facilitates the firm’s resolvability as its
activities, technology, business models, or
geographic footprint change over time.
Specifically, application of the criteria
should:
(A) Facilitate the recapitalization and
liquidity support of material entities, as
required by the firm’s resolution strategy.
Such criteria should include clean lines of
ownership, minimal use of multiple
intermediate holding companies, and clean
funding pathways between the parent and
material operating entities;
(B) Facilitate the sale, transfer, or winddown of certain discrete operations within a
timeframe that would meaningfully increase
the likelihood of an orderly resolution of the
firm, including provisions for the continuity
of associated services and mitigation of
financial, operational, and legal challenges to
separation and disposition;
(C) Adequately protect the subsidiary
insured depository institutions from risks
arising from the activities of any nonbank
subsidiaries of the firm (other than those that
are subsidiaries of an insured depository
institution); and Minimize complexity that
could impede an orderly resolution and
minimize redundant and dormant entities.
These criteria should be built into the
firm’s ongoing process for creating,
maintaining, and optimizing its structure and
operations on a continuous basis.
MPOE
Legal Entity Structure. A firm should
maintain a legal entity structure that supports
the firm’s preferred resolution strategy and
minimizes risk to U.S. financial stability in
the event of the firm’s failure. The firm
should consider factors such as business
activities; banking group structures and
booking models and practices; and potential
sales, transfers, or wind-downs during
resolution. The Plan should describe how the
firm’s legal entity structure aligns core
business lines and any identified critical
operations with the firm’s material entities to
support the firm’s resolution strategy. To the
extent a material entity IDI relies upon an
affiliate that is not the IDI’s subsidiary during
resolution, including for the provision of
shared services, the firm should discuss its
rationale for the legal entity structure and
associated resolution risks and potential
mitigants.
The firm’s corporate structure and
arrangements among legal entities should be
considered and maintained in a way that
facilitates the firm’s resolvability as its
activities, technology, business models, or
geographic footprint change over time.
Legal Entity Rationalization
SPOE
Legal Entity Rationalization Criteria (LER
Criteria). A firm should develop and
Separability
SPOE
Separability. The firm should identify
discrete operations that could be sold or
technology systems, software, and
intellectual property rights. The information
should include ownership, physical location,
where the property is managed and names of
legal entities and lines of business that the
property supports; and
• Updated legal records for domestic and
foreign entities, including entity type and
purpose (for example, holding company,
bank, broker dealer, and service entity),
jurisdiction(s), ownership, and regulator(s).
Shared and Outsourced Services. The firm
should maintain robust arrangements to
support the continuity of shared and
outsourced services that support any
identified critical operations or are material
to the execution of the resolution strategy,
including appropriate plans to retain key
personnel relevant to the execution of the
firm’s strategy. For example, specified firms
should evaluate internal and external
dependencies and develop documented
strategies and contingency arrangements for
the continuity or replacement of the shared
and outsourced services that are necessary to
maintain identified critical operations or are
material to the execution of the resolution
strategy. Examples may include personnel,
facilities, systems, data warehouses, and
intellectual property. Specified firms also
should maintain current cost estimates for
implementing such strategies and
contingency arrangements.
The firm should: (A) maintain an
identification of all shared services that
support identified critical operations or are
material to the execution of the resolution
strategy; and (B) mitigate identified
continuity risks through establishment of
SLAs for all shared services supporting
identified critical operations or are material
to the execution of the resolution strategy.
SLAs should fully describe the services
provided and incorporate appropriate terms
and conditions to: (A) prevent automatic
termination upon certain resolution-related
events; and (B) achieve continued provision
of such services during resolution.
The firm should identify all critical service
providers and outsourced services that
support identified critical operations or are
material to the execution of the resolution
strategy. Any of these services that cannot be
promptly substituted should be identified in
a firm’s Plan. The firm should: (A) evaluate
the agreements governing these services to
determine whether there are any that could
be terminated despite continued performance
upon the parent’s bankruptcy filing; and (B)
update contracts to incorporate appropriate
terms and conditions to prevent automatic
termination and facilitate continued
provision of such services through
resolution. Relying on entities projected to
survive during resolution to avoid contract
termination is insufficient to ensure
continuity. In the Plan, the firm should
document the amendment of any such
agreements governing these services.
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transferred in resolution, with the objective
of providing optionality in resolution under
different market conditions.
A firm’s separability options should be
actionable, and impediments to their
execution and projected mitigation strategies
should be identified in advance. Relevant
impediments could include, for example,
legal and regulatory preconditions,
interconnectivity among the firm’s
operations, tax consequences, market
conditions, and other considerations. To be
actionable, divestiture options should be
executable within a reasonable period of
time.
In developing their options, firms should
also consider potential consequences for U.S.
financial stability of executing each option,
taking into consideration impacts on
counterparties, creditors, clients, depositors,
and markets for specific assets.
Firms should have a comprehensive
understanding of the entire organization and
certain baseline capabilities. That
understanding should include the
operational and financial linkages among a
firm’s business lines, material entities, and
identified critical operations. Additionally,
information systems should be robust enough
to produce the required data and information
needed to execute separability options.
The level of detail and analysis should
vary based on the firm’s risk profile and
scope of operations. A separability analysis
should address the following elements:
• Divestiture Options: The options in the
Plan should be actionable and
comprehensive, and should include:
Æ Options contemplating the sale, transfer,
or disposal of significant assets, portfolios,
legal entities or business lines.
Æ Options that may permanently change
the firm’s structure or business strategy.
• Execution Plan: For each divestiture
option listed, the separability analysis should
describe the steps necessary to execute the
option. Among other considerations, the
description should include:
Æ The identity and position of the senior
management officials of the company who
are primarily responsible for overseeing
execution of the separability option.
Æ An estimated time frame for
implementation.
Æ A description of any impediments to
execution of the option and mitigation
strategies to address those impediments.
Æ A description of the assumptions
underpinning the option.
Æ A plan describing the methods and
forms of communication with internal,
external, and regulatory stakeholders.
• Impact Assessment: The separability
analysis should holistically consider and
describe the expected impact of individual
divestiture options. This should include the
following for each divestiture option:
Æ A financial impact assessment that
describes the impact of executing the option
on the firm’s capital, liquidity, and balance
sheet.
Æ A business impact assessment that
describes the effect of executing the option
on business lines and material entities,
including reputational impact.
Æ An identified critical operation impact
assessment that describes how execution of
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the option may affect the provision of any
identified critical operation.
Æ An operational impact assessment and
contingency plan that explains how
operations can be maintained if the option is
implemented; such an analysis should
address internal operations (for example,
shared services, IT requirements, and human
resources) and access to market infrastructure
(for example, clearing and settlement
facilities and payment systems).
Further, the firm should have, and be able
to demonstrate, the capability to populate in
a timely manner a data room with
information pertinent to a potential
divestiture of the business (including, but not
limited to, carve-out financial statements,
valuation analysis, and a legal risk
assessment).
Within the Plan, the firm should
demonstrate how the firm’s LER Criteria and
implementation efforts support meeting the
separability-related guidance above. The Plan
should also provide the separability analysis
noted above. Finally, the Plan should include
a description of the firm’s legal entity
rationalization governance process.
MPOE
A Plan should include options for the sale,
transfer, or disposal of significant assets,
portfolios, legal entities, or business lines in
resolution that may be executed in a
reasonable period of time. For each option,
supporting analysis should include: an
execution plan that includes an estimated
time frame for implementation, a description
of any impediments to execution of the
option, and mitigation strategies to address
those impediments; a description of the
assumptions underpinning the option; a
financial impact assessment that describes
the impact of executing the option; and an
identified critical operation impact
assessment that describes how execution of
the option may affect the provision of any
identified critical operation. Information
systems should be robust enough to produce
the required data and information needed to
execute the options.
VII. Insured Depository Institution (IDI)
Resolution
MPOE
If the Plan includes a strategy that
contemplates the separate resolution of a U.S.
IDI that is a material entity, the Plan should
demonstrate how this could be achieved in
a manner that is consistent with the overall
objective of the Plan to substantially mitigate
the risk that the failure of the specified firm
would have serious adverse effects on
financial stability in the United States while
also complying with the statutory and
regulatory requirements governing IDI
resolution. More specifically,
• If the strategy is other than payout
liquidation (e.g., a bridge depository
institution (BDI)), the Plan should provide
information supporting the feasibility of this
strategy. Under the FDI Act, the FDIC
generally would complete a least-cost
analysis when resolving a failed bank at the
time of entry into resolution. A Plan may use
an approach such as one of the following in
lieu of performing a complete least-cost
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analysis to demonstrate the feasibility of the
proposed strategy.22
Æ A Plan may demonstrate that a strategy
involving an all-deposit BDI would be
permissible under the least-cost test of the
FDI Act by presenting an analysis which
shows that the strategy results in no loss to
the Deposit Insurance Fund (DIF) by
demonstrating that the incremental estimated
cost to the DIF by having the BDI assume all
uninsured deposits is offset by the
preservation of franchise value connected to
the uninsured deposits after accounting for
the amount of any loss-absorbing debt
instruments and other liabilities subordinate
to the depositor class that would be left
behind in the receivership.
Æ A Plan may demonstrate the feasibility
of a strategy involving a BDI that assumes all
insured deposits and a portion of uninsured
deposits by providing an advance dividend
to uninsured depositors for a portion of their
deposit claim, as well as the basis for that
dividend, and pursuant to which a loss to the
DIF occurs, by presenting an analysis
comparing the cost of the proposed strategy
to the cost of payout liquidation and
demonstrating:
D The incremental estimated cost to the
DIF created by the BDI’s assumption of the
portion of uninsured deposits assumed is
offset by the franchise value preserved by
maintaining the assumed uninsured deposits,
after accounting for the amount of any longterm debt and other liabilities subordinate to
the depositor class that would be left behind
in the receivership; 23 and
D The loss to the DIF under the proposed
strategy (including the amounts paid by the
DIF for more favorable treatment, relative to
a payout liquidation, of a portion of
uninsured deposits) is less than or equal to
the loss to the DIF that would be incurred
through a payout liquidation of the IDI; and
Æ The deposit payout process for any
uninsured deposits that remain in the
receivership may be executed in a manner
that substantially mitigates the risk of serious
adverse effects on U.S. financial stability.
• If the Plan’s strategy envisions a payout
liquidation for the IDI, with or without use
of a Deposit Insurance National Bank or a
paying agent, the Plan should demonstrate
how the deposit payout and asset liquidation
process would be executed in a manner that
substantially mitigates the risk of serious
adverse effects on U.S. financial stability.
• In all cases, the Plan should show that
implementation of the resolution, including
the impact on depositors whose accounts are
not transferred in whole or in part to the BDI,
would not create the risk of serious adverse
effects on U.S. financial stability.
Regardless of the IDI resolution strategy
chosen, the Plan should assume asset
valuations consistent with the severely
adverse stress economic scenario and the
IDI’s condition as a failed institution, as
referenced in ‘‘Guidance regarding
Assumptions,’’ Items 4 and 7 below. The
Plan, in light of such conditions, should
explain the process for determining asset or
22 See 12 U.S.C. 1823(c)(4)(A)(ii) and
1821(n)(2)(A).
23 See 12 U.S.C. 1821(d)(11).
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business franchise values, including
providing detailed supporting descriptions
such as references to historical pricing,
benchmarks, or recognized models; evidence
supporting client attrition rates; and other
relevant information.
With respect to exit from IDI resolution
proceedings, a Plan could support the
feasibility of an asset liquidation or BDI exit
strategy by, for example, describing an
actionable process, based on historical
precedent or otherwise supportable
projections, that winds down certain
businesses, includes the sale of assets and
deposits to multiple acquirers, or culminates
in a capital markets transaction, such as an
initial public offering or a private placement
of securities.
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VIII. Format and Structure of Plans;
Assumptions
SPOE & MPOE
Format of Plan
Executive Summary. The Plan should
contain an executive summary consistent
with the Rule, which must include, among
other things, a concise description of the key
elements of the firm’s strategy for an orderly
resolution. In addition, the executive
summary should include a discussion of the
firm’s assessment of any impediments to the
firm’s resolution strategy and its execution,
as well as the steps it has taken to address
any identified impediments.
Narrative. The Plan should include a
strategic analysis consistent with the Rule.
This analysis should take the form of a
concise narrative that enhances the
readability and understanding of the firm’s
discussion of its strategy for an orderly
resolution in bankruptcy or other applicable
insolvency regimes (Narrative).
Appendices. The Plan should contain a
sufficient level of detail and analysis to
substantiate and support the strategy
described in the Narrative. Such detail and
analysis should be included in appendices
that are distinct from and clearly referenced
in the related parts of the Narrative
(Appendices).
Public Section. The Plan must be divided
into a public section and a confidential
section consistent with the requirements of
the Rule.
Other Informational Requirements. The
Plan must comply with all other
informational requirements of the Rule. The
firm may incorporate by reference previously
submitted information as provided in the
Rule.
Guidance Regarding Assumptions
1. The Plan should be based on the current
state of the applicable legal and policy
frameworks. Pending legislation or regulatory
actions may be discussed as additional
considerations.
2. The firm must submit a Plan that does
not rely on the provision of extraordinary
support by the United States or any other
government to the firm or its subsidiaries to
prevent the failure of the firm.24 The firm
should not submit a Plan that assumes the
24 12 CFR 243.4(a)(4)(ii) and 12 CFR
381.4(a)(4)(ii).
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use of the systemic risk exception to the
least-cost test in the event of a failure of an
IDI requiring resolution under the FDI Act.
3. The firm should not assume that it will
be able to sell identified critical operations or
core business lines, or that unsecured
funding will be available immediately prior
to filing for bankruptcy.
4. The resolution strategy may be based on
an idiosyncratic event or action, including a
series of compounding events. The firm
should justify use of that assumption,
consistent with the conditions of the
economic scenario.
5. Within the context of the applicable
idiosyncratic scenario, markets are
functioning and competitors are in a position
to take on business. If a firm’s Plan assumes
the sale of assets, the firm should take into
account all issues surrounding its ability to
sell in market conditions present in the
applicable economic condition at the time of
sale (i.e., the firm should take into
consideration the size and scale of its
operations as well as issues of separation and
transfer.).
6. For a firm that adopts an MPOE strategy,
the Plan should demonstrate and describe
how the failure event(s) results in material
financial distress.25 In particular, the Plan
should consider the likelihood that there
would be a diminution of the firm’s liquidity
buffer in the stress period prior to filing for
bankruptcy from high unexpected outflows
of deposits and increased liquidity
requirements from counterparties. Though
the immediate failure event may be liquidityrelated and associated with a lack of market
confidence in the financial condition of the
covered company or its material legal entity
subsidiaries prior to the final recognition of
losses, the demonstration and description of
material financial distress may also include
depletion of capital. Therefore, the Plan
should also consider the likelihood of the
depletion of capital.
7. The firm should not assume any waivers
of section 23A or 23B of the Federal Reserve
Act in connection with the actions proposed
to be taken prior to or in resolution.
