Resolution Plans Required for Insured Depository Institutions With $100 Billion or More in Total Assets; Informational Filings Required for Insured Depository Institutions With at Least $50 Billion but Less Than $100 Billion in Total Assets, 56620-56657 [2024-13982]

Download as PDF 56620 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 360 RIN 3064–AF90 Resolution Plans Required for Insured Depository Institutions With $100 Billion or More in Total Assets; Informational Filings Required for Insured Depository Institutions With at Least $50 Billion but Less Than $100 Billion in Total Assets Federal Deposit Insurance Corporation (FDIC). ACTION: Final rule. AGENCY: The FDIC is adopting this final rule to require the submission of resolution plans by insured depository institutions (IDIs) with $100 billion or more in total assets and informational filings by IDIs with at least $50 billion but less than $100 billion in total assets. The final rule modifies the current rule requirements regarding the content and timing of full resolution submissions, as well as interim supplements to those submissions provided to the FDIC, in order to support the FDIC’s resolution readiness in the event of material distress and failure of these large IDIs. The final rule also enhances how the credibility of full resolution submissions will be assessed, expands expectations regarding engagement and capabilities testing, and explains expectations regarding the FDIC’s review, feedback, and enforcement of IDIs’ compliance with the rule. DATES: The rule is effective October 1, 2024. FOR FURTHER INFORMATION CONTACT: Kent R. Bergey, Associate Director, Division of Complex Institution Supervision and Resolution, 917–320–2834, kebergey@ fdic.gov; Laura Porfiris, Associate Director, Division of Complex Institution Supervision and Resolution, 212–657–9974, lporfiris@fdic.gov; Elizabeth Falloon, Senior Advisor, Division of Complex Institution Supervision and Resolution, 202–898– 6626, efalloon@fdic.gov; Mark Haley, Chief, Policy Analysis, Division of Complex Institution Supervision and Resolution, 917–320–2911, mahaley@ fdic.gov; Dora Douglass Kochman, Senior CFI Policy Specialist, Division of Complex Institution Supervision and Resolution, 202–898–3633, ddouglasskochman@fdic.gov; Audra Cast, Deputy Director, Division of Resolutions and Receiverships, 312– 382–7577, acast@fdic.gov; Varanessa Marshall, Assistant Director, Division of Resolution and Receiverships, 678–916– lotter on DSK11XQN23PROD with RULES4 SUMMARY: VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 2233, vamarshall@fdic.gov; Benjamin M. DeMaria, Counsel, Legal Division, 202–898–7391, bdemaria@fdic.gov; Vickie R. Olafson, Counsel, Legal Division, 703–489–5873, volafson@ fdic.gov; Esther Rabin, Counsel, Legal Division, 202–898–6860, erabin@ fdic.gov; F. Angus Tarpley, III, Counsel, Legal Division, 202–898–8521, ftarpley@fdic.gov. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction A. Background B. Overview of the Proposed Rule II. Overview of Comments III. Final Rule A. Scope and Purpose B. Definitions C. Full Resolution Submissions Required D. Content of the Full Resolution Submissions for CIDIs E. Interim Supplement F. Credibility; Review of Full Resolution Submissions; Engagement and Capabilities Testing G. No Limiting Effect on FDIC H. Form of Full Resolution Submissions; Confidential Treatment of Full Resolution Submissions and Interim Supplements I. Extensions and exemptions J. Enforcement IV. Expected Effects A. Review of Comments B. Changes From the Proposed Rule to the Final Rule C. Marginal Effect of Changes Compared to the 2012 Rule D. Effects on Insured Deposits and the Deposit Insurance Fund E. Additional Economic Consideration and Effects F. Overall Effects V. Alternatives Considered VI. Regulatory Analysis and Procedures A. Paperwork Reduction Act B. Regulatory Flexibility Act C. Plain Language D. Riegle Community Development and Regulatory Improvement Act of 1994 E. Congressional Review Act I. Introduction The FDIC’s regulation ‘‘Resolution plans required for insured depository institutions with $50 billion or more in total assets,’’ issued in 2012 1 (2012 rule), requires IDIs with $50 billion or more in total assets (CIDIs) to submit resolution plans periodically. This resolution plan requirement was established to facilitate the FDIC’s readiness to resolve a CIDI under the Federal Deposit Insurance Act of 1950, 1 12 CFR 360.10. The 2012 rule was published as an interim final rule with an effective date of January 1, 2012, 76 FR 2011 (Sept. 11, 2011); the 2012 rule was effective April 1, 2012, 77 FR 3075 (Jan. 23, 2012). PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 as amended (FDI Act), in the event of its insolvency. This final rulemaking to amend and restate the 2012 rule builds on the FDIC’s more than a decade-long experience implementing the 2012 rule, providing guidance and feedback to CIDIs, and leveraging the content of submissions for the FDIC’s development of resolution strategies. Through this process, the FDIC has gained a better understanding of the challenges of resolving CIDIs and the essential information needed in resolution plans and other related submissions to facilitate the FDIC’s readiness in the event of a failure of one of these CIDIs. Therefore, this final rule supersedes all prior guidance, including the Statement (as defined below). Part of the challenge in resolving CIDIs arises from the wide range of business models and structures among these banks. While many of the CIDIs are engaged largely in traditional commercial and retail banking activities, with nearly all assets and activities conducted within the CIDI or its subsidiaries (the bank chain), others conduct significant non-banking activities. Many of the CIDIs have a broker-dealer subsidiary or affiliate that provides services to bank customers. The CIDIs also include banks primarily engaged in a particular business segment, such as credit card services, as well as U.S. IDIs that are part of large foreign banking organizations. There is no one-size-fits-all resolution approach for these institutions; rather, the FDIC must be prepared to execute a range of resolution options, recognizing the trade-offs among those options. The FDIC’s development of resolution strategies—and its assessment of the options and trade-offs that inform them—benefit from the CIDI’s knowledge of its own firm, an understanding of the CIDI’s relevant capabilities, and an awareness of the impediments to executing an orderly resolution of the CIDI. Across the different CIDI business models and structures, there is a variety of factors that increases the challenges and complexity of resolution in the event of the failure of one of these large banks. Key factors include size, organizational complexity, and deposit profile, among others. The importance of advance resolution planning was recently underscored in the failures of three large banks—all over $100 billion in size 2—in the spring 2 The failure of Washington Mutual Bank in 2008 remains the largest bank failure in U.S. history. At the time of its failure, its assets totaled approximately $300 billion. First Republic, SVB, E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations of 2023: Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank (First Republic). The failures of SVB and Signature Bank on March 10 and 12, 2023, respectively, were triggered by illiquidity resulting from withdrawals by uninsured depositors at unprecedented speed and volumes. As a result of the sudden failures, there was no opportunity for pre-failure marketing. For both IDIs, the FDIC established a bridge depository institution (bridge bank) to continue bank operations post-failure to allow time to market the bank. Less than two months following those failures, First Republic was placed in receivership and sold. First Republic’s failure was largely a result of contagion from the prior two failures and the bank was able to manage its liquidity for several weeks prior to failure, which allowed additional time to market the bank. The FDIC facilitated a transaction that resulted in transfer of all of the assets and liabilities to a single acquirer without establishing a bridge bank, although the FDIC stood ready to exercise the authority to form a bridge bank, if needed. The challenges associated with the rapidity of the failures were exacerbated because the FDIC lacked important resolution planning information to facilitate marketing for SVB and Signature Bank. While SVB and First Republic had filed resolution plans just a few months before their failures, the FDIC neither had completed review nor had the opportunity to provide feedback on those plans. Signature Bank had not yet filed any resolution plan at the time of its failure; its first submission would have been due in June 2023. Current and thorough resolution planning information would have facilitated the FDIC’s preparations to effectively and efficiently market the failed IDIs. The size of an IDI can significantly impact the resolution options available to the FDIC under the FDI Act. In particular, as IDIs increase in size, the likelihood of a timely sale to a single acquirer diminishes. Currently, there are 45 CIDIs, of which 33 have total assets over $100 billion. As a group, these 45 CIDIs represent approximately $12.9 trillion in total deposits.3 While a closing weekend sale may be an option in some cases, its availability cannot be assumed in view of the size, complexity, and potential speed of failure of a CIDI. This is particularly true for the largest and Signature Bank, respectively, were the second, third, and fourth largest bank failures in history. 