8. The Plan should support any
assumptions that the firm will have access to
the Discount Window and/or other
borrowings during the period immediately
prior to entering bankruptcy. To the extent
the firm assumes use of the Discount
Window and/or other borrowings, the Plan
should support that assumption with a
discussion of the operational testing
conducted to facilitate access in a stress
environment, placement of collateral, and the
amount of funding accessible to the firm. The
firm may assume that its depository
institutions will have access to the Discount
Window only for a few days after the point
of failure to facilitate orderly resolution.
However, the firm should not assume its
subsidiary depository institutions will have
access to the Discount Window while
critically undercapitalized, in FDIC
receivership, or operating as a bridge bank,
25 See Section 11(c)(5) of the FDI Act, codified at
11 U.S.C. 1821(c)(5), which details grounds for
appointing the FDIC as conservator or receiver of
an IDI.
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nor should it assume any lending from a
Federal Reserve credit facility to a non-bank
affiliate.
Financial Statements and Projections. The
Plan should include the actual balance sheet
for each material entity and the consolidating
balance sheet adjustments between material
entities as well as pro forma balance sheets
for each material entity at the point of failure
and at key junctures in the execution of the
resolution strategy. It should also include
statements of projected sources and uses of
funds for the interim periods. The pro forma
financial statements and accompanying notes
in the Plan must clearly evidence the failure
trigger event; the Plan’s assumptions; and
any transactions that are critical to the
execution of the Plan’s preferred strategy,
such as recapitalizations, the creation of new
legal entities, transfers of assets, and asset
sales and unwinds.
Material Entities. Material entities should
encompass those entities, including foreign
offices and branches, which are significant to
the maintenance of an identified critical
operation or core business line. If the abrupt
disruption or cessation of a core business line
might have systemic consequences to U.S.
financial stability, the entities essential to the
continuation of such core business line
should be considered for material entity
designation. Material entities should include
the following types of entities:
1. Any U.S.-based or non-U.S. affiliates,
including any branches, that are significant
to the activities of an identified critical
operation.
2. Subsidiaries or foreign offices whose
provision or support of global treasury
operations, funding, or liquidity activities
(inclusive of intercompany transactions) is
significant to the activities of an identified
critical operation.
3. Subsidiaries or foreign offices that
provide material operational support in
resolution (key personnel, information
technology, data centers, real estate or other
shared services) to the activities of an
identified critical operation.
4. Subsidiaries or foreign offices that are
engaged in derivatives booking activity that
is significant to the activities of an identified
critical operation, including those that
conduct either the internal hedge side or the
client-facing side of a transaction.
5. Subsidiaries or foreign offices engaged in
asset custody or asset management that are
significant to the activities of an identified
critical operation.
6. Subsidiaries or foreign offices holding
licenses or memberships in clearinghouses,
exchanges, or other FMUs that are significant
to the activities of an identified critical
operation.
For each material entity (including a
branch), the Plan should enumerate, on a
jurisdiction-by-jurisdiction basis, the specific
mandatory and discretionary actions or
forbearances that regulatory and resolution
authorities would take during resolution,
including any regulatory filings and
notifications that would be required as part
of the preferred strategy, and explain how the
Plan addresses the actions and forbearances.
Describe the consequences for the covered
company’s resolution strategy if specific
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actions in a non-U.S. jurisdiction were not
taken, delayed, or forgone, as relevant.
IX. Public Section
SPOE & MPOE
The purpose of the public section is to
inform the public’s understanding of the
firm’s resolution strategy and how it works.
The public section should discuss the steps
that the firm is taking to improve
resolvability under the U.S. Bankruptcy
Code. The public section should provide
background information on each material
entity and should be enhanced by including
the firm’s rationale for designating material
entities. The public section should also
discuss, at a high level, the firm’s intra-group
financial and operational interconnectedness
(including the types of guarantees or support
obligations in place that could impact the
execution of the firm’s strategy).
The discussion of strategy in the public
section should broadly explain how the firm
has addressed any deficiencies,
shortcomings, and other key vulnerabilities
that the agencies have identified in prior plan
submissions. For each material entity, it
should be clear how the strategy provides for
continuity, transfer, or orderly wind-down of
the entity and its operations. There should
also be a description of the resulting
organization upon completion of the
resolution process.
The public section may note that the Plan
is not binding on a bankruptcy court or other
resolution authority and that the proposed
failure scenario and associated assumptions
are hypothetical and do not necessarily
reflect an event or events to which the firm
is or may become subject.
By order of the Board of Governors of the
Federal Reserve System.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 29,
2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023–19267 Filed 9–18–23; 8:45 am]
BILLING CODE 6210–01–6714–01–P
FEDERAL RESERVE SYSTEM
[Docket No. OP–1817]
FEDERAL DEPOSIT INSURANCE
CORPORATION
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RIN 3064–ZA38
Guidance for Resolution Plan
Submissions of Foreign Triennial Full
Filers
Board of Governors of the
Federal Reserve System (Board) and
Federal Deposit Insurance Corporation
(FDIC).
ACTION: Proposed guidance; request for
comments.
AGENCY:
VerDate Sep<11>2014
19:54 Sep 18, 2023
Jkt 259001
The Board and the FDIC
(together, the agencies) are inviting
comments on proposed guidance for the
2024 and subsequent resolution plan
submissions by certain foreign banking
organizations. The proposed guidance is
meant to assist these firms in
developing their resolution plans,
which are required to be submitted
pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act, as
amended (the Dodd-Frank Act), and the
jointly issued implementing regulation
(the Rule). The scope of application of
the proposed guidance would be
foreign-based triennial full filers
(specified firms or firms), which are
foreign-based Category II and III banking
organizations, and the guidance, if
finalized, would supersede the joint
Guidance for Resolution Plan
Submissions of Certain Foreign-Based
Covered Companies (85 FR 83557 (Dec.
22, 2020) (2020 FBO Guidance)). The
proposed guidance is based on the
agencies’ review of the specified firms’
2021 and prior resolution plan
submissions, as well as the agencies’
experiences dealing with stress events
in the international and domestic
banking systems, and would describe
the agencies’ expectations regarding
several aspects of the specified firms’
plans for an orderly resolution under
the U.S. Bankruptcy Code. The agencies
invite public comment on all aspects of
the proposed guidance.
DATES: Comments must be received by
November 30, 2023.
ADDRESSES: Interested parties are
encouraged to submit written comments
jointly to both agencies. Comments
should be directed to:
Board: You may submit comments,
identified by Docket No. OP–1817, by
any of the following methods:
• Agency Website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Ann E. Misback, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551.
In general, all public comments will
be made available on the Board’s
website at www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, and will not be modified to
remove confidential, contact or any
SUMMARY:
PO 00000
Frm 00016
Fmt 4701
Sfmt 4703
64641
identifiable information. Public
comments may also be viewed
electronically or in paper in Room M–
4365A, 2001 C St. NW, Washington, DC
20551, between 9:00 a.m. and 5:00 p.m.
during federal business weekdays.
FDIC: You may submit comments,
identified by RIN 3064–ZA38, by any of
the following methods:
• FDIC Website: https://
www.fdic.gov/resources/regulations/
federal-register-publications/. Follow
the instructions for submitting
comments on the FDIC’s website.
• Email: comments@fdic.gov. Include
‘‘RIN 3064–ZA38’’ on the subject line of
the message.
• Mail: James P. Sheesley, Assistant
Executive Secretary, Attention:
Comments—RIN 3064–ZA38, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery/Courier: Comments
may be hand delivered to the guard
station at the rear of the 550 17th Street
NW building (located on F Street NW)
on business days between 7 a.m. and 5
p.m.
Public Inspection: Comments
received, including any personal
information provided, may be posted
without change to https://www.fdic.gov/
resources/regulations/federal-registerpublications/. Commenters should
submit only information that the
commenter wishes to make available
publicly. The FDIC may review, redact,
or refrain from posting all or any portion
of any comment that it may deem to be
inappropriate for publication, such as
irrelevant or obscene material. The FDIC
may post only a single representative
example of identical or substantially
identical comments, and in such cases
will generally identify the number of
identical or substantially identical
comments represented by the posted
example. All comments that have been
redacted, as well as those that have not
been posted, that contain comments on
the merits of this document will be
retained in the public comment file and
will be considered as required under all
applicable laws. All comments may be
accessible under the Freedom of
Information Act.
FOR FURTHER INFORMATION CONTACT:
Board: Catherine Tilford, Deputy
Associate Director, (202) 452–5240,
Elizabeth MacDonald, Assistant
Director, (202) 475–6316, Tudor Rus,
Lead Financial Institution Analyst, (202)
475–6359, Division of Supervision and
Regulation; or Jay Schwarz, Assistant
General Counsel, (202) 452–2970;
Andrew Hartlage, Special Counsel, (202)
452–6483; Sarah Podrygula, Senior
Attorney, (202) 912–4658; or Brian
E:\FR\FM\19SEN2.SGM
19SEN2
]]>Agencies
[Federal Register Volume 88, Number 180 (Tuesday, September 19, 2023)]
[Notices]
[Pages 64626-64641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19267]
Federal Register / Vol. 88 , No. 180 / Tuesday, September 19, 2023 /
Notices
[[Page 64626]]
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FEDERAL RESERVE SYSTEM
[Docket No. OP-1816]
FEDERAL DEPOSIT INSURANCE CORPORATION
RIN 3064-ZA37
Guidance for Resolution Plan Submissions of Domestic Triennial
Full Filers
AGENCY: Board of Governors of the Federal Reserve System (Board) and
Federal Deposit Insurance Corporation (FDIC).
ACTION: Proposed guidance; request for comments.
-----------------------------------------------------------------------
SUMMARY: The Board and the FDIC (together, the agencies) are inviting
comments on proposed guidance for the 2024 and subsequent resolution
plan submissions by certain domestic banking organizations. The
proposed guidance is meant to assist these firms in developing their
resolution plans, which are required to be submitted pursuant to the
Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended
(the Dodd-Frank Act), and the jointly issued implementing regulation
(the Rule). The scope of application of the proposed guidance would be
domestic triennial full filers (specified firms or firms), which are
domestic Category II and III banking organizations. The proposed
guidance is based on the agencies' review of the specified firms' 2021
and prior resolution plan submissions, as well as the agencies'
experiences resolving several large domestic banking organizations, and
would describe the agencies' expectations regarding several aspects of
the specified firms' plans for an orderly resolution under the U.S.
Bankruptcy Code. The agencies invite public comment on all aspects of
the proposed guidance.
DATES: Comments must be received by November 30, 2023.
ADDRESSES: Interested parties are encouraged to submit written comments
jointly to both agencies. Comments should be directed to:
Board: You may submit comments, identified by Docket No. OP-1816,
by any of the following methods:
Agency Website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include docket
number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
In general, all public comments will be made available on the
Board's website at www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, and will not be modified to remove
confidential, contact or any identifiable information. Public comments
may also be viewed electronically or in paper in Room M-4365A, 2001 C
St. NW, Washington, DC 20551, between 9:00 a.m. and 5:00 p.m. during
federal business weekdays.
FDIC: You may submit comments, identified by RIN 3064-ZA37, by any
of the following methods:
FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for submitting
comments on the FDIC's website.
Email: [email protected]. Include ``RIN 3064-ZA37'' on the
subject line of the message.
Mail: James P. Sheesley, Assistant Executive Secretary,
Attention: Comments-RIN 3064-ZA37, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
Hand Delivery/Courier: Comments may be hand delivered to
the guard station at the rear of the 550 17th Street NW building
(located on F Street NW) on business days between 7 a.m. and 5 p.m.
Public Inspection: Comments received, including any
personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/.
Commenters should submit only information that the commenter wishes to
make available publicly. The FDIC may review, redact, or refrain from
posting all or any portion of any comment that it may deem to be
inappropriate for publication, such as irrelevant or obscene material.
The FDIC may post only a single representative example of identical or
substantially identical comments, and in such cases will generally
identify the number of identical or substantially identical comments
represented by the posted example. All comments that have been
redacted, as well as those that have not been posted, that contain
comments on the merits of this document will be retained in the public
comment file and will be considered as required under all applicable
laws. All comments may be accessible under the Freedom of Information
Act.
FOR FURTHER INFORMATION CONTACT:
Board: Catherine Tilford, Deputy Associate Director, (202) 452-
5240, Elizabeth MacDonald, Assistant Director, (202) 475-6316, Tudor
Rus, Lead Financial Institution Analyst, (202) 475-6359, Division of
Supervision and Regulation; or Jay Schwarz, Assistant General Counsel,
(202) 452-2970; Andrew Hartlage, Special Counsel, (202) 452-6483; Sarah
Podrygula, Senior Attorney, (202) 912-4658; or Brian Kesten, Senior
Attorney, (202) 843-4079, Legal Division, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551. For users of TTY-TRS, please call 711 from any
telephone, anywhere in the United States.
FDIC: Robert C. Connors, Senior Advisor, (202) 898-3834, Division
of Complex Financial Institution Supervision and Resolution; Celia Van
Gorder, Senior Counsel, (202) 898-6749; Esther Rabin, Counsel, (202)
898-6860, [email protected], Legal Division.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Overview of the Proposed Guidance
III. Paperwork Reduction Act
Appendix: Text of the Proposed Guidance
I. Background
A. The Dodd-Frank Act and the Rule
Section 165(d) of the Dodd-Frank Act \1\ and the Rule \2\ require
certain financial institutions to report periodically to the Board and
the FDIC their plans for rapid and orderly resolution under the U.S.
Bankruptcy Code (the Bankruptcy Code) in the event of material
financial distress or failure. The Rule divides covered companies into
three groups of filers: (a) biennial filers; (b) triennial full filers;
and (c) triennial reduced filers.\3\
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\1\ 12 U.S.C. 5365(d).
\2\ 12 CFR parts 243 and 381.
\3\ 12 CFR 243.4 and 12 CFR 381.4. The terms ``covered company''
and ``triennial full filer'' have the meanings given in the Rule, as
do other, similar terms used throughout this proposal.
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Triennial full filers under the Rule are required to file a
resolution plan every three years, alternating between full and
targeted resolution plans.\4\ The Rule requires each covered company's
full resolution plan to include, among other things, a strategic
analysis of the plan's components, a description of the range of
specific actions the covered company proposes to take in resolution,
and a description of the covered company's organizational structure,
material
[[Page 64627]]
entities, and interconnections and interdependencies.\5\ Targeted
resolution plans are required to include a subset of information
contained in a full plan.\6\ In addition, the Rule requires that all
resolution plans consist of two parts: a confidential section that
contains any confidential supervisory and proprietary information
submitted to the agencies and a section that the agencies make
available to the public.\7\ Public sections of resolution plans can be
found on the agencies' websites.\8\
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\4\ 12 CFR 243.4(b) and 12 CFR 381.4(b).
\5\ 12 CFR 243.5 and 12 CFR 381.5.
\6\ 12 CFR 243.6(b) and 12 CFR 381.6(b).
\7\ 12 CFR 243.11(c) and 12 CFR 381.11(c).
\8\ The public sections of resolution plans submitted to the
agencies are available at www.federalreserve.gov/supervisionreg/resolution-plans.htm and www.fdic.gov/regulations/reform/resplans/.
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B. Recent Developments
Implementation of the Rule has been an iterative process aimed at
strengthening the resolution planning capabilities of financial
institutions subject to the Rule. To assist the development of covered
companies' resolution planning capabilities and plan submissions, the
agencies have provided feedback on individual plan submissions,
promulgated guidance to certain groups of covered companies, and issued
answers to frequently asked questions. The agencies believe that
guidance can help focus the efforts of similarly situated covered
companies to improve their resolution capabilities and clarify the
agencies' expectations for those filers' future progress. The agencies
have issued guidance to: (a) U.S. global systemically important banks
(GSIBs); \9\ which constitute the biennial filer group; and (b) certain
large foreign banking organizations (FBOs) that are triennial full
filers.\10\ The agencies have not, however, issued guidance to the
domestic firms and additional FBOs that make up the remainder of the
triennial full filers.
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\9\ Guidance for Sec. 165(d) Resolution Plan Submissions by
Domestic Covered Companies applicable to the Eight Largest, Complex
U.S. Banking Organizations, 84 FR 1438 (Feb. 4, 2019) (2019 GSIB
Guidance).
\10\ Guidance for Resolution Plan Submissions of Certain
Foreign-Based Covered Companies, 85 FR 83557 (Dec. 22, 2020) (2020
FBO Guidance).
---------------------------------------------------------------------------
As the agencies previously indicated,\11\ they believe that it is
now appropriate to issue guidance to the specified firms. The agencies'
review of the 2021 targeted resolution plans submitted by domestic
triennial full filers revealed significant inconsistencies in the
amount and nature of information they provided on critical
informational elements required by the Rule. In addition, some
resolution plans included optimistic assumptions regarding the
availability of financial resources at the firm at the time of a
bankruptcy filing as well as the ability of a firm to access financial
assistance prior to and during resolution. The agencies believe that
future resolution plans from these firms would benefit from guidance
regarding critical informational elements required by the Rule as well
as appropriate assumptions.
---------------------------------------------------------------------------
\11\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20220930a.htm.
---------------------------------------------------------------------------
The proposed guidance also reflects the agencies' recent experience
with Silicon Valley Bank (SVB), Signature Bank (SB), and First Republic
Bank (First Republic). While SVB, SB, and First Republic were not
required to file resolution plans under section 165(d) of the Dodd-
Frank Act and the Rule, the effects of their failures illustrate that
the failure of a large insured depository institution (IDI) may have
serious adverse effects on financial stability in the United
States.\12\ This experience illustrates the importance of issuing
guidance to domestic triennial full filers (many of which have large
subsidiary IDIs) to assist their progress in developing plans for an
orderly resolution in the event of material financial distress or
failure.
---------------------------------------------------------------------------
\12\ For example, the FDIC--upon the recommendation of two-
thirds of each of the board of directors of the FDIC and the Board,
as well as a determination by the Secretary of the Treasury, in
consultation with the President--resolved SVB and SB using the
systemic risk exception to the statutory requirement to employ the
least-costly method to resolve a failed IDI. https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm; https://www.fdic.gov/news/press-releases/2023/pr23017.html.
---------------------------------------------------------------------------
C. Resolution Plan Strategy
The specified firms have adopted one of two resolution strategies:
a single point of entry (SPOE) or multiple point of entry (MPOE)
strategy. The SPOE and MPOE resolution plan strategies require firms to
consider different risks and require different types of planning and
development of capabilities for the execution of the respective
strategies. The agencies do not prescribe a specific resolution
strategy for any covered company, nor do the agencies identify a
preferred strategy. The proposed guidance is not intended to favor one
strategy or another. Specified filers may continue to submit resolution
plans using the resolution strategies they believe would be most
effective in achieving an orderly resolution of their firms, but a
resolution plan must address the key vulnerabilities and support the
underlying assumptions required to successfully execute the chosen
resolution strategy.
Under an SPOE strategy for a U.S. firm, all material entity
subsidiaries are recapitalized and provided with liquidity, if needed,
so that only the top tier bank holding company (BHC) enters resolution.
The MPOE approach entails multiple U.S. material entities entering
separate resolution proceedings: any top-tier U.S. material entity
holding company enters bankruptcy; any U.S. material entity IDI
subsidiary is resolved separately under the Federal Deposit Insurance
Act of 1950, as amended (the FDI Act); and other individual U.S.
material entity subsidiaries separately enter bankruptcy (or another
appropriate resolution regime) or are wound down. All of the specified
firms presented an MPOE strategy in their 2021 targeted resolution plan
submissions.
D. Long-Term Debt Rulemaking
The agencies, as well as the Office of the Comptroller of the
Currency, are issuing a proposed rule for comment that would require
certain large IDI holding companies, U.S. intermediate holding
companies of FBOs, and certain IDIs, to issue and maintain outstanding
a minimum amount of long-term debt (LTD), among other proposed
requirements.\13\ This proposed rule would improve the resolvability of
these firms, and, in particular, their IDI subsidiaries, in case of
failure, reducing costs to the Deposit Insurance Fund (DIF), and
mitigating financial stability and contagion risks by reducing the risk
of loss to uninsured depositors. LTD issued by the IDI could help
support resolution strategies by, among other things, recapitalizing a
bridge depository institution and facilitating its exit from resolution
as a newly chartered IDI that would have new ownership. The agencies
expect that a final long-term debt rule could interact with how the
specified firms plan for resolution under the Rule, and the agencies
anticipate ensuring that the final resolution plan guidance for
domestic triennial full filers is consistent with any final long-term
debt rule. Accordingly, the agencies welcome comments that take the
proposed long-term debt rulemaking into consideration.\14\
---------------------------------------------------------------------------
\13\ This proposed rulemaking is published elsewhere in this
Federal Register.
\14\ The public also may provide comments on the proposed
guidance that assume that no long-term debt rule is finalized and
that specified firms remain subject to current capital rules.
---------------------------------------------------------------------------
II. Overview of the Proposed Guidance
The proposed guidance begins with the proposed scope and then is
organized into several substantive
[[Page 64628]]
topical areas. Each substantive topic is bifurcated, with separate
guidance for an SPOE resolution strategy and an MPOE resolution
strategy. As discussed, each resolution strategy poses distinct risks
and requires its own type of planning and capabilities development for
executing the strategy. Accordingly, the proposed guidance would
account for the different challenges posed by each approach.
The proposed guidance for firms that adopt an SPOE resolution
strategy is generally based on the 2019 GSIB Guidance, with certain
modifications that reflect the specific characteristics of and
potential risks posed by the failure of the specified firms. Successful
execution of an SPOE strategy relies on the ability to provide
sufficient capital and liquidity to material entities, a governance
structure that can identify the onset of financial stress events, and
the ability to ensure the timely execution of the strategy and to
maintain continuity of operations throughout resolution.
The proposed guidance for firms that utilize an MPOE resolution
strategy incorporates certain aspects of the 2019 GSIB Guidance that
the agencies believe are applicable to large banking organizations,
with modifications appropriate to this strategy and institutions with
the characteristics displayed by the specified firms. For MPOE firms,
the proposed guidance also omits aspects of the 2019 GSIB Guidance that
would not apply in an MPOE resolution. The agencies are, however,
proposing to clarify their expectations for specified firms that
utilize an MPOE strategy that includes the resolution of a material
entity that is a U.S. IDI. As discussed elsewhere in this proposal, the
resolution of a large U.S. IDI under the FDI Act likely would pose
substantial operational and legal challenges and complexities.
Accordingly, the agencies believe that the resolution plans of firms
whose resolution plans contemplate the separate resolution of a
material entity that is a U.S. IDI would benefit from developing
capabilities specific to and considering legal requirements regarding
U.S. IDI resolution.
The agencies believe that each substantive area of the proposed
guidance would play a part in helping to ensure that the specified
firms can be resolved in an orderly manner. The proposed guidance would
describe the agencies' expectations for each of these areas. In
addition, the proposed guidance would consolidate items of feedback
provided to a number of the specified firms in the past, thereby
providing the public with one source of applicable guidance for the
specified firms. The proposed guidance is not, however, intended to
override the obligation of an individual specified firm to respond, in
its next resolution plan submission, to pending items of individual
feedback or any shortcomings or deficiencies identified or determined
by the agencies in that specified firm's prior resolution plan
submission. The proposed guidance also is not meant to limit specified
firms' consideration of additional vulnerabilities or obstacles that
might arise based on a firm's particular structure, operations, or
resolution strategy, and that should be factored into the specified
firm's resolution plan submission.
The proposed guidance concludes with information about the format
and structure of a plan that applies equally to plans contemplating
either an SPOE strategy or an MPOE strategy.
A. Scope of Application
The agencies propose to apply the guidance to all domestic
triennial full filers. The Board's tailoring framework provides clear,
predictable scoping based on publicly reported quantitative data. As
discussed above, the agencies believe that it is appropriate to provide
resolution planning guidance to all domestic triennial full filers
given issues identified in these firms' 2021 targeted resolution plans
and considering lessons learned from recent events.
The agencies would like the specified firms to submit resolution
plans that take into consideration the final version of the proposed
guidance as soon as practicable. However, the agencies understand that
the specified firms may need time to take into consideration the
guidance when developing their resolution plans. In light of the timing
of this proposal, the agencies are considering providing a short
extension of the next resolution plan submission date for the specified
firms, with the expectation that these plan submissions would be due
sooner than one year after the proposed guidance is published in final
form.
The agencies seek comment on all aspects of the proposed scope of
application.
Question 1: Should the agencies provide more than 6 months for the
specified firms to take into consideration the expectations in the
proposed guidance, once finalized? If so, what time period should the
agencies provide?
B. Capital
For specified firms with an SPOE resolution strategy, the agencies
propose guidance substantially similar to the 2019 GSIB Guidance
regarding capital. The ability to provide sufficient capital to
material entities without disruption from creditors is important in
order to ensure that material entities can continue to maintain
operations as the firm is resolved. The proposal describes expectations
concerning the appropriate positioning of capital and other loss-
absorbing instruments (e.g., debt that a parent holding company may
choose to forgive or convert to equity) among the material entities
within the firm (resolution capital adequacy and positioning, or RCAP).
The positioning of capital resources within the firm should be
consistent with any applicable rules requiring prepositioned resources
in IDIs in the form of long-term debt. The proposal also describes
expectations regarding a methodology for periodically estimating the
amount of capital that may be needed to support each material entity
after the bankruptcy filing (resolution capital execution need, or
RCEN).
The agencies are not proposing further expectations concerning
capital to firms whose plans contemplate an MPOE resolution strategy,
as an MPOE strategy assumes most material entities do not continue as
going concerns upon entry into resolution.
Question 2: In addition to the capital-related resolution plan
requirements under the Rule, are there other capital-related
expectations that would reasonably enhance the resolvability of a
specified firm that utilizes an MPOE strategy in its resolution plan?
Question 3: Do the capital-related resolution expectations in the
proposed guidance align with the provisions of the interagency long-
term debt rulemaking proposal? Are there any aspects of the proposed
guidance that should be revised, or additional expectations added, in
light of the interagency long-term debt rulemaking proposal?
Question 4: Is it appropriate for a specified firm utilizing an
SPOE resolution strategy to assume, during the transition period for
any final long-term debt rulemaking, that the entire amount of debt
required under the rule after the transition period has been issued?
C. Liquidity
For firms that adopt an SPOE resolution strategy, the agencies
propose guidance substantially similar to the 2019 GSIB Guidance
regarding liquidity. A firm's ability to reliably estimate and
[[Page 64629]]
meet its liquidity needs prior to, and in, resolution is important to
the execution of a firm's resolution strategy because it enables the
firm to respond quickly to demands from stakeholders and
counterparties, including regulatory authorities in other jurisdictions
and financial market utilities. Maintaining sufficient and
appropriately positioned liquidity also allows the subsidiaries to
continue to operate while the firm is being resolved in accordance with
the firm's preferred resolution strategy.
For firms that adopt an MPOE resolution strategy, the agencies
propose that a firm should have the liquidity capabilities necessary to
execute its preferred resolution strategy, and its plan should include
analysis and projections of a range of liquidity needs during
resolution.
Question 5: In addition to the liquidity-related resolution plan
requirements under the Rule and the liquidity-related expectations in
the proposed guidance, are there other liquidity related expectations
that would reasonably enhance the resolvability of a specified firm
that utilizes an MPOE resolution strategy? Are there circumstances
under which it would be appropriate for a resolution plan that utilizes
an MPOE strategy to include the movement of liquidity among material
entities that are in resolution?
D. Governance Mechanisms
For firms using an SPOE resolution strategy, the agencies propose
guidance that is substantially similar to the 2019 GSIB Guidance
regarding governance mechanisms. An adequate governance structure with
triggers that identify the onset, continuation, and increase of
financial stress is important to ensure that there is sufficient time
to allow firms to prepare for resolution, and to ensure the timely
execution of the resolution strategy. The governance mechanisms section
proposes expectations that firms have playbooks that describe the board
and senior management actions necessary to execute the firm's preferred
strategy. In addition, the proposal describes expectations that these
firms have triggers that are linked to specific actions outlined in
these playbooks to ensure the timely escalation of information to
senior management and the board, to address the successful
recapitalization of subsidiaries prior to the parent's bankruptcy, and
to address how the firm would ensure the timely execution of a
bankruptcy filing. The proposal also describes the expectations that
firms identify and analyze potential legal challenges to the provision
of capital and liquidity to subsidiaries that would precede the
parent's bankruptcy filing under an SPOE resolution strategy, and any
defenses and mitigants to such challenges.
The agencies do not propose issuing guidance on this topic to firms
whose resolution plans contemplate an MPOE resolution strategy, as
entry of many types of material entities, including IDIs, into
resolution would be determined by criteria prescribed in statute or
dependent to some extent on actions taken by regulatory authorities in
implementing a statute.
Question 6: Should the agencies consider applying aspects of the
governance mechanisms guidance developed for an SPOE strategy to
resolution plans utilizing an MPOE resolution strategy? If, so, what
aspects should be extended to resolution plans utilizing an MPOE
resolution strategy? Should the agencies consider developing new
governance mechanisms guidance specific to resolution plans utilizing
an MPOE resolution strategy?
Question 7: If a specified firm chooses to switch from utilizing an
MPOE resolution strategy to an SPOE resolution strategy in its
resolution plan, should the agencies provide a transition period for a
firm to take into consideration the SPOE-specific guidance when
developing its resolution planning capabilities and its next resolution
plan? If so, are there aspects that should have a shorter transition
period, and what period or periods would be appropriate?
E. Operational
The development and maintenance of operational capabilities is
important to support and enable execution of a firm's preferred
resolution strategy, including providing for the continuation of
identified critical operations and preventing or mitigating adverse
effects on U.S. financial stability. For firms that utilize an SPOE
resolution strategy, the agencies propose adopting portions of the
operational expectations of the 2019 GSIB Guidance and SR letter 14-
1,\15\ with modifications that reflect the specific characteristics and
complexities of the specified firms. Like the 2019 GSIB Guidance, the
proposal contains expectations on payment, clearing and settlement
activities, managing, identifying and valuing collateral, management
information systems, and shared and outsourced services. For firms that
utilize an MPOE resolution strategy, the agencies propose adopting
expectations based on SR letter 14-1 and the 2019 GSIB Guidance that
are most relevant to an MPOE resolution strategy. For example, the
proposed expectations regarding payment, clearing and settlement
activities are those most likely to support resolution in the MPOE
context.