3 FDIC Consolidated Reports of Condition and Income data as of March 31, 2024. VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 CIDIs with $100 billion or more in total assets because the pool of potential acquirers for these institutions is limited, and any possible transaction would be complex. While there is a larger pool of possible acquiring institutions for CIDIs in the $50 to $100 billion total asset range, some of these institutions engage in highly complex activities and pose similar levels of operational complexity as those over $100 billion in total assets. The CIDIs also tend to have a more significant proportion of uninsured deposits as compared to smaller banks. In the aggregate, more than 43.4 percent of deposits of IDIs with over $50 billion in total assets are uninsured.4 Under the FDI Act, any transaction using FDIC assistance—including where assistance is provided in connection with the establishment of a bridge bank—must meet the least-cost test, absent a systemic risk exception. Under the leastcost test, the cost to the deposit insurance fund (DIF) resulting from any resolution needs to be less than the cost to the DIF than all other alternatives. Where the proportion of insured deposits is very low, the potential cost to the DIF of a resolution in which only insured deposits are protected is more likely to be less costly than a resolution in which all deposits are protected. These and other characteristics of large banks add to resolution challenges and increase the importance of robust and ongoing resolution planning for the CIDIs. The content of the full resolution submissions under this final rule will support planning for strategic options, including use of a bridge bank, and is important to the FDIC’s readiness to resolve these banks. A. Background Since issuing the 2012 rule, the FDIC has provided guidance and feedback to CIDIs to assist in development of their resolution plans. In 2014, following the first submissions, the FDIC provided guidance and direction for the preparation of subsequent CIDI resolution plans with a focus on the discussion of failure scenario, resolution strategies, least-cost analysis, and identified obstacles. In addition, following each resolution plan submission cycle, the FDIC issued feedback letters to CIDIs with information for the subsequent plan submission. After several plan submission cycles, in 2018, the FDIC instituted a moratorium on the 2012 rule’s requirements for all CIDIs pending PO 00000 4 Id. Frm 00003 Fmt 4701 Sfmt 4700 56621 completion of a new rulemaking. At the time the moratorium was adopted, the FDIC also published an advance notice of proposed rulemaking (ANPR),5 which requested comment on how to tailor and improve the 2012 rule, including how to reduce the burden associated with the least-cost test analysis and whether requirements should be tiered based on size or complexity factors of cohorts of CIDIs. The ANPR also requested comment on potential enhancement of engagement and capabilities testing. At that time, the FDIC extended the due date for future plan submissions pending completion of the rulemaking process. Following the issuance of the ANPR, the FDIC continued to develop its thinking regarding resolution planning for large IDIs, including how to maximize the FDIC’s resolution readiness. In 2020 and 2021, the FDIC undertook targeted engagement with select CIDIs on their 2018 plan submissions, a step consistent with the enhanced emphasis on engagement and capabilities testing envisioned under the ANPR. In January 2021, the FDIC Board took action to lift the moratorium on the resolution plan requirement for CIDIs with $100 billion or more in assets and, in June 2021, the FDIC issued a policy statement (Statement) 6 to describe how it planned to implement certain aspects of the 2012 rule. The Statement superseded all prior guidance and feedback. For CIDIs with total assets of at least $50 billion and less than $100 billion, the moratorium on submission of resolution plans remained in effect. CIDIs with $100 billion or more in total assets submitted resolution plans in accordance with a schedule established by the FDIC from December 1, 2022 through December 1, 2023. Consistent with the Statement, each of these CIDIs received exemptions from certain content requirements under the 2012 rule and could submit streamlined resolution plans for review. On September 19, 2023, the FDIC published for comment a Notice of Proposed Rulemaking, ‘‘Resolution Plans Required for Insured Depository Institutions with $100 Billion or More in Total Assets; Informational Filings Required for Insured Depository Institutions with At Least $50 Billion but Less Than $100 Billion in Total Assets’’ (NPR).7 The FDIC received and 5 84 FR 16620 (April 22, 2019). on Resolution Plans for Insured Depository Institutions (June 25, 2021), https:// www.fdic.gov/resources/resolutions/resolutionauthority/idi-statement-06-25-2021.pdf. 7 88 FR 64579 (Sept. 19, 2023). 6 Statement E:\FR\FM\09JYR4.SGM 09JYR4 56622 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 considered 12 comment letters, which are discussed below.8 In addition to enacting and implementing the 2012 rule, the FDIC has instituted several rulemakings that support its mission as deposit insurer to make timely insured deposit payments and to resolve a failed IDI in the manner that is least costly to the DIF. These separate rulemakings address certain difficulties the FDIC could face in the closing of a large, complex IDI, and include Recordkeeping for Timely Deposit Insurance Determination (part 370) and Recordkeeping Requirements for Qualified Financial Contracts (part 371).9 Part 370 requires covered institutions, namely IDIs with two million or more deposit accounts, to put in place mechanisms to facilitate prompt deposit insurance determinations. Part 371 requires IDIs in a troubled condition to keep detailed records in a specified, standard format regarding their qualified financial contracts. This information would be used by the FDIC, were it appointed receiver, in making a determination of which qualified financial contracts entered into by the failed institution (if any) will be transferred within the brief statutory window. Separate from the FDI Act and this rule’s requirements, section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended (Dodd-Frank Act),10 and the related joint rulemaking published by the Board of Governors of the Federal Reserve System (FRB) and the FDIC in November 2019 (DFA rule) 11 mandate that certain bank holding companies and nonbank financial companies (covered companies) submit resolution plans (DFA resolution plans) for the rapid and orderly resolution of the covered company under the U.S. Bankruptcy Code. There are some noteworthy differences between the DFA rule requirements and this rule. First of all, Section 165(d) of the Dodd-Frank Act and the DFA rule focus on resolution of the organization by the organization itself under the U.S. Bankruptcy Code or other ordinary resolution regime. While some DFA resolution plans utilize a strategy where the IDI is resolved under the FDI Act, they must address resolution of the organization as a whole, including the holding company and non-bank affiliates. In addition, the 8 FDIC staff also met with staff of two commenters. 9 Codified at 12 CFR part 370 and 12 CFR part 371, respectively. 10 12 U.S.C. 5365(d). 11 84 FR 59194 (Nov. 1, 2019), codified at 12 CFR 381 (FDIC) and 243 (FRB). VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 statutory purpose of a DFA resolution plan is to reduce the likelihood that the financial distress or failure of a covered company would have serious adverse effects on financial stability in the United States by requiring covered companies to submit plans for rapid and orderly resolution without any assumptions of reliance on public support. By contrast, this rule focuses only on the CIDI itself, and the strategic analysis and information needed to support a resolution using the FDIC’s traditional resolution tools under the FDI Act. Presently, all U.S. global systemically important banking organizations 12 (U.S. GSIBs), which are the largest and most systemic and interconnected banking organizations in the United States, have developed DFA resolution plans that use a single-point-of-entry (SPOE) strategy. Under an SPOE strategy, the top tier holding company is placed into bankruptcy and generally all material operating subsidiaries, including any IDIs in the group, remain open and operating. In an SPOE resolution, the FDIC would not be called upon to resolve the IDI under the FDI Act. The SPOE approach may minimize disruption and preserve franchise value, as well as reduce systemic risk, particularly in a firm with a complex structure that includes multiple material operating entities outside of the bank chain. In contrast, most other banking organizations subject to the DFA resolution plan submission requirements currently utilize a strategy in which the top tier holding company is placed into bankruptcy and the IDI is resolved under the FDI Act. Firms that have submitted DFA resolution plans adopting an SPOE strategy must have or develop the capabilities and may need to make improvements to their organizational structures to support implementation of that strategy. However, the FDIC still must be prepared to use its resolution authorities if necessary to achieve an orderly resolution of the firm, including its authority to resolve a CIDI under the FDI Act, or, if necessary, the extraordinary backup orderly resolution authorities provided in Title II of the Dodd-Frank Act. A resolution using Title II orderly liquidation authorities, which supports a group-wide SPOE approach, is a backup authority to be used, if necessary, to resolve a financial company whose resolution under the Bankruptcy Code would have serious 12 As defined by rules promulgated by the FRB, see 12 CFR 217.402 (Identification as a global systemically important BHC). PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 adverse effects on U.S. financial stability. That extraordinary authority may not be called upon to resolve the firm, however, if the resolution of the IDI under the FDI Act would avoid the serious adverse effects of the firm’s failure. By the same token, a resolution under the FDI Act is particularly likely for large regional banks with less significant non-bank activities, predominately domestic operations, and few or no systemically important identified critical operations. The requirements of the DFA rule and this rule support their respective differing purposes; at the same time, both rules serve the broader objective of facilitating orderly resolutions. Consistent with the proposal, this final rule specifically allows the incorporation of information from an affiliate’s DFA resolution plan into a CIDI’s full resolution submission or interim supplement. In providing feedback or making determinations with respect to any submission under this final rule, the FDIC will consider feedback and determinations provided with respect to DFA resolution plans with similar content, to promote consistency across the two planning requirements, and, where appropriate, taking into account the differences in the requirements of the two rules and the approaches to resolution strategy and regime. B. Overview of the Proposed Rule The proposal provided for two distinct groups of CIDIs based on size, with differing obligations for each group. The first group comprised those IDIs with $100 billion or more in total assets (group A CIDIs). The proposed rule would have required group A CIDIs to submit full resolution plans containing an identified strategy appropriate to the CIDI for its orderly and efficient resolution, as well as providing all other content elements described in the proposed rule. The second group comprised those IDIs with at least $50 billion but less than $100 billion in total assets (group B CIDIs). The proposed rule would have required full resolution submissions from group B CIDIs with more limited requirements, in the form of an informational filing. The proposal was intended to: • Clarify and enhance requirements applicable to IDIs with $50 billion or more in total assets, including resolution plans submitted by group A CIDIs and informational filings submitted by group B CIDIs; • Require each group A CIDI to provide an identified strategy for resolution that ensures timely access to E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 insured deposits, maximizes value from the sale or disposition of assets, minimizes any losses realized by creditors of the group A CIDI in resolution, and addresses potential risks of adverse effects on U.S. economic conditions or financial stability; • Clarify requirements with respect to the assumptions for the failure scenario used by group A CIDIs in resolution plans and reserve the ability of the FDIC to provide additional parameters for the failure scenario for all group A CIDIs or specific individual group A CIDIs in future plan submission cycles; • Strengthen full resolution submission content elements and associated requirements regarding capabilities to support optionality available to the FDIC and ensure that the FDIC’s development of resolution strategies reflects considerations related to the characteristics of the individual CIDI and potential challenges that could be faced in resolution; • Refine the requirements for group A CIDIs with respect to least-cost analysis and focus on ensuring that the FDIC has the building blocks and capabilities it needs to undertake the least-cost test in resolution in the event of failure of a group A CIDI; • Establish an enhanced credibility standard for full resolution submissions and clarify the process for review and feedback to identify and address weaknesses in full resolution submissions and enforce the rule; • Establish a requirement for informational filings to be submitted by group B CIDIs that is focused on information most important and appropriate for resolution of those CIDIs; • Adjust the frequency of full resolution submissions to a two-year cycle for all CIDIs to accommodate engagement and capabilities testing as part of the resolution planning process, and establish periodic interim supplements containing specified resolution submission content items; and • Codify certain aspects of guidance and feedback previously issued to IDIs subject to the 2012 rule. II. Overview of Comments The FDIC received 12 comment letters to the proposal from banking organizations, industry and trade groups representing the banking and financial services industry, a law firm, and consumer groups. The comments received generally were responsive to questions posed by the FDIC in the NPR. The majority of commenters suggested changes to reduce the costs of submission VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 preparation for filers, including by adjusting the proposed submission cycle, narrowing the proposed scope and content requirements, and enhancing alignment with relevant resolution planning requirements of the DFA rule. Several commenters raised concerns about the enhanced credibility standard, and asked for greater clarity on engagement and capability testing. Three commenters offered broad support for the proposed rule as written. The comments received are summarized below. Scope of Rule Most commenters agreed with the overall scope of the rule. Two commenters suggested creating a new group of filers that would include only firms with $100 billion to $250 billion in total assets, and reducing requirements for that new group, as compared to the CIDIs with at least $250 billion in total assets. As for group B CIDIs, several commenters noted the content requirements of the informational filings varied in a limited manner from a full resolution plan and asserted that the FDIC should more significantly reduce the burden for group B CIDIs with further tailoring or elimination of requirements for group B CIDIs. Two other commenters recommended that group B CIDIs should be subject to the same requirements as group A CIDIs. Several commenters addressed the relationship between IDI resolution plans and DFA resolution plans. Two commenters supported changes to better harmonize these resolution planning efforts. One commenter suggested CIDIs with parent banking organizations that are biennial filers or triennial full filers of DFA resolution plans should be exempted from IDI resolution plan requirements. That commenter also argued for streamlining requirements if IDI resolution plans continue to be required for CIDIs in addition to the DFA resolution plans required of their parent banking organizations. Regarding consistency across these two programs, two commenters emphasized the need to use consistent definitions with regard to IDI resolution plans and DFA resolution plans, and cited the definition of ‘‘material change’’ as an example where there could be better alignment. Another commenter highlighted that the scope of the virtual data room capabilities requirement should be aligned with the equivalent requirement for DFA resolution plans. Additionally, two commenters emphasized the importance of consistency between credibility determinations on DFA resolution plans PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 56623 by the FDIC and FRB, and on IDI resolution plans by the FDIC, as well as any other feedback on common elements of these two submissions. Submission Cycle and Transition Period Two commenters broadly supported the cycle as proposed, while four argued to reduce the frequency of full resolution submissions. Commenters arguing for a longer submission cycle generally supported a three-year cycle, which they noted would take into account the cycle for certain DFA resolution plans, allow for adequate review and feedback by FDIC staff, and provide time for CIDIs to incorporate that feedback. However, one commenter noted that a two-year cycle with no interim supplements could be appropriate for CIDIs whose parent companies are biennial filers of DFA resolution plans. In terms of the dates of submissions, one commenter suggested July, while two others proposed December. With respect to the first full resolution submissions or interim supplements following the effective date of the final rule, five commenters suggested a period of 12 months or longer, rather than the proposed 270-day period. In particular, with respect to group B CIDIs, commenters suggested a transition period of 18 months, since none of these CIDIs has submitted a resolution plan under the 2012 rule since implementation of the moratorium. Regarding the interim supplements, three commenters recommended narrowing the scope of information required. Commenters recommended reducing or eliminating requirements for narrative or description, and to limit the required content to information that has materially changed. Another commenter suggested that narrative commentary in the interim supplement should be limited to a summary of material changes in the information provided in the prior full resolution submission. One commenter suggested that interim supplements, like full resolution submissions, should use data as of the end of the prior year, rather than the prior quarter. Several commenters emphasized the importance of the FDIC providing meaningful feedback to CIDIs and adequate time for that feedback to be incorporated into subsequent submissions, with one commenter recommending feedback be provided at least 12 months before the next submission is due and two others noting the need for the FDIC to build internal capacity and capabilities to support this. E:\FR\FM\09JYR4.SGM 09JYR4 56624 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 Rule Requirements Commenters generally supported the FDIC’s focus on increasing optionality available to it in preparing for resolution. Four agreed that a bridge bank may be helpful in this respect, to provide more time to sell all or parts of the institution, reduce reliance on strategies involving a single buyer, and expand the universe of potential acquirers. Two commenters supported the identified strategy requirement as proposed, with one noting it would be among the most critical pieces of information in a resolution plan and plans without this element would not likely be credible or effective. Three other commenters favored elimination or modification of the scenario and identified strategy requirement. One of these commenters suggested that some CIDIs with more than $100 billion but less than $250 billion in total assets may have less complex structures that make an FDIC-arranged sale feasible. They noted that, by requiring just one identified strategy, the proposal restricts CIDIs from presenting a full range of options for resolution. Another commenter argued that, based on the lessons learned from recent failures, the FDIC should be more focused on maximizing the likelihood of a resolution weekend sale, including by emphasizing real-time capability for IDIs to produce necessary information for potential buyers. A third commenter expressed concern that the proposed requirement for the identified strategy to have ‘‘meaningful optionality’’ is too vague. Two commenters addressed aspects of assumptions in the proposed failure scenario, with one arguing against the assumption that the CIDI’s parent holding company enters bankruptcy, and the other supporting the assumption of continued Federal Home Loan Bank lending to a bridge bank. Regarding the proposed approach to valuation to facilitate the FDIC’s assessment of least-costly resolution method, three commenters emphasized the importance of valuation to resolution planning and another expressed support for replacing the least-cost test requirement of the 2012 rule with the proposed valuation requirement. Three commenters suggested modifications to the approach; specifically, these commenters favored elimination of the requirement for quantitative valuation analysis. These commenters argued that such analysis would be overly burdensome, more expensive for CIDIs that do not maintain in-house expertise, VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 and of little value to the FDIC in an actual resolution scenario. Engagement and Capabilities Testing Commenters were generally supportive of engagement and capabilities testing. One commenter suggested increasing the expected frequency of engagement, while another advocated for committing more resources toward engagement and capabilities testing while decreasing the emphasis on full resolution submission documentation. Four commenters suggested that the FDIC should provide advance notice of the timing for engagement and capabilities testing, and the process for the testing and feedback. Two of these commenters indicated the FDIC should provide CIDIs with a comprehensive list of capabilities it expects a CIDI to maintain, and suggested this should be done through a notice and comment period to enable input from the industry. One of these commenters also noted that CIDIs— especially, group B CIDIs—will need time to build, improve, and test capabilities prior to undergoing capabilities testing with the FDIC, and suggested capabilities testing should not occur during a CIDI’s initial submission cycle under this Rule. Credibility Standard Two commenters expressed support for the proposed enhancement of the credibility standard. Three other commenters recommended eliminating