---------------------------------------------------------------------------
\15\ SR letter 14-1, ``Principles and Practices for Recovery and
Resolution Preparedness'' (Jan. 24, 2014), available at https://www.federalreserve.gov/supervisionreg/srletters/sr1401.htm.
---------------------------------------------------------------------------
F. Legal Entity Rationalization & Separability
For specified firms that utilize an SPOE resolution strategy, the
agencies propose substantively adopting the 2019 GSIB Guidance
regarding legal entity rationalization and separability. It is
important that firms maintain a structure that facilitates orderly
resolution. To achieve this, the proposal states that a firm should
develop and describe in their plans criteria supporting its resolution
strategy and integrate them into day-to-day decision-making processes.
The criteria would be expected to consider the best alignment of legal
entities and business lines and facilitate resolvability as a firm's
activities, technology, business models, or geographic footprint change
over time. In addition, the proposed guidance provides that the firm
should identify discrete operations that could be sold or transferred
in resolution to provide meaningful optionality for the resolution
strategy under a range of potential failure scenarios and include this
information in their plans.
For firms that utilize an MPOE resolution strategy, the proposed
guidance would clarify that the firms should have legal entity
structures that support their preferred resolution strategy and
describe those structures in their plans. The proposal also provides
that to the extent a material entity IDI relies upon other affiliates
during resolution, the firm should discuss its rationale for the legal
entity structure and associated resolution risks and potential
mitigants. In addition, the agencies propose that the firms include
options for the sale, transfer, or disposal of significant assets,
portfolios, legal entities, or business lines in resolution.
Question 8: Are there other separability related expectations that
would reasonably enhance resolution plans that utilize an MPOE
resolution strategy?
[[Page 64630]]
G. Insured Depository Institution (IDI) Resolution 16
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\16\ The FDIC has a separate rule requiring resolution plans
from certain IDIs, 12 CFR 360.10, ``Resolution Plans Required for
Insured Depository Institutions With $50 Billion or More in Total
Assets'' (the IDI Rule). The Rule and the IDI Rule each have
different goals and the expected content of the respective
resolution plans accordingly also is different. The Rule requires a
covered company to submit a resolution plan that would allow rapid
and orderly resolution of the covered company under the Bankruptcy
Code in the event of material financial distress or failure. The
purpose of the IDI Rule is to ensure that the FDIC has access to all
of the material information it needs to efficiently resolve an IDI
in the event of its failure.
---------------------------------------------------------------------------
Background. When an IDI fails and the FDIC is appointed receiver,
the FDIC generally must utilize the resolution option for the failed
IDI that is least costly to the DIF of all possible methods (the least-
cost requirement).\17\ An exception to this requirement is provided
where a determination is made by the Secretary of the Treasury, in
consultation with the President and after a written recommendation from
two-thirds of the FDIC's Board of Directors and two-thirds of the
Board, that complying with the least-cost requirement would have
serious adverse effects on economic conditions or financial stability
and implementing another resolution option would avoid or mitigate such
adverse effects.\18\ A specified firm should not assume the use of this
systemic risk exception to the least-cost requirement in its resolution
plan.
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\17\ See 12 U.S.C. 1823(c)(4). A deposit payout and liquidation
of the failed IDI's assets (payout liquidation) is the general
baseline the FDIC uses in a least-cost requirement determination.
See 12 U.S.C. 1823(c)(4)(D).
\18\ See 12 U.S.C. 1823(c)(4)(G).
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Purchase and Assumption Transaction. The FDIC typically seeks to
resolve a failed IDI by identifying, before the IDI's failure, one or
more potential acquirers so that as many of the IDI's assets and
deposit liabilities as possible can be sold to and assumed by the
acquirer(s) instead of remaining in the receivership created on the
failure date.\19\ This transaction form, termed a ``purchase and
assumption'' or ``P&A'' transaction, has historically been the
resolution approach that is least costly to the DIF, easiest for the
FDIC to execute, and least disruptive to the depositors of the failed
IDI--particularly in the case of transactions involving the assumption
of all the failed IDI's deposits by the assuming institution (an ``all-
deposit transaction'')--and typically can be completed over the weekend
following the IDI's closure by its primary regulator but before
business ordinarily would commence the following Monday (closing
weekend). The limited size and operational complexity present in most
small-bank failures has allowed the FDIC to execute a P&A transaction
with a single acquirer on numerous occasions. Resolving an IDI via a
P&A transaction over the closing weekend, however, may not be available
to the FDIC, particularly in failures involving large IDIs. P&A
transactions require lead time to identify potential buyers and allow
due diligence on, and an auction of, the failing IDI's assets and
banking business, also termed its ``franchise.'' Additionally, larger
banks can pose significant, and potentially systemic, challenges in
resolutions. These challenges include: a more limited pool of potential
acquirers as a failed IDI increases in size, which makes a transaction
in which nearly all assets and liabilities are transferred to one or
more acquirers increasingly less likely; operational complexities which
require advance planning on the part of the IDI and the FDIC and the
development of certain capabilities; potential market concentration and
antitrust considerations; and potentially the need to maintain the
continuity of activities conducted in whole or in part in the IDI that
are critical to U.S. financial stability.
---------------------------------------------------------------------------
\19\ See generally https://www.fdic.gov/resources/resolutions/bank-failures/ for background about the resolution of IDIs by the
FDIC.
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For example, the largest failed IDI in U.S. history, Washington
Mutual Bank, had approximately $307 billion in assets. The DIF did not
incur a loss associated with this failure in part because it benefitted
from the FDIC's sale of the institution to an acquirer which had first
engaged in exhaustive due diligence of the institution during a self-
marketing effort conducted by the IDI prior to its failure. A more
recent example, that of First Republic Bank, which was also acquired in
an all-deposit transaction, illustrates that such a transaction can be
difficult to effectuate. The FDIC invited 21 banks and 21 nonbanks to
participate in the bidding process and received bids from only four
bidders.\20\ The least costly bid necessitated a loss-sharing
agreement, and the transaction is expected to result in a significant
loss to the DIF. In addition, the FDIC received only one viable bid for
Silicon Valley Bank during the weekend following its failure, but this
bid did not satisfy the least-cost test. The FDIC received no viable
all-deposit bids for Signature Bank at the time it failed.\21\
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\20\ See Remarks by Chairman Martin J. Gruenberg on ``Oversight
of Prudential Regulators'' before the Committee on Financial
Services, United States House of Representatives available at
https://www.fdic.gov/news/speeches/2023/spmay1523.html; see also
Remarks by Chairman Martin J. Gruenberg on ``Recent Bank Failures
and the Federal Regulatory Response'' before the Committee on
Banking, Housing, and Urban Affairs, United States Senate available
at https://www.fdic.gov/news/speeches/2023/spmar2723.html.
\21\ To protect depositors and preserve the value of the assets
and operations of each of SVB and SB following failure--which can
improve recoveries for creditors and the DIF--the FDIC ultimately
transferred all the deposits and substantially all of the assets of
each failed bank to a full-service bridge depository institution
(BDI) operated by the FDIC while the FDIC marketed the institutions
to potential bidders.
---------------------------------------------------------------------------
If no P&A transaction that meets the least-cost requirement can be
accomplished at the time an IDI fails, the FDIC must pursue an
alternative resolution strategy. The primary alternative resolution
strategies for a failed IDI are: (1) a payout liquidation; or (2)
utilization of a BDI. The FDIC conducts payout liquidations by paying
insured deposits in cash or transferring the insured deposits to an
existing institution or a new institution organized by the FDIC to
assume the insured deposits (generally, a Deposit Insurance National
Bank or DINB). In payout liquidations, the FDIC as receiver retains
substantially all of the failed IDI's assets for later sale, and the
franchise value of the failed IDI is lost.
Bridge Depository Institution. If the FDIC determines that
temporarily continuing the operations of the failed IDI is less costly
than a payout liquidation, it may organize a BDI to purchase certain
assets and assume certain liabilities of the failed IDI.\22\ Generally,
a BDI would continue the failed bank's operations according to business
plans and budgets approved by the FDIC and carried out by FDIC-selected
leadership of the BDI. In addition to providing depositors access to
deposits and banking services, the BDI would conduct any necessary
restructuring required to rationalize the failed IDI's operations and
maximize value to be achieved in an eventual sale. Subject to the
least-cost requirement, the initial structure of the BDI may be based
upon an all-deposit transaction, a transaction in which the BDI assumes
only the insured deposits, or a transaction in which the BDI assumes
all insured deposits and a portion of the uninsured deposits. Once a
BDI is established, the FDIC seeks to stabilize the institution while
simultaneously planning for the eventual termination of
[[Page 64631]]
the BDI. In exiting and terminating a BDI, the FDIC may merge or
consolidate the BDI with another depository institution, issue and sell
a majority of the capital stock in the BDI, or effect the assumption of
the deposits or acquisition of the assets of the BDI.\23\ However, many
of the same factors that challenge the feasibility of a traditional P&A
transaction also complicate planning for the termination of a BDI
through a sale of the whole entity or its constituent parts. The
proposed guidance would clarify the expectations for a firm adopting an
MPOE resolution strategy with a material entity IDI to demonstrate how
the IDI can be resolved in a manner that is consistent with the overall
objective of the Plan to substantially mitigate the risk that the
failure of the specified firm would have serious adverse effects on
financial stability in the United States, while also adhering to the
requirements of the FDI Act regarding failed bank resolutions without
relying on the assumption that a systemic risk exception will be
available. These expectations would not be applicable to firms adopting
an SPOE resolution strategy because U.S. IDI subsidiaries of such firms
would not be expected to enter resolution.
---------------------------------------------------------------------------
\22\ Before a BDI may be chartered, the chartering conditions
set forth in 12 U.S.C. 1821(n)(2) must also be satisfied. For
purposes of this guidance, if the Plan provides appropriate analysis
concerning the feasibility of the BDI strategy, there is no
expectation that the resolution plan also demonstrate separately
that the conditions for chartering the BDI have been satisfied.
\23\ 12 U.S.C. 1821(n)(10).
---------------------------------------------------------------------------
Question 9: Should the guidance indicate that if a specified filer
proposes a strategy using a BDI to resolve its subsidiary material
entity IDI, the plan should include a detailed description of the
balance sheet components that would transfer to the BDI and of the
process the specified filer believes is most appropriate to value the
transferred components, inclusive of pro forma balance sheet and income
statements?
Question 10: Should the guidance indicate that if a specified filer
proposes a strategy using a BDI to resolve its subsidiary material
entity IDI, the plan should describe and quantify:
The amounts to be realized through liquidating the failed
IDI's assets and any expected premiums associated with selling the
institution's deposits;
Any franchise value bid premiums expected to be realized
through maintaining certain ongoing business operations in a BDI; and
A comparison of the loss to the DIF realized from a payout
liquidation and from utilizing a BDI so as to support the conclusion
that a BDI would result in the least costly resolution?
H. Derivatives and Trading Activities
The agencies request comment on whether to provide guidance on
derivatives and trading activities for specified firms that utilize an
SPOE resolution strategy. Although the specified firms have limited
derivatives and trading operations compared to the U.S. GSIBs, it
remains important that their derivatives and trading activities can be
stabilized and de-risked during resolution without causing significant
disruption to U.S. markets. If the agencies were to provide guidance on
derivatives and trading activities, the agencies likely would adopt
aspects of the 2019 GSIB Guidance. The agencies do not anticipate
providing derivatives and trading activities guidance to specified
firms that utilize an MPOE resolution strategy.
In the 2019 GSIB Guidance, the agencies specified the particular
covered companies to which the derivatives and trading activities
guidance was directed. The agencies recognize that covered companies
may move in and out of the triennial full filer category and want to
ensure that the proposal would remain applicable and relevant
regardless of which covered companies are considered triennial full
filers at any moment in time.
Question 11: Should the agencies provide resolution plan guidance
on derivatives and trading activities for specified firms that utilize
an SPOE resolution strategy? If so, what should be the content of that
guidance, what methodology should the agencies use to determine the
scope of specified firms to be subject to that guidance, and would it
be appropriate to adopt all or some of the expectations contained in
the 2019 GSIB Guidance? What other derivatives and trading activities-
related expectations would reasonably enhance resolution plans that
utilize an SPOE resolution strategy?
Question 12: Should the agencies provide resolution plan guidance
on derivatives and trading activities for specified firms that utilize
an MPOE resolution strategy? If so, what should be the content of that
guidance and what methodology should the agencies use to determine the
scope of specified firms to be subject to that guidance?
I. Format and Structure of Plans; Assumptions
This section states the agencies' preferred presentation regarding
the format, assumptions, and structure of resolution plans. Plans
should contain an executive summary, a narrative of the firm's
resolution strategy, relevant technical appendices, and a public
section as detailed in the Rule. The proposed format, structure, and
assumptions are generally similar to those in the 2019 GSIB Guidance,
except that the proposed guidance reflects the expectation that a firm
should support any assumptions that it will have access to the Discount
Window and/or other borrowings during the period immediately prior to
entering bankruptcy and clarifies expectations around such assumptions
and that firms should not assume the use of the systemic risk exception
to the least-cost test in the event of a failure of an IDI requiring
resolution under the FDI Act. In addition, for firms that adopt an MPOE
resolution strategy, the proposal includes the expectation that a plan
should demonstrate and describe how the failure event(s) results in
material financial distress, including consideration of the likelihood
of the diminution the firm's liquidity and capital levels prior to
bankruptcy.
Question 13: Certain firms' plans rely on lending facilities,
including the Discount Window or other government-sponsored facilities
in the period immediately preceding a bankruptcy filing. Should the
guidance include additional clarifications related to assumptions
regarding these lending facilities? Should the guidance contain
clarifications relating to other assumptions discussed in the guidance
or additional appropriate assumptions?
Question 14: The agencies included in the 2019 GSIB Guidance and
2020 FBO Guidance answers that had been previously published to
frequently asked questions (FAQs) the agencies received from the
guidance recipients about the topics in resolution plan guidance (e.g.,
capital, liquidity, etc.); however, there was no FAQ process for the
specified firms given the limited number of common questions received.
Should the agencies include in resolution guidance for the specified
firms answers to FAQs similar to those contained in the 2019 GSIB
Guidance and 2020 FBO Guidance? If so, which answers to FAQs should the
final guidance contain, and what changes, if any, should the agencies
make to the answers to FAQs in the 2019 GSIB Guidance and 2020 FBO
Guidance?