the credibility determination, granting CIDIs latitude on the standard’s application, or foregoing any enforcement action based on a credibility determination. They argued that the standard, particularly the first prong, is subjective and susceptible to being applied inconsistently over time. Another commenter observed that any credibility standard is necessarily subjective. Several commenters emphasized the importance of a collaborative approach to resolution planning, with one emphasizing the role communications can play to support this, including related to the timing and scope of capabilities testing. In addition, several commenters expressed concerns about any enforcement actions related to engagement and capabilities testing, with one commenter stressing that full resolution submissions should only be deemed non-credible due to fundamental resolvability issues and not because of issues with CIDIs’ resolution capabilities that fall short. PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 Expected Effects One commenter indicated that the proposal would substantially add to the time and resources required to prepare IDI resolution plans. Another two commenters argued that the analysis of the compliance burden understates the true cost of the burden. A fourth commenter suggested that the estimated time required to develop an IDI full resolution submission is not unreasonable and the cost of compliance would pale in comparison to the costs of potential bank failures and banking crises. III. Final Rule The FDIC considered all comments received and has adopted certain changes to the proposed rule as discussed below. In addition, the FDIC made certain technical, non-substantive changes throughout, including corrections to paragraph numbering and grammar, improving word choice for readability, and eliminating redundancy. A. Scope and Purpose The scope and purpose of the final rule are substantively unchanged from the proposal. This rule is intended to ensure that each group A CIDI develops a credible strategy to facilitate the FDIC’s resolution of the institution across a range of possible scenarios and, with respect to each group A CIDI and each group B CIDI, that the FDIC has access to all of the material information and analysis it needs to efficiently resolve the CIDI in the event of its failure. Consistent with the 2012 rule and the proposal, the final rule applies to all IDIs with at least $50 billion in total assets based upon the average total assets reported over the previous four quarters. Like the proposal, the final rule will differentiate the requirements pertaining to group A CIDIs and group B CIDIs. Each group A CIDI is required to periodically submit a resolution plan to the FDIC, including an identified strategy for its resolution under the specified failure scenario. Each group B CIDI is required to periodically submit an informational filing to the FDIC that would consist of certain informational content, but would not be required to include an identified strategy or to develop capabilities necessary to produce valuations needed to support least-cost test analysis. Comments received by the FDIC included letters from two commenters who recommended that group B CIDIs should file resolution plans with no distinction between group A CIDIs and E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations group B CIDIs. Two other comment letters suggested that group A CIDIs should consist only of CIDIs with at least $250 billion in total assets and that there should be further tiering of requirements for CIDIs between $100– 250 billion in total assets and those between $50–$100 billion in total assets. One commenter recommended that group B CIDIs not be required to make any full resolution submissions. The FDIC has retained the distinction between group A CIDIs and group B CIDIs, and the requirement that group B CIDIs provide informational filings. The FDIC believes that the approach taken for group B CIDIs appropriately recognizes the additional complexity and greater resolution challenges applicable to the group A CIDIs. The threshold of $100 billion in total assets, which is also used in the Dodd-Frank Act 13 and other rulemakings as a basis for assessing a banking organization’s financial stability and safety and soundness risks,14 is an appropriate threshold to distinguish full resolution submission requirements for group A CIDIs and group B CIDIs, and is retained in the final rule. While all group A CIDIs have the same requirements for submission of full resolution plans, in response to comments discussed further below, the group A CIDIs are further divided into two filing categories: triennial and biennial filers. While most group A CIDIs will file on a triennial cycle under the final rule, those CIDIs that are part of the largest and most systemic and interconnected U.S. banking organizations—those affiliated with U.S. GSIBs—will file biennially. The FDIC considered comments proposing specific changes to the content of informational filings for group B CIDIs, which are addressed below. lotter on DSK11XQN23PROD with RULES4 B. Definitions The proposal included definitions of terms used in the proposed rule, which are included without change in the final rule, except as noted below. Several comments were received with respect to certain defined terms. Two commenters emphasized the importance of consistency in the definitions of equivalent terms between the proposed rule and the DFA rule, and ‘‘core business line’’ and ‘‘material change’’ were cited as specific examples. 13 See 12 U.S.C. 5365(a)(2)(C). The threshold for enhanced prudential standards under that provision was established through passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. 14 See, e.g., 84 FR 59230 (Nov. 1, 2019) (codified at 12 CFR parts 3, 50, 217, 249, 324, 329). VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 Additionally, two comment letters argued that the proposed definition of ‘‘material change’’ was overly inclusive and used in a manner that might result in triggering the notice requirements contained in the proposal upon relatively minor events, noting a narrower approach to events triggering such a notice in the DFA rule. Accordingly, the definitions for ‘‘core business lines’’ and ‘‘material change’’ are revised in the final rule to be more consistent with similar concepts in the DFA rule. The definition of ‘‘core business lines’’ is revised to conform more closely to the DFA rule. The definition covers the CIDI’s business lines whose failure would result in a material loss of the CIDI’s revenue, profit, or franchise value. The definition of ‘‘material change’’ is revised to combine concepts from the definition in the proposed rule and from the definition in the DFA rule. As discussed in the preamble to the proposed rule, in administering the 2012 rule, the FDIC has observed that not all CIDIs have interpreted the material change concept similarly. Accordingly, the intent of revising the defined term is to use an approach similar to the DFA rule, while improving clarity as to how to apply the concept in the context of this rule. Given differences in the purpose and scope of the two rules, the final rule focuses on changes that are important for CIDIs. Thus, the definition of material change in the final rule focuses on events that relate to the requirements of the rule, such as changes to overall deposit structure, identification or deidentification of a franchise component, and acquisition or disposition of a material asset portfolio, among other things. The usage of the term ‘‘material change’’ was modified as well, to be more consistent with the approach taken under the DFA rule. As discussed below, the final rule uses the phrase ‘‘extraordinary event,’’ borrowed from the DFA rule, in the context of the notice requirement instead of the term ‘‘material change.’’ One commenter noted that the proposed definition of ‘‘material entity’’ is over-inclusive, which might be inconsistent with the goal of focusing on the material aspects of the organization, and noted that this approach diverges from the approach taken in the DFA rule. The FDIC agrees with the comment that including all entities that are material to franchise components may result in relatively insignificant entities being captured within the definition. Accordingly, the reference to franchise components is omitted from the definition in the final rule. However, PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 56625 including all IDIs as material entities, regardless of size, is important for FDIC’s resolution planning, as it is likely that all may enter resolution under the FDI Act, due to statutory cross-guarantees. No change is being made to the inclusion of all IDIs as material entities. In the definition of ‘‘franchise component,’’ the term ‘‘asset pool’’ was replaced by the term ‘‘material asset portfolio’’ to utilize a defined term from the rule. A similar change was made to the definition of ‘‘multiple acquirer exit’’ in using the defined term ‘‘material asset portfolios’’ instead of ‘‘asset portfolios.’’ Throughout the final rule, the term ‘‘resolution submission’’ was replaced by the term ‘‘full resolution submission’’ and the term ‘‘BDI’’ was replaced by the term ‘‘bridge depository institution’’ for clarity. The definitions of ‘‘group A CIDI’’ and ‘‘group B CIDI’’ were revised to be more consistent with the approach used in the DFA rule for determining filing groups. The definition of United States was revised to be consistent with the definition under the FDI Act. New defined terms were added for clarity, including ‘‘PCS service provider,’’ ‘‘DIF,’’ ‘‘biennial filer,’’ and ‘‘triennial filer.’’ C. Full Resolution Submissions Required Biennial Filers and Triennial Filers Under the proposal, each CIDI would have been required to provide a full resolution submission to the FDIC every two years. The FDIC would have retained the discretion to alter the submission dates upon written notice to the CIDI. An interim supplement would have been required in any year in which the CIDI is not required to file a full resolution submission. Four commenters recommended a three-year submission cycle consistent with the Statement. Commenters supporting the three-year cycle emphasized the importance of receiving timely feedback and having sufficient time to incorporate improvements in the full resolution submissions with each cycle. These commenters also cited an increased cost in more frequent filings. Commenters flagged the importance of the coordination of filing resolution submissions, submission review, and engagement and capabilities testing, as well as filing interim supplements over the course of the cycle. Two commenters supported the proposed biennial submission. One commenter recommended that if the FDIC were to E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56626 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations move to a triennial submission cycle for most CIDIs, the biennial cycle should be retained for the CIDI affiliates of U.S. GSIBs, which are biennial filers under the DFA rule. The commenter suggested that this approach would be more efficient for the U.S. GSIBs and for the FDIC, as interim supplements would not be necessary because either a DFA resolution plan or a resolution plan under this rule would be submitted in alternating years. The final rule adopts the recommended three-year submission cycle for most CIDIs. The FDIC agrees with commenters that timely and fulsome feedback for each CIDI is an important priority, and ensuring time for engagement and capabilities testing between full resolution submissions is of significant value. In addition, the FDIC expects that key components of the full resolution submission will remain relatively constant over a threeyear cycle, including the identified strategy for group A CIDIs. Important information that is more likely to change over that period will be updated annually through the interim supplement. In addition, the FDIC will receive notices of extraordinary events that will provide information of significant changes at the CIDI, such as through merger and acquisition or divestiture, and the FDIC would be in a position to request additional information if needed. With respect to the CIDI affiliates of U.S. GSIBs, the FDIC agrees with the commenter that a full resolution submission cycle that is complimentary with the DFA resolution plan cycle will improve efficiency, and will ensure timeliness of content needed for contingency planning for an FDI Act resolution. The biennial filing is appropriate for these CIDIs, which are part of the largest and most systemic and interconnected U.S. banking organizations. Accordingly, the final rule establishes a two-year cycle for CIDIs that are affiliates of U.S. GSIBs. Consistent with the proposal, the FDIC retains the discretion to change filing dates for any CIDI. The FDIC received several comments with respect to the preferred submission date. One commenter suggested July 1, while two commenters recommended December dates. One of these commenters suggested that CIDIs with parent banking organizations that are triennial filers of DFA resolution plans should submit full resolution submissions under this rule in December of the same year in which the DFA resolution plan is filed. The final rule does not specify a calendar date for submissions, to retain flexibility over VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 the life of the rule. While July 1, January 1, and December 1 dates have been used in the past, the most suitable dates may be different for different cohorts of CIDIs and may change over time. The FDIC considers the annual cadence for information required by this rule to be provided by most CIDIs, including those with parent banking organizations that are triennial filers of DFA resolution plans—whether via full resolution submissions or interim supplements—to be appropriate from a resolution planning workflow perspective for both the FDIC and CIDIs. The FDIC also expects to establish a regular cadence of review, testing, and engagement across two cohorts of group B CIDIs, and may establish different calendar dates for submissions by those group B CIDI cohorts. With respect to the first full resolution submissions or interim supplements following the effective date of the final rule, five commenters suggested a period of 12 months or longer, rather than the proposed 270-day period. In particular, with respect to group B CIDIs, commenters suggested a transition period of 18 months, since none of these CIDIs have submitted a resolution plan under the 2012 rule since implementation of the moratorium. The FDIC will notify CIDIs of the date when their first full resolution submissions or interim supplements are due under the final rule. Consistent with the proposal, for group A CIDIs, that date will be at least 270 days from the effective date of the rule. The FDIC believes that 270 days following the effective date is sufficient time for group A CIDIs to prepare a resolution plan or interim supplement that conforms to the final rule. This timing reflects the urgency of resolution planning for these largest CIDIs, and supports the establishment of a regular cadence of full resolution submissions and interim supplements across three cohorts of group A CIDIs for purposes of full resolution submission review, horizontal capabilities testing, and firmspecific engagement. The text of the final rule will be publicly available following action by the FDIC Board of Directors, and will be published in the Federal Register well before the effective date, giving CIDIs notice of the final rule’s requirements. For group B CIDIs, the initial submission due dates will be at least one year from the effective date of the final rule. This is appropriate because the group B CIDIs are generally new to the resolution planning process—or have not filed for an extended period due to the moratorium—and because the PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 resolution challenges associated with the group B CIDIs are somewhat reduced. Full Resolution Submissions by New CIDIs Consistent with the proposal, the final rule indicates that an IDI that becomes a CIDI after the effective date of the final rule is required to provide its initial full resolution submission on or before the date specified in writing by the FDIC, which will be no earlier than 270 days after the IDI became a CIDI. As these firms are aware of such transition well in advance, 270 days after the change of status is an appropriate length of time to submit a new full resolution submission. As IDIs grow, whether through merger or business strategy or otherwise, it is important that the FDIC receive prompt and timely information for resolution planning. The 270-day period balances the urgency of resolution readiness against the time needed for a new CIDI to complete a thorough and responsive full resolution submission. The final rule adds language to address submissions subsequent to a CIDI transitioning between groups. A CIDI that transitions from group B to group A or from group A to group B, will file a full resolution submission or interim supplement, as applicable, pursuant to the requirements relevant to its new filing group on or before the date that its next full resolution submission or interim supplement is due, unless it receives written notice of a different date from the FDIC. The final rule contains language changes from the proposal for clarity and consistency by providing for full resolution submissions on or before the submission date, rather than on the submission date, for the biennial filers, the triennial filers, and the new filers. This is consistent with similar language in the DFA rule. Notice of Extraordinary Event The proposal would have required that a CIDI provide the FDIC with a notice and explanation of a material change no later than 45 days after certain events included in the proposed definition of ‘‘material change.’’ The proposal also would have allowed for an exemption from this requirement if the date on which the CIDI would be required to submit the notice would be within 90 days before the date on which the CIDI is required to provide a full resolution submission. Commenters suggested that the definition of material change was too broad and would give rise to notices that were not likely to significantly E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations impact the full resolution submission. Commenters suggested consideration of the approach taken in the DFA rule, which requires notice of a more limited set of ‘‘extraordinary events.’’ The FDIC considered those comments and adopted the concept of an ‘‘extraordinary event’’ as the basis for the 45-day notice, rather than a ‘‘material change.’’ The term ‘‘material change’’ remains in the final rule, but is no longer part of the notice requirement. This is similar to the approach taken for DFA resolution plans, with appropriate adjustments for the differences in the two rules. The FDIC expects that this approach will provide a focus on the events that are significant enough to warrant a notice, such as a merger, acquisition or disposition of assets, or fundamental change to the CIDI’s organizational structure, core business lines, size, or complexity. The final rule retains the requirement of the notice within 45 days of the event, and the exemption from the requirement if the event occurs within 90 days of the date by which the next full resolution submission is due. The impact of the extraordinary event on resolution would be discussed in the discussion of material changes in the next submission, whether a full resolution submission or the interim supplement, and the FDIC would be in a position to request additional information if needed. A CIDI is not exempt from the requirement if the event occurs within 90 days of the date by which the next interim supplement is due because of the more limited content required in an interim supplement. lotter on DSK11XQN23PROD with RULES4 Approval by the CIDI Board of Directors The final rule adopts without change the requirement that a CIDI’s board of directors approve the full resolution submission, and that this approval be noted in the board’s minutes. For an insured branch, the final rule allows a submission to be approved by a delegee acting under the express authority of the board, and requires such delegation of authority to be noted in the board’s minutes. No comments were received on this proposed provision. This requirement does not apply to an interim supplement. Incorporation From Other Sources The proposal would have allowed the CIDI to incorporate certain information or analysis without seeking the authorization required under 12 CFR part 309 for disclosure of FDIC confidential information. The proposed rule included certain proposed requirements about the format and process for incorporation of information VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 from other sources and would have required certification that the information or analysis remains accurate in all respects that are material to the CIDI’s full resolution submission. The FDIC received no comments on this proposed provision and there were no substantive changes. However, the final rule has been modified from the proposal for consistency and clarity to state that a CIDI may incorporate information from other sources into its interim supplement and the ‘‘confidential section’’ of the full resolution submission and to allow information from a regulatory filing of a CIDI affiliate without seeking a separate waiver. D. Content of the Full Resolution Submissions for CIDIs The proposal would have required each group A CIDI to submit a resolution plan that includes all content specified in § 360.10(d) of the proposed rule. The proposal would have required each group B CIDI to provide an informational filing, which would not include all of the content of a resolution plan. As proposed, the informational filing would not include the executive summary, identified strategy and failure scenario, or valuation to support leastcost test analysis content elements that are applicable to group A CIDI resolution plans. The FDIC received comments related to the content elements that would apply to an informational filing. Two commenters suggested that the requirement to describe franchise components be reduced or removed for group B CIDIs, because, the commenters argued, the proposed franchise component content element included information similar to resolution planning that should not be required in an informational filing. While the FDIC continues to believe that the identification of franchise components is critical for resolution preparation, particularly in situations where a whole bank sale may be difficult to achieve, the FDIC also agrees that some proposed aspects of the franchise components content element may inadvertently require discussion of resolution strategy by group B CIDIs. Accordingly, in response to these comments, the final rule exempts group B CIDIs from reporting the portions of the franchise component content element relating to marketing process and capabilities, key assumptions underpinning each divestiture, and obstacles to execution. All other proposed subparts of the franchise component content element are required for group B CIDIs in the final rule. PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 56627 Commenters also recommended the reduction, removal, or amendment of several other content elements for informational filings. Some commenters generally suggested changes to content elements that they viewed as requiring information that they did not believe to be as relevant or applicable for group B CIDIs as for group A CIDIs or to be available from other sources aside from the group B CIDIs, while one commenter was generally supportive of the proposed content element requirements. After reviewing these comments, the proposed content element requirements, the availability of the information for the proposed content elements, and the FDIC’s resolution practices and experience, the FDIC has determined that all other informational filing content elements should be maintained as proposed. The content elements will provide critical information at a level of detail necessary for resolution planning and execution that, in the FDIC’s estimation and experience, is not available in sufficient detail from other sources to meet the FDIC’s needs in the resolution context. Under the final rule, a full resolution submission, whether a resolution plan for a group A CIDI, or an informational filing for a group B CIDI, must include a discussion of any material changes from the prior full resolution submission or interim supplement or an affirmation that no material change has occurred, and a discussion of changes to the CIDI’s previous full resolution submission resulting from any change in law or regulation, guidance, or feedback from the FDIC. This requirement was proposed as part of the executive summary of the resolution plans submitted by the group A CIDIs, and while the group B CIDIs do not need to include an executive summary as part of their informational filings, the final rule requires that the information filing include a similar discussion of changes since the prior submission. As discussed above, the definition of material change has been modified in the final rule in response to comments, providing additional context to this requirement. The FDIC considered all comments related to the specific requirements of the content elements described in § 360.10(d) of the proposed rule and discusses these content elements below. Identified Strategy The proposal would have required each group A CIDI to provide an identified strategy, which describes the resolution from the point of failure through the sale or disposition of the group A CIDI’s franchise (including all E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56628 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations of its core business lines and all other business segments, branches, and assets that constitute the CIDI and its businesses as a whole) in a manner that meets the credibility standard. The proposal would have established the bridge bank approach as the default identified strategy, and indicated that a bridge bank strategy must provide for the establishment and stabilization of a bridge bank and an exit strategy from the bridge bank. Recognizing that the bridge bank approach may not be optimal for all group A CIDIs, the proposal would have permitted a different identified strategy if that different strategy best addressed the first prong of the credibility criteria, could reasonably be executed by the FDIC across a range of likely failure scenarios, and would be more appropriate for the size, complexity, and risk profile of the specific group A CIDI. However, the proposed rule would not have permitted the identified strategy to be based upon the sale of substantially all assets and liabilities over closing weekend. The proposal would have required that any identified strategy include meaningful optionality for execution across a range of failure scenarios. Two commenters recommended eliminating the requirement of a failure scenario-based identified strategy in any resolution plan. In addition, one comment letter suggested that this requirement should be based on factors other than size, such as whether more than 90 percent of the total consolidated assets are within the CIDI, the extent of cross-border activity, or the IDI’s role as a financial utility or agent bank. Two commenters supported the proposed scope of the requirement; one commenter suggested that it should apply to group B CIDIs as well. Two commenters supported the identified strategy requirement as proposed, with one noting it would be among the most critical pieces of information in a resolution plan and plans without this element would not likely be credible or effective. Three other commenters favored elimination or modification of the failure scenario and identified strategy requirement. Several commenters supported the proposed rule’s emphasis on a bridge bank approach as the default identified strategy. Two commenters recommended including a whole bank sale as a permitted identified strategy for group A CIDIs, suggesting that it is a possible option even for large banks, and its use may minimize losses to the DIF and other creditors. The FDIC considered the comments and concludes that there are certainly VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 factors other than size that impact challenges in resolution and availability and likelihood of a closing weekend sale as a strategic option, however, the FDIC considers that size alone may present significant challenges and make a closing weekend sale less likely. While the FDIC will consider any feasible bid for the sale of the IDI franchise over closing weekend or as promptly as possible post-failure, it cannot rely on that option, and must have available other strategic options. As explained in the preamble to the proposal, the proposed requirements related to the identified strategy and failure scenario are intended to provide the FDIC with a strategic option that is adaptable under a wide range of potential scenarios, as the actual scenario is likely to be materially different from any hypothetical scenario construct. Further, the development of an identified strategy that takes into account a group A CIDI’s organization, structure, business lines, and other characteristics provides significant insight into the obstacles that the FDIC might face in resolving the CIDI and possible mitigating actions that may be available to address those obstacles. Accordingly, the final rule retains the requirement that group A CIDIs develop an identified strategy based on a failure scenario. In addition, the final rule adopts the approach taken in the proposal with respect to the strategic options to be considered in each group A CIDI’s identified strategy. The strategic option that the FDIC considers most useful for the group A CIDIs across the widest range of failure scenarios is the establishment of a bridge bank that can continue the operations of the CIDI. Generally, a bridge bank approach will support the preservation of franchise value and will also allow time for restructuring and marketing to facilitate the sale or disposition of the business lines and related assets, while providing insured depositors with prompt access to their accounts. Accordingly, the final rule establishes the bridge bank approach as the default identified strategy. A bridge bank strategy must provide for the establishment and stabilization of a bridge bank and an exit strategy from the bridge bank, such as a multiple acquirer exit involving the regional breakup of the group A CIDI or sale of business segments, an orderly wind down of certain business lines and asset sales, an exit via restructuring and subsequent initial public offering or other capital markets transaction, or another exit strategy appropriate to the size, structure, and complexity of the PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 CIDI. If a multiple acquirer exit is included as part of the identified strategy, it may be appropriate for the resolution plan to address the time required for that exit option and any restructuring or other actions needed to address obstacles to separability of divestiture options. If the identified strategy assumes the sale of franchise components or a multiple acquirer exit, the resolution plan should take into account all issues surrounding the CIDI’s ability to sell in market conditions present in the applicable economic condition at the time of sale. Consistent with the proposed rule, in addressing the establishment of the bridge bank, the final rule does not require that a resolution plan demonstrate that the identified strategy is the least-costly to the DIF of all available strategies; in particular, the resolution plan is not required to demonstrate that the identified strategy would be less costly to the DIF than liquidation. Similarly, the resolution plan is not required to include analysis discussing whether the conditions for chartering the bridge bank would be satisfied. Rather, each group A CIDI is required to support its estimation that the identified strategy in the resolution plan maximizes value and minimizes losses to the creditors of the group A CIDI. While commenters noted that this necessarily would be subjective and depend on a variety of factors, the CIDI’s assessment of this item will be helpful to the FDIC in making its own assessment in the event of a failure. The valuation analysis discussed below supports the FDIC’s ability to evaluate the strategy’s impact on value and its potential costs to the DIF across a range of options. Recognizing that the bridge bank approach may not be optimal for all group A CIDIs, consistent with the proposal, the final rule permits a different identified strategy if it best addresses the first prong of the credibility standard (discussed in