III. Paperwork Reduction Act
Certain provisions of the proposed guidance contain ``collections
of information'' within the meaning of the Paperwork Reduction Act of
1995 (PRA) (44 U.S.C. 3501-3521). In accordance with the requirements
of the PRA, the agencies may not conduct or sponsor, and a respondent
is not required to respond to, an information collection unless it
displays a currently valid Office of Management and Budget (OMB)
control number. The agencies reviewed the proposed guidance and
determined that it would revise the
[[Page 64632]]
reporting revisions that have been previously approved by OMB under the
Board's OMB control number 7100-0346 (Reporting Requirements Associated
with Regulation QQ; FR QQ) and the FDIC's control number 3064-0210
(Reporting Requirements Associate with Resolution Planning). The Board
has reviewed the proposed guidance under the authority delegated to the
Board by OMB.
Comments are invited on the following:
(A) Whether the collections of information are necessary for the
proper performance of the agencies' functions, including whether the
information has practical utility;
(B) the accuracy of the agencies' estimates of the burden of the
information collections, including the validity of the methodology and
assumptions used;
(C) ways to enhance the quality, utility, and clarity of the
information to be collected;
(D) ways to minimize the burden of the information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(E) estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Comments on aspects of this document that may affect reporting,
recordkeeping, or disclosure requirements and burden estimates should
be sent to the addresses listed in the ADDRESSES section of the
Supplementary Information. A copy of the comments may also be submitted
to the OMB desk officer for the Agencies: By mail to U.S. Office of
Management and Budget, 725 17th Street NW, #10235, Washington, DC 20503
or by facsimile to (202) 395-5806, Attention, Federal Banking Agency
Desk Officer.
Proposed Revisions, With Extension, of the Following Information
Collections Board
Collection title: Reporting Requirements Associated with Regulation
QQ.
Collection identifier: FR QQ.
OMB control number: 7100-0346.
Frequency: Triennial, Biennial, and on occasion.
Respondents: Bank holding companies (including any foreign bank or
company that is, or is treated as, a bank holding company under section
8(a) of the International Banking Act of 1978 and meets the relevant
total consolidated assets threshold) with total consolidated assets of
$250 billion or more, bank holding companies with $100 billion or more
in total consolidated assets with certain characteristics, and nonbank
financial firms designated by the Financial Stability Oversight Council
for supervision by the Board.
FDIC
Collection title: Reporting Requirements Associated with Resolution
Planning.
OMB control number: 3064-0210.
Current Actions: The proposed guidance would apply to all triennial
full filers, but expectations would differ based on whether a firm
adopts an SPOE or an MPOE resolution strategy and whether it is foreign
or domestic. The proposed guidance is intended to clarify the agencies'
expectations concerning the resolution plans required pursuant to the
Rule. The document does not have the force and effect of law. Rather,
it describes the agencies' expectations and priorities regarding these
the resolution plans of triennial full filers and the agencies' general
views regarding specific areas where additional detail should be
provided and where certain capabilities or optionality should be
developed and maintained to demonstrate that each firm has considered
fully, and is able to mitigate, obstacles to the successful
implementation of its preferred resolution strategy.
The proposed guidance for triennial full filers using an SPOE
strategy is based on the 2019 GSIB guidance (for domestic firms) and
the 2020 FBO guidance (for foreign firms). It would clarify the
agencies' expectations around capital, liquidity, governance
mechanisms, and operations. The proposed guidance also would clarify
expectations concerning management information systems capabilities and
the identification of discrete separability options appropriate to the
resolution strategy. Additionally, if finalized, the foreign banking
organizations that adopt an SPOE resolution strategy should address how
their U.S. resolution plan aligns with their group resolution plan.
The proposed guidance for triennial full filers using an MPOE
resolution strategy addresses similar topics but reflects the risks of
and capabilities needed for an MPOE resolution. The proposed guidance
explains the agencies' expectations around liquidity and operational
capabilities, and legal entity rationalization. The proposed guidance
also provides clarified expectations related to the separate resolution
of a U.S. IDI and to identification of discrete separability options.
Foreign banking organizations that adopt an MPOE resolution strategy
would have expectations related to governance mechanisms; the role of
branches; and the group resolution plan.
The proposed guidance does not specify expectations around
derivatives and trading activities.
Historically, the Board and the FDIC have split the respondents for
purposes of PRA clearances. As such, the agencies will split the change
in burden as well. As a result of this split and the proposed
revisions, there is a proposed net increase in the overall estimated
burden hours of 13,386 hours for the Board and 17,610 hours for the
FDIC. Therefore, the total Board estimated burden for its entire
information collection would be 216,853 hours and the total FDIC
estimate burden for its entire information collection would be 211,300
hours.
The following table presents only the change in the estimated
burden hours, as amended if the guidance were finalized, broken out by
agency. The table does not include a discussion of the remaining
estimated burden hours, which remain unchanged.\24\ As shown in the
table, the Triennial Full filing types would be estimated more
granularly according to SPOE and MPOE resolution strategies.
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\24\ In addition to the proposed revisions to the estimations
for Triennial Full filings, the agencies have revised the estimation
for Biennial Full filings from 40,115 hours per response to 39,550
hours per response to align the burden estimation methodology with
what was used for Triennial Full filings under the proposed
guidance. Specifically, the agencies removed a component for a
biennial full filer's analysis of its critical operations as part of
its submission of targeted and full resolution plans, because this
critical operations analysis is integrated in the preparation of
such plans.
[[Page 64633]]
Table 1--Burden Hour Estimates Under Current Regulations and Under the Proposed Guidance
----------------------------------------------------------------------------------------------------------------
Estimated Estimated Estimated Estimated
FR QQ number of annual average hours annual burden
respondents frequency per response hours
----------------------------------------------------------------------------------------------------------------
Board Burdens
----------------------------------------------------------------------------------------------------------------
Current
Triennial Full:
Complex Foreign......................... 1 1 9,777 9,777
Foreign and Domestic.................... 7 1 4,667 32,669
---------------------------------------------------------------
Current Total....................... .............. .............. .............. 42,446
Proposed
Triennial Full:
FBO SPOE *.............................. 2 1 11,848 23,696
FBO MPOE................................ 3 1 5,939 17,817
Domestic MPOE........................... 3 .............. 5,513 16,539
---------------------------------------------------------------
Proposed Total...................... .............. .............. .............. 58,052
----------------------------------------------------------------------------------------------------------------
FDIC Burdens
----------------------------------------------------------------------------------------------------------------
Current
Triennial Full:
Complex Foreign......................... 0 1 9,777 0
Foreign and Domestic.................... 7 1 4,667 32,669
---------------------------------------------------------------
Current Total....................... .............. .............. .............. 32,669
Proposed
Triennial Full:
FBO SPOE *.............................. 2 1 11,848 23,696
FBO MPOE................................ 3 1 5,939 17,817
Domestic MPOE........................... 2 1 5,513 11,026
---------------------------------------------------------------
Proposed Total...................... .............. .............. .............. 52,539
----------------------------------------------------------------------------------------------------------------
* There are currently no domestic triennial full filers utilizing a SPOE strategy. Estimated hours per response
for a domestic SPOE triennial full filer would be 11,235 hours.
Appendix: Text of the Proposed Guidance
Guidance for Resolution Plan Submissions of Domestic Triennial Full
Filers
I. Introduction
Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5365(d)) requires certain financial
companies to report periodically to the Board of Governors of the
Federal Reserve System (the Board) and the Federal Deposit Insurance
Corporation (the FDIC) (together, the agencies) their plans for
rapid and orderly resolution in the event of material financial
distress or failure. On November 1, 2011, the agencies promulgated a
joint rule implementing the provisions of Section 165(d).\1\
Subsequently, in November 2019, the agencies finalized amendments to
the joint rule addressing amendments to the Dodd-Frank Act made by
the Economic Growth, Regulatory Relief, and Consumer Protection Act
and improving certain aspects of the joint rule based on the
agencies' experience implementing the joint rule since its
adoption.\2\ Financial companies meeting criteria set out in the
Rule must file a resolution plan (Plan) according to the schedule
specified in the Rule.
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\1\ Resolution Plans Required, 76 FR 67323 (Nov. 1, 2011).
\2\ Resolution Plans Required, 84 FR 59194 (Nov. 1, 2019). The
amendments became effective December 31, 2019. ``Rule'' means the
joint rule as amended in 2019. Terms not defined herein have the
meanings set forth in the Rule.
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This document is intended to provide guidance to certain
domestic financial companies required to submit Plans to assist
their further development of a Plan for their 2024 and subsequent
Plan submissions. Specifically, the guidance applies to any domestic
covered company that is a triennial full filer under the Rule
(specified firms).\3\ The Plan for a specified firm would address
the subsidiaries and operations that are domiciled in the United
States as well as the foreign subsidiaries, offices, and operations
of the covered company.
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\3\ See 12 CFR 243.4(b)(1) and 12 CFR 381.4(b)(1).
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In general, this document is organized around a number of key
challenges in resolution (capital; liquidity; governance mechanisms;
operational; legal entity rationalization and separability; and
insured depository institution resolution, if applicable) that apply
across resolution plans, depending on their strategy. Additional
challenges or obstacles may arise based on a firm's particular
structure, operations, or resolution strategy. Each firm is expected
to satisfactorily address these vulnerabilities in its Plan. In
addition, each topic of this guidance is separated into expectations
for a specified firm that utilizes a single point of entry (SPOE)
resolution strategy for its Plan and expectations for a specified
firm that utilizes a multiple point of entry (MPOE) resolution
strategy for its Plan.
Under the Rule, the agencies will review a Plan to determine if
it satisfactorily addresses key potential challenges, including
those specified below. If the agencies jointly decide that an aspect
of a Plan presents a weakness that individually or in conjunction
with other aspects could undermine the feasibility of the Plan, the
agencies may determine jointly that the Plan is not credible or
would not facilitate an orderly resolution under the U.S. Bankruptcy
Code.
II. Capital
SPOE
The firm should have the capital capabilities necessary to
execute its resolution strategy, including the modeling and
estimation process described below.
Resolution Capital Adequacy and Positioning (RCAP). In order to
help ensure that a firm's material entities \4\ could operate while
the parent company is in bankruptcy, the firm should have an
adequate amount of
[[Page 64634]]
loss-absorbing capacity to recapitalize those material entities.
Thus, a firm should have outstanding a minimum amount of loss-
absorbing capacity, including long-term debt, to help ensure that
the firm has adequate capacity to meet that need at a consolidated
level (external LAC).
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\4\ The terms ``material entities,'' ``identified critical
operations,'' and ``core business lines'' have the same meaning as
in the Rule.
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A firm's external LAC should be complemented by appropriate
positioning of loss-absorbing capacity within the firm (i.e.,
internal LAC), consistent with any applicable rules requiring
prepositioned resources at IDIs in the form of long-term debt. After
adhering to any requirements related to prepositioning long-term
debt at IDIs, the positioning of a firm's remaining resources should
balance the certainty associated with pre-positioning resources
directly at material entities with the flexibility provided by
holding recapitalization resources at the parent (contributable
resources) to meet unanticipated losses at material entities. That
balance should take account of both pre-positioning at material
entities and holding resources at the parent, and the obstacles
associated with each. With respect to material entities that are not
U.S. IDIs subject to pre-positioned long-term debt requirements, the
firm should not rely exclusively on either full pre-positioning or
parent contributable resources to recapitalize such entities. The
Plan should describe the positioning of resources within the firm,
along with analysis supporting such positioning.
Finally, to the extent that pre-positioned resources at a
material entity are in the form of intercompany debt and there are
one or more entities between that material entity and the parent,
the firm should structure the instruments so as to ensure that the
material entity can be recapitalized.
Resolution Capital Execution Need (RCEN). To support the
execution of the firm's resolution strategy, material entities need
to be recapitalized to a level that allows them to operate or be
wound down in an orderly manner following the parent company's
bankruptcy filing. The firm should have a methodology for
periodically estimating the amount of capital that may be needed to
support each material entity after the bankruptcy filing (RCEN). The
firm's positioning of resources should be able to support the RCEN
estimates. In addition, the RCEN estimates should be incorporated
into the firm's governance framework to ensure that the parent
company files for bankruptcy at a time that enables execution of the
preferred strategy.
The firm's RCEN methodology should use conservative forecasts
for losses and risk-weighted assets and incorporate estimates of
potential additional capital needs through the resolution period,\5\
consistent with the firm's resolution strategy. The RCEN methodology
should be calibrated such that recapitalized material entities will
have sufficient capital to maintain market confidence as required
under the preferred resolution strategy. Capital levels should meet
or exceed all applicable regulatory capital requirements for ``well-
capitalized'' status and meet estimated additional capital needs
throughout resolution. Material entities that are not subject to
capital requirements may be considered sufficiently recapitalized
when they have achieved capital levels typically required to obtain
an investment-grade credit rating or, if the entity is not rated, an
equivalent level of financial soundness. Finally, the methodology
should be independently reviewed, consistent with the firm's
corporate governance processes and controls for the use of models
and methodologies.
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\5\ The resolution period begins immediately after the parent
company bankruptcy filing and extends through the completion of the
preferred resolution strategy.
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MPOE
The agencies do not propose issuing guidance on this topic to
firms whose Plans contemplate a MPOE resolution strategy.
III. Liquidity
SPOE
The firm should have the liquidity capabilities necessary to
execute its preferred resolution strategy. For resolution purposes,
these capabilities should include having an appropriate model and
process for estimating and maintaining sufficient liquidity at or
readily available to material entities and a methodology for
estimating the liquidity needed to successfully execute the
resolution strategy, as described below.
Resolution Liquidity Adequacy and Positioning (RLAP). With
respect to RLAP, the firm should be able to measure the stand-alone
liquidity position of each material entity (including material
entities that are non-U.S. branches)--i.e., the high-quality liquid
assets (HQLA) at the material entity less net outflows to third
parties and affiliates--and ensure that liquidity is readily
available to meet any deficits. The RLAP model should cover a period
of at least 30 days and reflect the idiosyncratic liquidity profile
and risk of the firm. The model should balance the reduction in
frictions associated with holding liquidity directly at material
entities with the flexibility provided by holding HQLA at the parent
available to meet unanticipated outflows at material entities. Thus,
the firm should not rely exclusively on either full pre-positioning
or an expected contribution of liquid resources from the parent. The
model \6\ should ensure that the parent holding company holds
sufficient HQLA (inclusive of its deposits at the U.S. branch of the
lead bank subsidiary) to cover the sum of all stand-alone material
entity net liquidity deficits. The stand-alone net liquidity
position of each material entity (HQLA less net outflows) should be
measured using the firm's internal liquidity stress test assumptions
and should treat inter-affiliate exposures in the same manner as
third-party exposures. For example, an overnight unsecured exposure
to an affiliate should be assumed to mature. Finally, the firm
should not assume that a net liquidity surplus at one material
entity could be moved to meet net liquidity deficits at other
material entities or to augment parent resources.
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\6\ ``Model'' refers to the set of calculations estimating the
net liquidity surplus/deficit at each legal entity and for the firm
in aggregate based on assumptions regarding available liquidity,
e.g., HQLA, and third-party and interaffiliate net outflows.
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Additionally, the RLAP methodology should take into account: (A)
the daily contractual mismatches between inflows and outflows; (B)
the daily flows from movement of cash and collateral for all inter-
affiliate transactions; and (C) the daily stressed liquidity flows
and trapped liquidity as a result of actions taken by clients,
counterparties, key FMUs, and foreign supervisors, among others.