credibility criteria below), could reasonably be executed by the FDIC across a range of likely failure scenarios, and would be more appropriate for the size, complexity, and risk profile of the specific group A CIDI. Also consistent with the proposal, an alternative identified strategy under the final rule could include transferring some but not all business lines and assets to a bridge bank and liquidating others in a receivership. For some group A CIDIs, a payment of insured deposits 15 and 15 This task could be accomplished through a Deposit Insurance National Bank established by the FDIC pursuant to 12 U.S.C. 1821(m). E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 liquidation of all business lines and assets in receivership may be the most appropriate identified strategy. Consistent with the proposed rule, the final rule requires any identified strategy to include meaningful optionality for execution across a range of scenarios and provide the information and analysis to inform decisions and support optionality for the FDIC in undertaking a resolution of the CIDI following its material financial distress and failure. One commenter stated that meaningful optionality is a vague and difficult standard. As explained in the preamble to the proposal, meaningful optionality reflects an expectation that an identified strategy be flexible so that it can be adapted to a change in the failure scenario or an unexpected obstacle to its execution. The nature and extent of meaningful optionality will vary based upon the size and complexity of the CIDI. For instance, a relatively smaller and less complex CIDI with a focus on traditional banking may identify only a breakup between two business lines or the spinoff or sale of a separable business unit. For the largest or most complex CIDIs, meaningful optionality might include alternatives such as a breakup by business lines and a regional breakup, or by sale of one or more identified franchise components as options for a sale of the IDI franchise. The final rule retains the expectation of meaningful optionality as proposed. Failure Scenario The proposal would have required the identified strategy to be based on a failure scenario that demonstrates that the CIDI is experiencing material financial distress. The proposed rule would have required the failure scenario to assume and demonstrate that the CIDI experienced a deterioration of its asset base, and that its high quality assets have been depleted or pledged due to increased liquidity requirements from counterparties and deposit outflows. The proposal noted that, while the immediate cause of failure may be based on liquidity shortfalls, the failure scenario also must consider the likelihood of the depletion of capital and losses in the assets of the CIDI, which may include embedded losses that may not have been recognized by the CIDI for financial reporting purposes. The FDIC has learned that a submission is most valuable when it is based on the assumption that the CIDI has experienced material financial distress such that its failure is a result of the depletion of capital and/or liquidity. While the resolution strategy may be based on an idiosyncratic event VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 or action, including a series of compounding events, the firm should justify all assumptions, consistent with the conditions of the economic scenario and the nature of the CIDI. These proposed provisions remain substantively unchanged in the final rule. Under the proposal, the failure scenario would have been required to assume that the U.S. parent holding company is in bankruptcy and is consistent with the approach taken in DFA resolution plans. One commenter objected to the assumption that the parent is in bankruptcy, stating that this assumption is not appropriate for all firm structures and may overlook potential sources of value in resolution and limit the information available to the FDIC. While the FDIC appreciates that the CIDI’s parent and parent affiliates may not be in bankruptcy in all cases, experience shows that a bank failure frequently occurs with bankruptcy of the parent and parent affiliates. For that reason, an understanding of the impact of such a failure scenario on the resolution of the CIDI is important for the FDIC to prepare for that possibility and the FDIC believes that this baseline assumption is useful and appropriate. The full resolution submissions will contain information to support an evaluation of outcomes in the event that a coordinated, group-wide approach is feasible. For instance, consistent with the proposal, the final rule requires information on financial and operational interconnections between the IDI and the parent and parent affiliates that will be helpful to the FDIC in considering options should this baseline assumption prove not to be the case in an actual resolution scenario. For these reasons, the FDIC has made no change with respect to this assumption in the final rule. The FDIC made a clarifying change to the failure scenario by deleting the references to discount window borrowing before or in resolution. While assumptions regarding discount window borrowing are included in the scenarios described in prior DFA resolution plan guidance, these considerations are less important to the FDI Act resolution scenario because of the availability of the DIF for temporary liquidity in resolution. The preamble to the proposed rule noted that the identified strategy may assume continuation of Federal Home Loan Bank (FHLB) advances as well as the availability of short-term liquidity advances from the DIF to meet temporary liquidity needs in resolution, if the identified strategy provides for PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 56629 timely repayment of those funds, an assumption that was supported by one commenter. As the scenario specifically permits the use of DIF liquidity in resolution, provided that the identified strategy may not assume use of the DIF to avoid losses to creditors of the bridge bank, and may assume the availability of FHLB or other sources of liquidity on applicable terms, it is less significant whether the bridge bank borrows from the discount window. To the extent that the CIDI assumes that DIF funding is used during the resolution by a bridge bank, it must demonstrate the capacity for such borrowing on a fully secured basis and must demonstrate a source of timely repayment. In addition, the final rule retains the proposal without change to allow flexibility for the FDIC to devise specific failure scenario assumptions with respect to macroeconomic conditions or the precipitating cause of failure. One commenter stated that the FDIC should provide any changes to failure scenario assumptions at least 12 months before a full resolution submission is due. The FDIC will endeavor to provide a group A CIDI notice of additional or alternative parameters for the failure scenario at least one year before the applicable full resolution submission is due. Other comments suggesting that changes to the scenario must be public and apply equally to all group A CIDIs were not adopted. The FDIC has learned in past plan reviews and resolution experience that the path to failure is different for different firms and may depend on the particular business structure of an individual CIDI or cohort of CIDIs. Accordingly, the FDIC believes that it is appropriate to retain options for flexibility and confidentiality in the development of scenarios. Executive Summary The proposed rule would have required a group A CIDI to include an executive summary describing the key elements of its identified strategy. It also would have required a discussion of changes to the group A CIDI’s previously submitted resolution plan resulting from any change in law or regulation, guidance or feedback from the FDIC, or any material change. Finally, the proposed rule would have required a discussion of any actions the group A CIDI had taken since submitting its most recent resolution plan to improve the resolution plan’s information and analysis, or to improve its capabilities to develop and timely deliver that information and analysis. This provision of the final rule is adopted as proposed. As discussed above, the definition of material change E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56630 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations has been refined from the definition in the proposal. affiliates. This requirement is retained in the final rule. Organizational Structure: Legal Entities; Core Business Lines; and Branches Methodology for Material Entity Designation The proposed rule would have required each CIDI to describe its methodology for identifying material entities, to afford each CIDI the flexibility to develop a methodology that is appropriate to the nature, size, complexity, and scope of its operations. The final rule adopts this proposed requirement without change. The proposal would have required a full resolution submission to describe the CIDI’s domestic and foreign branch organization and to provide addresses and asset size. The proposed rule would have also required the CIDI to identify and describe the core business lines of the CIDI, the parent company, and parent company affiliates. The proposed rule would have introduced the requirement to identify all regulated subsidiaries, as this information will assist the FDIC in identifying entities with capital, liquidity, and other requirements, and in assessing these entities’ regulatory requirements when it is resolving a CIDI using a bridge bank. The proposed rule would have modified the mapping requirements to require that core business lines be mapped to material entities, franchise components, and regulated subsidiaries, to improve the utility of mapping and support the analysis of franchise components. One commenter objected to the level of informational detail required for regulated subsidiaries, and recommended that the final rule limit the requirements to material entities, as defined, or limit the information required with respect to regulated entities to a list of these subsidiaries and their respective jurisdictions, regulators, and asset sizes. The definition of ‘‘regulated subsidiaries’’ includes registered brokers and dealers, registered investment advisors, registered investment companies, insurance companies, futures commission merchants and other entities regulated by the Commodity Futures Trading Commission, and other, similar regulated entities. These entities, even if relatively small in asset size or income, present complexity in resolution, and it is important to the FDIC to understand their role in the banking organization and the capital and liquidity impacts of these entities if they are maintained by a bridge bank. Accordingly, the final rule adopts this requirement as proposed. The proposed rule would have required the full resolution submission to describe whether any core business line draws additional value from, or relies on, the operations of the parent company or a parent