Resolution Liquidity Execution Need (RLEN). The firm should have
a methodology for estimating the liquidity needed after the parent's
bankruptcy filing to stabilize the surviving material entities and
to allow those entities to operate post-filing. The RLEN estimate
should be incorporated into the firm's governance framework to
ensure that the firm files for bankruptcy in a timely way, i.e.,
prior to the firm's HQLA falling below the RLEN estimate.
The firm's RLEN methodology should:
(A) Estimate the minimum operating liquidity (MOL) needed at
each material entity to ensure those entities could continue to
operate post-parent's bankruptcy filing and/or to support a wind-
down strategy;
(B) Provide daily cash flow forecasts by material entity to
support estimation of peak funding needs to stabilize each entity
under resolution;
(C) Provide a comprehensive breakout of all inter-affiliate
transactions and arrangements that could impact the MOL or peak
funding needs estimates; and
(D) Estimate the minimum amount of liquidity required at each
material entity to meet the MOL and peak needs noted above, which
would inform the firm's board(s) of directors of when they need to
take resolution-related actions.
The MOL estimates should capture material entities' intraday
liquidity requirements, operating expenses, working capital needs,
and inter-affiliate funding frictions to ensure that material
entities could operate without disruption during the resolution. The
peak funding needs estimates should be projected for each material
entity and cover the length of time the firm expects it would take
to stabilize that material entity. Inter-affiliate funding frictions
should be taken into account in the estimation process.
The firm's forecasts of MOL and peak funding needs should ensure
that material entities could operate post-filing consistent with
regulatory requirements, market expectations, and the firm's post-
failure strategy. These forecasts should inform the RLEN estimate,
i.e., the minimum amount of HQLA required to facilitate the
execution of the firm's strategy. The RLEN estimate should be tied
to the firm's governance mechanisms and be incorporated into the
playbooks as discussed below to assist the board of directors in
taking timely resolution-related actions.
MPOE
The firm should have the liquidity capabilities necessary to
execute its preferred resolution strategy. A Plan with an MPOE
[[Page 64635]]
strategy should include analysis and projections of a range of
liquidity needs during resolution, including intraday; reflect
likely failure and resolution scenarios; and consider the guidance
on assumptions provided in Section VIII, Format and Structure of
Plans; Assumptions.
IV. Governance Mechanisms
SPOE
Playbooks and Triggers. A firm should identify the governance
mechanisms that would ensure execution of required board actions at
the appropriate time (as anticipated under the firm's preferred
strategy) and include pre-action triggers and existing agreements
for such actions. Governance playbooks should detail the board and
senior management actions necessary to facilitate the firm's
preferred strategy and to mitigate vulnerabilities, and should
incorporate the triggers identified below. The governance playbooks
should also include a discussion of: (A) the firm's proposed
communications strategy, both internal and external; \7\ (B) the
boards of directors' fiduciary responsibilities and how planned
actions would be consistent with such responsibilities applicable at
the time actions are expected to be taken; (C) potential conflicts
of interest, including interlocking boards of directors; and (D) any
employee retention policy. All responsible parties and timeframes
for action should be identified. Governance playbooks should be
updated periodically for all entities whose boards of directors
would need to act in advance of the commencement of resolution
proceedings under the firm's preferred strategy.
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\7\ External communications include those with U.S. and foreign
authorities and other external stakeholders, such as large
depositors and shareholders.
---------------------------------------------------------------------------
The firm should demonstrate that key actions will be taken at
the appropriate time in order to mitigate financial, operational,
legal, and regulatory vulnerabilities. To ensure that these actions
will occur, the firm should establish clearly identified triggers
linked to specific actions for:
(A) The escalation of information to senior management and the
board(s) to potentially take the corresponding actions at each stage
of distress leading eventually to the decision to file for
bankruptcy;
(B) Successful recapitalization of subsidiaries prior to the
parent's filing for bankruptcy and funding of such entities during
the parent company's bankruptcy to the extent the preferred strategy
relies on such actions or support; and
(C) The timely execution of a bankruptcy filing and related pre-
filing actions.\8\
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\8\ Key pre-filing actions include the preparation of any
emergency motion required to be decided on the first day of the
firm's bankruptcy.
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These triggers should be based, at a minimum, on capital,
liquidity, and market metrics, and should incorporate the firm's
methodologies for forecasting the liquidity and capital needed to
operate as required by the preferred strategy following a parent
company's bankruptcy filing. Additionally, the triggers and related
actions should be specific.
Triggers linked to firm actions as contemplated by the firm's
preferred strategy should identify when and under what conditions
the firm, including the parent company and its material entities,
would transition from business-as-usual conditions to a stress
period and from a stress period to the recapitalization/resolution
periods. Corresponding escalation procedures, actions, and
timeframes should be constructed so that breach of the triggers will
allow prerequisite actions to be completed. For example, breach of
the triggers needs to occur early enough to ensure that resources
are available and can be downstreamed, if anticipated by the firm's
strategy, and with adequate time for the preparation of the
bankruptcy petition and first-day motions, necessary stakeholder
communications, and requisite board actions. Triggers identifying
the onset of stress and recapitalization/resolution periods, and the
associated escalation procedures and actions, should be discussed
directly in the governance playbooks.
Pre-Bankruptcy Parent Support. The Plan should include a
detailed legal analysis of the potential state law and bankruptcy
law challenges and mitigants to planned provision of capital and
liquidity to the subsidiaries prior to the parent's bankruptcy
filing (Support). Specifically, the analysis should identify
potential legal obstacles and explain how the firm would seek to
ensure that Support would be provided as planned. Legal obstacles
include claims of fraudulent transfer, preference, breach of
fiduciary duty, and any other applicable legal theory identified by
the firm. The analysis also should include related claims that may
prevent or delay an effective recapitalization, such as equitable
claims to enjoin the transfer (e.g., imposition of a constructive
trust by the court). The analysis should apply the actions
contemplated in the Plan regarding each element of the claim, the
anticipated timing for commencement and resolution of the claims,
and the extent to which adjudication of such claim could affect
execution of the firm's preferred resolution strategy.
The analysis should include mitigants to the potential
challenges to the planned Support. The Plan should identify the
mitigant(s) to such challenges that the firm considers most
effective. In identifying appropriate mitigants, the firm should
consider the effectiveness of a contractually binding mechanism
(CBM), pre-positioning of financial resources in material entities,
and the creation of an intermediate holding company. Moreover, if
the Plan includes a CBM, the firm should consider whether it is
appropriate that the CBM should have the following:
(A) Clearly defined triggers;
(B) Triggers that are synchronized to the firm's liquidity and
capital methodologies;
(C) Perfected security interests in specified collateral
sufficient to fully secure all Support obligations on a continuous
basis (including mechanisms for adjusting the amount of collateral
as the value of obligations under the agreement or collateral assets
fluctuates); and
(D) Liquidated damages provisions or other features designed to
make the CBM more enforceable.
The firm also should consider related actions or agreements that
may enhance the effectiveness of a CBM. A copy of any agreement and
documents referenced therein (e.g., evidence of security interest
perfection) should be included in the Plan.
The governance playbooks included in the Plan should incorporate
any developments from the firm's analysis of potential legal
challenges regarding the Support, including any Support approach(es)
the firm has implemented. If the firm analyzed and addressed an
issue noted in this section in a prior plan submission, the Plan may
reproduce that analysis and arguments and should build upon it to at
least the extent described above. In preparing the analysis of these
issues, firms may consult with law firms and other experts on these
matters. The agencies do not object to appropriate collaboration
between firms, including through trade organizations and with the
academic community, to develop analysis of common legal challenges
and available mitigants.
MPOE
The agencies do not propose issuing guidance on this topic to
firms whose Plans utilize a MPOE resolution strategy.
V. Operational
SPOE
Payment, Clearing, and Settlement Activities Framework.
Maintaining continuity of payment, clearing, and settlement (PCS)
services is critical for the orderly resolution of firms that are
either users or providers,\9\ or both, of PCS services. A firm
should demonstrate capabilities for continued access to PCS services
essential to an orderly resolution through a framework to support
such access by:
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\9\ A firm is a user of PCS services if it accesses PCS services
through an agent bank or it uses the services of a financial market
utility (FMU) through its membership in that FMU or through an agent
bank. A firm is a provider of PCS services if it provides PCS
services to clients as an agent bank or it provides clients with
access to an FMU or agent bank through the firm's membership in or
relationship with that service provider. A firm is also a provider
if it provides clients with PCS services through the firm's own
operations (e.g., payment services or custody services).
---------------------------------------------------------------------------
Identifying clients,\10\ FMUs, and agent banks as key
from the firm's perspective, using both quantitative (volume and
value) \11\ and qualitative criteria;
---------------------------------------------------------------------------
\10\ For purposes of this section, a client is an individual or
entity, including affiliates of the firm, to whom the firm provides
PCS services and any related credit or liquidity offered in
connection with those services.
\11\ In identifying entities as key, examples of quantitative
criteria may include: for a client, transaction volume/value, market
value of exposures, assets under custody, usage of PCS services, and
any extension of related intraday credit or liquidity; for an FMU,
the aggregate volumes and values of all transactions processed
through such FMU; and for an agent bank, assets under custody, the
value of cash and securities settled, and extensions of intraday
credit.
---------------------------------------------------------------------------
Mapping material entities, identified critical
operations, core business lines, and key clients to both key FMUs
and key agent banks; and
[[Page 64636]]
Developing a playbook for each key FMU and key agent
bank reflecting the firm's role(s) as a user and/or provider of PCS
services.
The framework should address direct relationships (e.g., a
firm's direct membership in an FMU, a firm's provision of clients
with PCS services through its own operations, or a firm's
contractual relationship with an agent bank) and indirect
relationships (e.g., a firm's provision of clients with access to
the relevant FMU or agent bank through the firm's membership in or
relationship with that FMU or agent bank).
Playbooks for Continued Access to PCS Services. The firm is
expected to provide a playbook for each key FMU and key agent bank
that addresses considerations that would assist the firm and its key
clients in maintaining continued access to PCS services in the
period leading up to and including the firm's resolution. Each
playbook should provide analysis of the financial and operational
impact to the firm's material entities and key clients due to
adverse actions that may be taken by a key FMU or a key agent bank
and contingency actions that may be taken by the firm. Each playbook
also should discuss any possible alternative arrangements that would
allow continued access to PCS services for the firm's material
entities, identified critical operations and core business lines,
and key clients, while the firm is in resolution. The firm is not
expected to incorporate a scenario in which it loses key FMU or key
agent bank access into its preferred resolution strategy or its RLEN
and RCEN estimates. The firm should continue to engage with key
FMUs, key agent banks, and key clients, and playbooks should reflect
any feedback received during such ongoing outreach.
Content Related to Users of PCS Services. Individual key FMU and
key agent bank playbooks should include:
Description of the firm's relationship as a user with
the key FMU or key agent bank and the identification and mapping of
PCS services to material entities, identified critical operations,
and core business lines that use those PCS services;
Discussion of the potential range of adverse actions
that may be taken by that key FMU or key agent bank when the firm is
in resolution,\12\ the operational and financial impact of such
actions on each material entity, and contingency arrangements that
may be initiated by the firm in response to potential adverse
actions by the key FMU or key agent bank; and
---------------------------------------------------------------------------
\12\ Examples of potential adverse actions may include increased
collateral and margin requirements and enhanced reporting and
monitoring.
---------------------------------------------------------------------------
Discussion of PCS-related liquidity sources and uses in
business-as-usual (BAU), in stress, and in the resolution period,
presented by currency type (with U.S. dollar equivalent) and by
material entity.
[cir] PCS Liquidity Sources: These may include the amounts of
intraday extensions of credit, liquidity buffer, inflows from FMU
participants, and key client prefunded amounts in BAU, in stress,
and in the resolution period. The playbook also should describe
intraday credit arrangements (e.g., facilities of the key FMU, key
agent bank, or a central bank) and any similar custodial
arrangements that allow ready access to a firm's funds for PCS-
related key FMU and key agent bank obligations (including margin
requirements) in various currencies, including placements of firm
liquidity at central banks, key FMUs, and key agent banks.
[cir] PCS Liquidity Uses: These may include firm and key client
margin and prefunding and intraday extensions of credit, including
incremental amounts required during resolution.
[cir] Intraday Liquidity Inflows and Outflows: The playbook
should describe the firm's ability to control intraday liquidity
inflows and outflows and to identify and prioritize time-specific
payments. The playbook also should describe any account features
that might restrict the firm's ready access to its liquidity
sources.
Content Related to Providers of PCS Services.\13\ Individual key
FMU and key agent bank playbooks should include:
---------------------------------------------------------------------------
\13\ Where a firm is a provider of PCS services through the
firm's own operations, the firm is expected to produce a playbook
for the material entities that provide those services, addressing
each of the items described under ``Content Related to Providers of
PCS Services,'' which include contingency arrangements to permit the
firm's key clients to maintain continued access to PCS services.
---------------------------------------------------------------------------
Identification and mapping of PCS services to the
material entities, identified critical operations, and core business
lines that provide those PCS services, and a description of the
scale and the way in which each provides PCS services;
Identification and mapping of PCS services to key
clients to whom the firm provides such PCS services and any related
credit or liquidity offered in connection with such services;
Discussion of the potential range of firm contingency
arrangements available to minimize disruption to the provision of
PCS services to its key clients, including the viability of
transferring key client activity and any related assets, as well as
any alternative arrangements that would allow the firm's key clients
continued access to PCS services if the firm could no longer provide
such access (e.g., due to the firm's loss of key FMU or key agent
bank access), and the financial and operational impacts of such
arrangements from the firm's perspective;
Descriptions of the range of contingency actions that
the firm may take concerning its provision of intraday credit to key
clients, including analysis quantifying the potential liquidity the
firm could generate by taking such actions in stress and in the
resolution period, such as: (i) requiring key clients to designate
or appropriately pre-position liquidity, including through
prefunding of settlement activity, for PCS-related key FMU and key
agent bank obligations at specific material entities of the firm
(e.g., direct members of key FMUs) or any similar custodial
arrangements that allow ready access to key clients' funds for such
obligations in various currencies; (ii) delaying or restricting key
client PCS activity; and (iii) restricting, imposing conditions upon
(e.g., requiring collateral), or eliminating the provision of
intraday credit or liquidity to key clients; and
Descriptions of how the firm will communicate to its
key clients the potential impacts of implementation of any
identified contingency arrangements or alternatives, including a
description of the firm's methodology for determining whether any
additional communication should be provided to some or all key
clients (e.g., due to the key client's BAU usage of that access and/
or related intraday credit or liquidity), and the expected timing
and form of such communication.
Capabilities. The firm is expected to have and describe
capabilities to understand, for each material entity, the
obligations and exposures associated with PCS activities, including
contractual obligations and commitments. The firm should be able to:
Track the following items by: (i) material entity; and
(ii) with respect to customers, counterparties, and agents and
service providers, location and jurisdiction:
[cir] PCS activities, with each activity mapped to the relevant
material entities, identified critical operations, and core business
lines; \14\
---------------------------------------------------------------------------
\14\ 12 CFR 243.5(e)(12) and 12 CFR 381.5(e)(12).
---------------------------------------------------------------------------
[cir] Customers and counterparties for PCS activities, including
values and volumes of various transaction types, as well as used and
unused capacity for all lines of credit; \15\
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
[cir] Exposures to and volumes transacted with FMUs, nostro
agents, and custodians; and \16\
---------------------------------------------------------------------------
\16\ 12 CFR 252.34(h).
---------------------------------------------------------------------------
[cir] Services provided and service level agreements, as
applicable, for other current agents and service providers (internal
and external).\17\
---------------------------------------------------------------------------
\17\ 12 CFR 243.5(f)(l)(i) and 12 CFR 381.5(f)(1)(i).
---------------------------------------------------------------------------
Assess the potential effects of adverse actions by
FMUs, nostro agents, custodians, and other agents and service
providers, including suspension or termination of membership or
services, on the firm's operations and customers and counterparties
of those operations; \18\
---------------------------------------------------------------------------
\18\ 12 CFR 252.34(f).
---------------------------------------------------------------------------
Develop contingency arrangements in the event of such
adverse actions; \19\ and
---------------------------------------------------------------------------
\19\ Id.
---------------------------------------------------------------------------
Quantify the liquidity needs and operational capacity
required to meet all PCS obligations, including any change in demand
for and sources of liquidity needed to meet such obligations.
Managing, Identifying, and Valuing Collateral. The firm is
expected to have and describe its capabilities to manage, identify
and value the collateral that it receives from and posts to external
parties and affiliates. Specifically, the firm should:
Be able to query and provide aggregate statistics for
all qualified financial contracts concerning cross-default clauses,
downgrade triggers, and other key collateral-related contract
terms--not just those terms that may be impacted in an adverse
economic environment--across contract types, business lines, legal
entities, and jurisdictions;
[[Page 64637]]
Be able to track both collateral sources (i.e.,
counterparties that have pledged collateral) and uses (i.e.,
counterparties to whom collateral has been pledged) at the CUSIP
level on at least a t+1 basis;
Have robust risk measurements for cross-entity and
cross-contract netting, including consideration of where collateral
is held and pledged;
Be able to identify CUSIP and asset class level
information on collateral pledged to specific central counterparties
by legal entity on at least a t+1 basis;
Be able to track and report on inter-branch collateral
pledged and received on at least a t+1 basis and have clear policies
explaining the rationale for such inter-branch pledges, including
any regulatory considerations; and
Have a comprehensive collateral management policy that
outlines how the firm as a whole approaches collateral and serves as
a single source for governance.\20\
---------------------------------------------------------------------------
\20\ The policy may reference subsidiary or related policies
already in place, as implementation may differ based on business
line or other factors.
---------------------------------------------------------------------------
Management Information Systems. The firm should have the
management information systems (MIS) capabilities to readily produce
data on a legal entity basis and have controls to ensure data
integrity and reliability. The firm also should perform a detailed
analysis of the specific types of financial and risk data that would
be required to execute the preferred resolution strategy and how
frequently the firm would need to produce the information, with the
appropriate level of granularity. The firm should have the
capabilities to produce the following types of information in a
timely manner and describe these capabilities in the Plan:
Financial statements for each material entity (at least
monthly);
External and inter-affiliate credit exposures, both on-
and off-balance sheet, by type of exposure, counterparty, maturity,
and gross payable and receivable;
Gross and net risk positions with internal and external
counterparties;
Guarantees, cross holdings, financial commitments and
other transactions between material entities;
Data to facilitate third-party valuation of assets and
businesses, including risk metrics;
Key third-party contracts, including the provider,
provider's location, service(s) provided, legal entities that are a
party to or a beneficiary of the contract, and key contractual
rights (for example, termination and change in control clauses);
Legal agreement information, including parties to the
agreement and key terms and interdependencies (for example, change
in control, collateralization, governing law, termination events,
guarantees, and cross-default provisions);
Service level agreements between affiliates, including
the service(s) provided, the legal entity providing the service,
legal entities receiving the service, and any termination/
transferability provisions;
Licenses and memberships to all exchanges and value
transfer networks, including FMUs;
Key management and support personnel, including dual-
hatted employees, and any associated retention agreements;
Agreements and other legal documents related to
property, including facilities, technology systems, software, and
intellectual property rights. The information should include
ownership, physical location, where the property is managed and
names of legal entities and lines of business that the property
supports; and
Updated legal records for domestic and foreign
entities, including entity type and purpose (for example, holding
company, bank, broker dealer, and service entity), jurisdiction(s),
ownership, and regulator(s).
Shared and Outsourced Services. The firm should maintain a fully
actionable implementation plan to ensure the continuity of shared
services that support identified critical operations or core
business lines and robust arrangements to support the continuity of
shared and outsourced services, including, without limitation
appropriate plans to retain key personnel relevant to the execution
of the firm's strategy. For example, specified firms should evaluate
internal and external dependencies and develop documented strategies
and contingency arrangements for the continuity or replacement of
the shared and outsourced services that are necessary to maintain
identified critical operations or core business lines. Examples may
include personnel, facilities, systems, data warehouses, and
intellectual property. Specified firms also should maintain current
cost estimates for implementing such strategies and contingency
arrangements.
The firm should (A) maintain an identification of all shared
services that support identified critical operations or core
business lines; \21\ (B) maintain a mapping of how/where these
services support its core business lines and identified critical
operations; (C) incorporate such mapping into legal entity
rationalization criteria and implementation efforts; and (D)
mitigate identified continuity risks through establishment of
service-level agreements (SLAs) for all shared services that support
identified critical operations or core business lines.
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\21\ This should be interpreted to include data access and
intellectual property rights.
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SLAs should fully describe the services provided, reflect
pricing considerations on an arm's-length basis where appropriate,
and incorporate appropriate terms and conditions to (A) prevent
automatic termination upon certain resolution-related events and (B)
achieve continued provision of such services during resolution. The
firm should also store SLAs in a central repository or repositories
in a searchable format, develop and document contingency strategies
and arrangements for replacement of critical shared services, and
complete re-alignment or restructuring of activities within its
corporate structure. In addition, the firm should ensure the
financial resilience of internal shared service providers by
maintaining working capital for six months (or through the period of
stabilization as required in the firm's preferred strategy) in such
entities sufficient to cover contract costs, consistent with the
preferred resolution strategy.
The firm should identify all critical service providers and
outsourced services that support identified critical operations or
core business lines and identify any that could not be promptly
substituted. The firm should (A) evaluate the agreements governing
these services to determine whether there are any that could be
terminated despite continued performance upon the parent's
bankruptcy filing, and (B) update contracts to incorporate
appropriate terms and conditions to prevent automatic termination
upon commencement of any resolution proceeding and facilitate
continued provision of such services. Relying on entities projected
to survive during resolution to avoid contract termination is
insufficient to ensure continuity. In the Plan, the firm should
document the amendment of any such agreements governing these
services.
Qualified Financial Contracts. The Plan should reflect how the
early termination of qualified financial contracts triggered by the
parent company's bankruptcy filing could impact the resolution of
the firm's operations, including potential termination of any
contracts that are not subject to statutory, contractual or
regulatory stays of direct default or cross-default rights. A Plan
should explain and support the firm's strategy for addressing the
potential disruptive effects in resolution of early termination
provisions and cross-default rights in existing qualified financial
contracts at both the parent company and material entity
subsidiaries. This discussion should address, to the extent relevant
for the firm, qualified financial contracts that include limitations
of standard contractual direct default and cross default rights by
agreement of the parties.
MPOE
Payment, Clearing and Settlement (PCS) Capabilities. Firms are
expected to have and describe capabilities to understand, for each
material entity, its obligations and exposures associated with PCS
activities, including contractual obligations and commitments. For
example, firms should be able to:
As users of PCS services:
[cir] Track the following items by: (i) material entity; and
(ii) with respect to customers, counterparties, and agents and
service providers, location and jurisdiction:
[ssquf] PCS activities, with each activity mapped to the
relevant material entities, identified critical operations, and core
business lines;
[ssquf] Customers and counterparties for PCS activities,
including values and volumes of various transaction types, as well
as used and unused capacity for all lines of credit;
[ssquf] Exposures to and volumes transacted with FMUs, nostro
agents, and custodians; and
[ssquf] Services provided and service level agreements, as
applicable, for other current agents and service providers (internal
and external).
[cir] Assess the potential effects of adverse actions by FMUs,
nostro agents, custodians, and other agents and service providers,
[[Page 64638]]
including suspension or termination of membership or services, on
the firm and its customers and counterparties;
[cir] Develop contingency arrangements in the event of such
adverse actions; and
[cir] Quantify the liquidity needs and operational capacity
required to meet all PCS obligations, including intraday
requirements.
As providers of PCS services:
[cir] Identify their PCS clients and the services they provide
to these clients, including volumes and values of transactions;
[cir] Quantify and explain time-sensitive payments; and
[cir] Quantify and explain intraday credit provided.
Managing, Identifying and Valuing Collateral. The firm should
have appropriate capabilities related to managing, identifying, and
valuing the collateral that it receives from and posts to external
parties and its affiliates, including tracking collateral received,
pledged, and available at the CUSIP level and measuring exposures.
Management Information Systems. The firm should have the
management information systems (MIS) capabilities to readily produce
data on a legal entity basis and have controls to ensure data
integrity and reliability. The firm also should perform a detailed
analysis of the specific types of financial and risk data that would
be required to execute the preferred resolution strategy. The firm
should have the capabilities to produce the following types of
information, as appropriate for its resolution strategy, in a timely
manner and describe these capabilities in the Plan:
Financial statements for each material entity (at least
monthly);
External and inter-affiliate credit exposures, both on-
and off-balance sheet, by type of exposure, counterparty, maturity,
and gross payable and receivable;
Gross and net risk positions with internal and external
counterparties;
Guarantees, cross holdings, financial commitments and
other transactions between material entities;
Data to facilitate third-party valuation of assets and
businesses, including risk metrics;
Key third-party contracts, including the provider,
provider's location, service(s) provided, legal entities that are a
party to or a beneficiary of the contract, and key contractual
rights (for example, termination and change in control clauses);
Legal agreement information, including parties to the
agreement and key terms and interdependencies (for example, change
in control, collateralization, governing law, termination events,
guarantees, and cross-default provisions);
Service level agreements between affiliates, including
the service(s) provided, the legal entity providing the service,
legal entities receiving the service, and any termination/
transferability provisions;
Licenses and memberships to all exchanges and value
transfer networks, including FMUs;
Key management and support personnel, including dual-
hatted employees, and any associated retention agreements;
Agreements and other legal documents related to
property, including facilities, technology systems, software, and
intellectual property rights. The information should include
ownership, physical location, where the property is managed and
names of legal entities and lines of business that the property
supports; and
Updated legal records for domestic and foreign
entities, including entity type and purpose (for example, holding
company, bank, broker dealer, and service entity), jurisdiction(s),
ownership, and regulator(s).
Shared and Outsourced Services. The firm should maintain robust
arrangements to support the continuity of shared and outsourced
services that support any identified critical operations or are
material to the execution of the resolution strategy, including
appropriate plans to retain key personnel relevant to the execution
of the firm's strategy. For example, specified firms should evaluate
internal and external dependencies and develop documented strategies
and contingency arrangements for the continuity or replacement of
the shared and outsourced services that are necessary to maintain
identified critical operations or are material to the execution of
the resolution strategy. Examples may include personnel, facilities,
systems, data warehouses, and intellectual property. Specified firms
also should maintain current cost estimates for implementing such
strategies and contingency arrangements.
The firm should: (A) maintain an identification of all shared
services that support identified critical operations or are material
to the execution of the resolution strategy; and (B) mitigate
identified continuity risks through establishment of SLAs for all
shared services supporting identified critical operations or are
material to the execution of the resolution strategy. SLAs should
fully describe the services provided and incorporate appropriate
terms and conditions to: (A) prevent automatic termination upon
certain resolution-related events; and (B) achieve continued
provision of such services during resolution.
The firm should identify all critical service providers and
outsourced services that support identified critical operations or
are material to the execution of the resolution strategy. Any of
these services that cannot be promptly substituted should be
identified in a firm's Plan. The firm should: (A) evaluate the
agreements governing these services to determine whether there are
any that could be terminated despite continued performance upon the
parent's bankruptcy filing; and (B) update contracts to incorporate
appropriate terms and conditions to prevent automatic termination
and facilitate continued provision of such services through
resolution. Relying on entities projected to survive during
resolution to avoid contract termination is insufficient to ensure
continuity. In the Plan, the firm should document the amendment of
any such agreements governing these services.
VI. Legal Entity Rationalization & Separability
Legal Entity Rationalization
SPOE
Legal Entity Rationalization Criteria (LER Criteria). A firm
should develop and implement legal entity rationalization criteria
that support the firm's preferred resolution strategy and minimize
risk to U.S. financial stability in the event of the firm's failure.
LER Criteria should consider the best alignment of legal entities
and business lines to improve the firm's resolvability under
different market conditions. LER Criteria should govern the firm's
corporate structure and arrangements between legal entities in a way
that facilitates the firm's resolvability as its activities,
technology, business models, or geographic footprint change over
time. Specifically, application of the criteria should:
(A) Facilitate the recapitalization and liquidity support of
material entities, as required by the firm's resolution strategy.
Such criteria should include clean lines of ownership, minimal use
of multiple intermediate holding companies, and clean funding
pathways between the parent and material operating entities;
(B) Facilitate the sale, transfer, or wind-down of certain
discrete operations within a timeframe that would meaningfully
increase the likelihood of an orderly resolution of the firm,
including provisions for the continuity of associated services and
mitigation of financial, operational, and legal challenges to
separation and disposition;
(C) Adequately protect the subsidiary insured depository
institutions from risks arising from the activities of any nonbank
subsidiaries of the firm (other than those that are subsidiaries of
an insured depository institution); and Minimize complexity that
could impede an orderly resolution and minimize redundant and
dormant entities.
These criteria should be built into the firm's ongoing process
for creating, maintaining, and optimizing its structure and
operations on a continuous basis.
MPOE
Legal Entity Structure. A firm should maintain a legal entity
structure that supports the firm's preferred resolution strategy and
minimizes risk to U.S. financial stability in the event of the
firm's failure. The firm should consider factors such as business
activities; banking group structures and booking models and
practices; and potential sales, transfers, or wind-downs during
resolution. The Plan should describe how the firm's legal entity
structure aligns core business lines and any identified critical
operations with the firm's material entities to support the firm's
resolution strategy. To the extent a material entity IDI relies upon
an affiliate that is not the IDI's subsidiary during resolution,
including for the provision of shared services, the firm should
discuss its rationale for the legal entity structure and associated
resolution risks and potential mitigants.
The firm's corporate structure and arrangements among legal
entities should be considered and maintained in a way that
facilitates the firm's resolvability as its activities, technology,
business models, or geographic footprint change over time.
Separability
SPOE
Separability. The firm should identify discrete operations that
could be sold or
[[Page 64639]]
transferred in resolution, with the objective of providing
optionality in resolution under different market conditions.
A firm's separability options should be actionable, and
impediments to their execution and projected mitigation strategies
should be identified in advance. Relevant impediments could include,
for example, legal and regulatory preconditions, interconnectivity
among the firm's operations, tax consequences, market conditions,
and other considerations. To be actionable, divestiture options
should be executable within a reasonable period of time.
In developing their options, firms should also consider
potential consequences for U.S. financial stability of executing
each option, taking into consideration impacts on counterparties,
creditors, clients, depositors, and markets for specific assets.
Firms should have a comprehensive understanding of the entire
organization and certain baseline capabilities. That understanding
should include the operational and financial linkages among a firm's
business lines, material entities, and identified critical
operations. Additionally, information systems should be robust
enough to produce the required data and information needed to
execute separability options.
The level of detail and analysis should vary based on the firm's
risk profile and scope of operations. A separability analysis should
address the following elements:
Divestiture Options: The options in the Plan should be
actionable and comprehensive, and should include:
[cir] Options contemplating the sale, transfer, or disposal of
significant assets, portfolios, legal entities or business lines.
[cir] Options that may permanently change the firm's structure
or business strategy.
Execution Plan: For each divestiture option listed, the
separability analysis should describe the steps necessary to execute
the option. Among other considerations, the description should
include:
[cir] The identity and position of the senior management
officials of the company who are primarily responsible for
overseeing execution of the separability option.
[cir] An estimated time frame for implementation.
[cir] A description of any impediments to execution of the
option and mitigation strategies to address those impediments.
[cir] A description of the assumptions underpinning the option.
[cir] A plan describing the methods and forms of communication
with internal, external, and regulatory stakeholders.
Impact Assessment: The separability analysis should
holistically consider and describe the expected impact of individual
divestiture options. This should include the following for each
divestiture option:
[cir] A financial impact assessment that describes the impact of
executing the option on the firm's capital, liquidity, and balance
sheet.
[cir] A business impact assessment that describes the effect of
executing the option on business lines and material entities,
including reputational impact.
[cir] An identified critical operation impact assessment that
describes how execution of the option may affect the provision of
any identified critical operation.
[cir] An operational impact assessment and contingency plan that
explains how operations can be maintained if the option is
implemented; such an analysis should address internal operations
(for example, shared services, IT requirements, and human resources)
and access to market infrastructure (for example, clearing and
settlement facilities and payment systems).
Further, the firm should have, and be able to demonstrate, the
capability to populate in a timely manner a data room with
information pertinent to a potential divestiture of the business
(including, but not limited to, carve-out financial statements,
valuation analysis, and a legal risk assessment).
Within the Plan, the firm should demonstrate how the firm's LER
Criteria and implementation efforts support meeting the
separability-related guidance above. The Plan should also provide
the separability analysis noted above. Finally, the Plan should
include a description of the firm's legal entity rationalization
governance process.
MPOE
A Plan should include options for the sale, transfer, or
disposal of significant assets, portfolios, legal entities, or
business lines in resolution that may be executed in a reasonable
period of time. For each option, supporting analysis should include:
an execution plan that includes an estimated time frame for
implementation, a description of any impediments to execution of the
option, and mitigation strategies to address those impediments; a
description of the assumptions underpinning the option; a financial
impact assessment that describes the impact of executing the option;
and an identified critical operation impact assessment that
describes how execution of the option may affect the provision of
any identified critical operation. Information systems should be
robust enough to produce the required data and information needed to
execute the options.
VII. Insured Depository Institution (IDI) Resolution
MPOE
If the Plan includes a strategy that contemplates the separate
resolution of a U.S. IDI that is a material entity, the Plan should
demonstrate how this could be achieved in a manner that is
consistent with the overall objective of the Plan to substantially
mitigate the risk that the failure of the specified firm would have
serious adverse effects on financial stability in the United States
while also complying with the statutory and regulatory requirements
governing IDI resolution. More specifically,
If the strategy is other than payout liquidation (e.g.,
a bridge depository institution (BDI)), the Plan should provide
information supporting the feasibility of this strategy. Under the
FDI Act, the FDIC generally would complete a least-cost analysis
when resolving a failed bank at the time of entry into resolution. A
Plan may use an approach such as one of the following in lieu of
performing a complete least-cost analysis to demonstrate the
feasibility of the proposed strategy.\22\
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\22\ See 12 U.S.C. 1823(c)(4)(A)(ii) and 1821(n)(2)(A).
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[cir] A Plan may demonstrate that a strategy involving an all-
deposit BDI would be permissible under the least-cost test of the
FDI Act by presenting an analysis which shows that the strategy
results in no loss to the Deposit Insurance Fund (DIF) by
demonstrating that the incremental estimated cost to the DIF by
having the BDI assume all uninsured deposits is offset by the
preservation of franchise value connected to the uninsured deposits
after accounting for the amount of any loss-absorbing debt
instruments and other liabilities subordinate to the depositor class
that would be left behind in the receivership.
[cir] A Plan may demonstrate the feasibility of a strategy
involving a BDI that assumes all insured deposits and a portion of
uninsured deposits by providing an advance dividend to uninsured
depositors for a portion of their deposit claim, as well as the
basis for that dividend, and pursuant to which a loss to the DIF
occurs, by presenting an analysis comparing the cost of the proposed
strategy to the cost of payout liquidation and demonstrating:
[ssquf] The incremental estimated cost to the DIF created by the
BDI's assumption of the portion of uninsured deposits assumed is
offset by the franchise value preserved by maintaining the assumed
uninsured deposits, after accounting for the amount of any long-term
debt and other liabilities subordinate to the depositor class that
would be left behind in the receivership; \23\ and
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\23\ See 12 U.S.C. 1821(d)(11).
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[ssquf] The loss to the DIF under the proposed strategy
(including the amounts paid by the DIF for more favorable treatment,
relative to a payout liquidation, of a portion of uninsured
deposits) is less than or equal to the loss to the DIF that would be
incurred through a payout liquidation of the IDI; and
[cir] The deposit payout process for any uninsured deposits that
remain in the receivership may be executed in a manner that
substantially mitigates the risk of serious adverse effects on U.S.
financial stability.
If the Plan's strategy envisions a payout liquidation
for the IDI, with or without use of a Deposit Insurance National
Bank or a paying agent, the Plan should demonstrate how the deposit
payout and asset liquidation process would be executed in a manner
that substantially mitigates the risk of serious adverse effects on
U.S. financial stability.
In all cases, the Plan should show that implementation
of the resolution, including the impact on depositors whose accounts
are not transferred in whole or in part to the BDI, would not create
the risk of serious adverse effects on U.S. financial stability.
Regardless of the IDI resolution strategy chosen, the Plan
should assume asset valuations consistent with the severely adverse
stress economic scenario and the IDI's condition as a failed
institution, as referenced in ``Guidance regarding Assumptions,''
Items 4 and 7 below. The Plan, in light of such conditions, should
explain the process for determining asset or
[[Page 64640]]
business franchise values, including providing detailed supporting
descriptions such as references to historical pricing, benchmarks,
or recognized models; evidence supporting client attrition rates;
and other relevant information.
With respect to exit from IDI resolution proceedings, a Plan
could support the feasibility of an asset liquidation or BDI exit
strategy by, for example, describing an actionable process, based on
historical precedent or otherwise supportable projections, that
winds down certain businesses, includes the sale of assets and
deposits to multiple acquirers, or culminates in a capital markets
transaction, such as an initial public offering or a private
placement of securities.
VIII. Format and Structure of Plans; Assumptions
SPOE & MPOE
Format of Plan
Executive Summary. The Plan should contain an executive summary
consistent with the Rule, which must include, among other things, a
concise description of the key elements of the firm's strategy for
an orderly resolution. In addition, the executive summary should
include a discussion of the firm's assessment of any impediments to
the firm's resolution strategy and its execution, as well as the
steps it has taken to address any identified impediments.
Narrative. The Plan should include a strategic analysis
consistent with the Rule. This analysis should take the form of a
concise narrative that enhances the readability and understanding of
the firm's discussion of its strategy for an orderly resolution in
bankruptcy or other applicable insolvency regimes (Narrative).
Appendices. The Plan should contain a sufficient level of detail
and analysis to substantiate and support the strategy described in
the Narrative. Such detail and analysis should be included in
appendices that are distinct from and clearly referenced in the
related parts of the Narrative (Appendices).
Public Section. The Plan must be divided into a public section
and a confidential section consistent with the requirements of the
Rule.
Other Informational Requirements. The Plan must comply with all
other informational requirements of the Rule. The firm may
incorporate by reference previously submitted information as
provided in the Rule.
Guidance Regarding Assumptions
1. The Plan should be based on the current state of the
applicable legal and policy frameworks. Pending legislation or
regulatory actions may be discussed as additional considerations.
2. The firm must submit a Plan that does not rely on the
provision of extraordinary support by the United States or any other
government to the firm or its subsidiaries to prevent the failure of
the firm.\24\ The firm should not submit a Plan that assumes the use
of the systemic risk exception to the least-cost test in the event
of a failure of an IDI requiring resolution under the FDI Act.
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\24\ 12 CFR 243.4(a)(4)(ii) and 12 CFR 381.4(a)(4)(ii).
---------------------------------------------------------------------------
3. The firm should not assume that it will be able to sell
identified critical operations or core business lines, or that
unsecured funding will be available immediately prior to filing for
bankruptcy.
4. The resolution strategy may be based on an idiosyncratic
event or action, including a series of compounding events. The firm
should justify use of that assumption, consistent with the
conditions of the economic scenario.
5. Within the context of the applicable idiosyncratic scenario,
markets are functioning and competitors are in a position to take on
business. If a firm's Plan assumes the sale of assets, the firm
should take into account all issues surrounding its ability to sell
in market conditions present in the applicable economic condition at
the time of sale (i.e., the firm should take into consideration the
size and scale of its operations as well as issues of separation and
transfer.).
6. For a firm that adopts an MPOE strategy, the Plan should
demonstrate and describe how the failure event(s) results in
material financial distress.\25\ In particular, the Plan should
consider the likelihood that there would be a diminution of the
firm's liquidity buffer in the stress period prior to filing for
bankruptcy from high unexpected outflows of deposits and increased
liquidity requirements from counterparties. Though the immediate
failure event may be liquidity-related and associated with a lack of
market confidence in the financial condition of the covered company
or its material legal entity subsidiaries prior to the final
recognition of losses, the demonstration and description of material
financial distress may also include depletion of capital. Therefore,
the Plan should also consider the likelihood of the depletion of
capital.
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\25\ See Section 11(c)(5) of the FDI Act, codified at 11 U.S.C.
1821(c)(5), which details grounds for appointing the FDIC as
conservator or receiver of an IDI.
---------------------------------------------------------------------------
7. The firm should not assume any waivers of section 23A or 23B
of the Federal Reserve Act in connection with the actions proposed
to be taken prior to or in resolution.
8. The Plan should support any assumptions that the firm will
have access to the Discount Window and/or other borrowings during
the period immediately prior to entering bankruptcy. To the extent
the firm assumes use of the Discount Window and/or other borrowings,
the Plan should support that assumption with a discussion of the
operational testing conducted to facilitate access in a stress
environment, placement of collateral, and the amount of funding
accessible to the firm. The firm may assume that its depository
institutions will have access to the Discount Window only for a few
days after the point of failure to facilitate orderly resolution.
However, the firm should not assume its subsidiary depository
institutions will have access to the Discount Window while
critically undercapitalized, in FDIC receivership, or operating as a
bridge bank, nor should it assume any lending from a Federal Reserve
credit facility to a non-bank affiliate.
Financial Statements and Projections. The Plan should include
the actual balance sheet for each material entity and the
consolidating balance sheet adjustments between material entities as
well as pro forma balance sheets for each material entity at the
point of failure and at key junctures in the execution of the
resolution strategy. It should also include statements of projected
sources and uses of funds for the interim periods. The pro forma
financial statements and accompanying notes in the Plan must clearly
evidence the failure trigger event; the Plan's assumptions; and any
transactions that are critical to the execution of the Plan's
preferred strategy, such as recapitalizations, the creation of new
legal entities, transfers of assets, and asset sales and unwinds.
Material Entities. Material entities should encompass those
entities, including foreign offices and branches, which are
significant to the maintenance of an identified critical operation
or core business line. If the abrupt disruption or cessation of a
core business line might have systemic consequences to U.S.
financial stability, the entities essential to the continuation of
such core business line should be considered for material entity
designation. Material entities should include the following types of
entities:
1. Any U.S.-based or non-U.S. affiliates, including any
branches, that are significant to the activities of an identified
critical operation.
2. Subsidiaries or foreign offices whose provision or support of
global treasury operations, funding, or liquidity activities
(inclusive of intercompany transactions) is significant to the
activities of an identified critical operation.
3. Subsidiaries or foreign offices that provide material
operational support in resolution (key personnel, information
technology, data centers, real estate or other shared services) to
the activities of an identified critical operation.
4. Subsidiaries or foreign offices that are engaged in
derivatives booking activity that is significant to the activities
of an identified critical operation, including those that conduct
either the internal hedge side or the client-facing side of a
transaction.
5. Subsidiaries or foreign offices engaged in asset custody or
asset management that are significant to the activities of an
identified critical operation.
6. Subsidiaries or foreign offices holding licenses or
memberships in clearinghouses, exchanges, or other FMUs that are
significant to the activities of an identified critical operation.
For each material entity (including a branch), the Plan should
enumerate, on a jurisdiction-by-jurisdiction basis, the specific
mandatory and discretionary actions or forbearances that regulatory
and resolution authorities would take during resolution, including
any regulatory filings and notifications that would be required as
part of the preferred strategy, and explain how the Plan addresses
the actions and forbearances. Describe the consequences for the
covered company's resolution strategy if specific
[[Page 64641]]
actions in a non-U.S. jurisdiction were not taken, delayed, or
forgone, as relevant.
IX. Public Section
SPOE & MPOE
The purpose of the public section is to inform the public's
understanding of the firm's resolution strategy and how it works.
The public section should discuss the steps that the firm is
taking to improve resolvability under the U.S. Bankruptcy Code. The
public section should provide background information on each
material entity and should be enhanced by including the firm's
rationale for designating material entities. The public section
should also discuss, at a high level, the firm's intra-group
financial and operational interconnectedness (including the types of
guarantees or support obligations in place that could impact the
execution of the firm's strategy).
The discussion of strategy in the public section should broadly
explain how the firm has addressed any deficiencies, shortcomings,
and other key vulnerabilities that the agencies have identified in
prior plan submissions. For each material entity, it should be clear
how the strategy provides for continuity, transfer, or orderly wind-
down of the entity and its operations. There should also be a
description of the resulting organization upon completion of the
resolution process.
The public section may note that the Plan is not binding on a
bankruptcy court or other resolution authority and that the proposed
failure scenario and associated assumptions are hypothetical and do
not necessarily reflect an event or events to which the firm is or
may become subject.
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 29, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-19267 Filed 9-18-23; 8:45 am]
BILLING CODE 6210-01-6714-01-P