company affiliate, and identify whether any such operations are cross-border, to support and inform the FDIC’s analysis of the impact of breakup of the CIDI from its parent company and parent company VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 Separation From Parent; Potential Barriers or Material Obstacles to Orderly Resolution The proposed requirements with respect to actions needed to separate a CIDI from the organizational structure of its parent company and parent company affiliates, as well as how to separate the CIDI’s subsidiaries from this structure, are adopted without substantive change. The final rule, consistent with the proposal, requires that a full resolution submission address the CIDI’s ability to operate separately from the parent company’s organization, and that the CIDI assume that its parent company and the parent company affiliates have filed for bankruptcy or are in resolution under another insolvency regime. It also requires addressing the impact on the bridge bank’s value if the CIDI were separated from the parent company’s organization. These requirements are intended to focus on whether the CIDI, and therefore a bridge bank, can be a viable stand-alone entity from the point of view of economic value and viability of business lines. Consistent with the proposed rule, the final rule requires identification of potential barriers or other material obstacles to an orderly resolution, the identification of how such barriers or obstacles could pose risks to a group A CIDI’s identified strategy, and the identification of inter-connections and inter-dependencies that may hinder the timely and effective resolution of the CIDI. For clarification, the final rule qualifies the potential barriers or other material obstacles to an orderly resolution as those that may occur upon the CIDI’s separation from the parent company’s organization. Like the proposal, the final rule also provides for the CIDI to identify any remediation steps or mitigating responses necessary to eliminate or minimize these barriers or obstacles. Overall Deposit Activities Consistent with the proposal, the final rule requires a full resolution submission to include important PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 information about deposit activities. One comment letter suggested that instead of requiring this information, the rule should focus on ensuring that the CIDI has the capabilities to provide the necessary information timely. The FDIC agrees that the capabilities to provide this information on a current basis would be important in resolution. The CIDIs’ provision of the information required would be one way to demonstrate these capabilities. This information would give the FDIC a baseline view of the deposit activities of each CIDI and assist the FDIC in contingency planning activities for a potential failure of the CIDI, recognizing that updates would be needed in an actual resolution event. The final rule adopts the proposed requirements with respect to deposit activities, which include information about insured and uninsured deposits. While the proposal would have required information on commercial deposits by business line and unique aspects of the deposit base or underlying systems, the final rule provides clarification of that particular aspect of the requirement. The final rule specifies that the requirement is to identify ‘‘particular deposit concentrations,’’ in addition to other aspects of the deposit base or underlying systems that may increase complexity in resolution. The final rule retains the proposed requirement to describe how types or groups of deposits are related to a core business line, business segment, or franchise component and how they are identified in the CIDI’s systems or records. As discussed in the preamble to the proposed rule, the deposits related to a particular franchise component must be readily identified to facilitate the separation and sale of the franchise component along with the associated liabilities. Similarly, in a multiple acquirer exit, which may involve regional breakup of the CIDI or a breakup of its business lines, it will be important to understand how to identify the deposits that would relate to the various divestiture options in such a breakup. Consistent with the proposal, the final rule requires a discussion of foreign deposits and identification of deposits dually payable in the U.S. The final rule also adopts the proposed requirements with respect to information about deposit sweep arrangements with affiliates and unaffiliated parties and the contracts governing those arrangements. The final rule clarifies the proposal by stating that the FDIC needs information about the CIDI’s reporting capabilities to generate accurate and timely contact information for omnibus, deposit sweep, E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 and pass-through accounts. The FDIC intends this clarification to be a nonsubstantive change. The final rule adopts the proposed requirements with respect to identification of key depositors, which are defined as depositors that hold or control the largest deposits (whether in one account or in multiple accounts) that collectively are material to one or more business segments. Each key depositor must be identified by name, business segment, and amount of deposit, and the CIDI must identify other services it provides to that depositor. One commenter stated that the required information regarding deposit activities should be narrowed, but the commenter did not propose an alternative approach. The FDIC asked for feedback on the approach to identification of key depositors but did not receive feedback. Rather than providing for a prescriptive approach, the final rule simply requires a description of the approach used by the CIDI in identifying its key depositors. While in some cases providing information on the top 10 or 20 percent of deposits may be the best approach, in others it may be the top 50 or 400 depositors, or it may be that the nature of the relationship is a crucial identifying feature. Key depositors should include those depositors that the CIDI monitors most closely and may want to engage with in a stress event. Critical Services The final rule adopts the proposed requirements with respect to critical services without substantive change. This includes the requirement that the CIDI be able to demonstrate capabilities necessary to ensure continuity of critical services in resolution. Under the final rule, full resolution submissions are required to identify critical services and critical services support and include an explanation of the criteria by which critical services are identified in order to clarify for the FDIC the CIDI’s approach to this content element. The final rule requires the identification of critical services and critical services support provided by the parent company or a parent company affiliate, as well as the physical locations and jurisdictions of critical service providers and critical services support that are located outside of the United States. The full resolution submission must map critical services support to legal entities that provide those services directly or indirectly through third parties. In addition, a full resolution submission must map critical services to the material entities, core business lines, and franchise components supported by VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 those critical services. It also must include information about the critical services and critical services support that may be at risk of interruption if the CIDI fails and the process the CIDI used to make that determination. The full resolution submission must also discuss potential obstacles to maintaining critical services that could occur in the event of the CIDI’s failure and steps that could be taken to remediate or otherwise mitigate the risk of interruption, describe the CIDI’s approach for continuing critical services in the event of the CIDI’s failure, and provide information about the contracts governing the provision of these services. Consistent with the proposal, the final rule requires a CIDI to provide information about its process for collecting and monitoring the contracts governing critical services and critical services support. As noted in the preamble to the proposed rule, providing information about the systems that store these contracts and how this information is stored (e.g., centrally, by business line or material entity, by business function, etc.) would provide the FDIC with valuable information when seeking to understand a CIDI’s operations and business relationships. Key Personnel The final rule adopts without change the proposed requirements with respect to key personnel, including that a CIDI must identify key personnel and describe its methodology for identifying key personnel, and must furnish information regarding the identification of employee benefit programs provided to key personnel and any applicable collective bargaining agreements or similar arrangements. Key personnel are defined broadly in the rule, and should include personnel tasked with an essential role in support of a core business line, franchise component, or critical service, or having a function, responsibility, or knowledge that may be significant to the FDIC’s resolution of the CIDI. Key personnel should include personnel that hold or maintain necessary licenses or permits for domestic or foreign operations at the CIDI or have been designated as key personnel to domestic or foreign authorities. Consistent with the proposal, the final rule requires a CIDI to provide a recommended approach for retaining key personnel during its resolution that, for example, may specify retention bonuses and other retention incentives. This approach should consider and address employees most at risk for leaving the CIDI promptly upon a failure event. PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 56631 Franchise Components The proposal included certain requirements with respect to the identification of franchise components and related capabilities. Under the proposal, a franchise component was defined as a business segment, regional branch network, major asset or asset pool, or other key component of the IDI franchise that could be separated and sold or divested. In response to comments, the final rule makes certain adjustments to the requirements with respect to franchise components. The proposed rule included the requirement that a CIDI must be able to demonstrate the capabilities to ensure that franchise components are separable and marketable in resolution. The final rule eliminates the word separable from this definition. Instead of referring to separability as a required capability of a CIDI, the emphasis of the final rule is on the identification of franchise components that are, in their current circumstances, separable. The final rule retains the requirement that a CIDI must be able to demonstrate the capabilities necessary to market the franchise components. In addition, the final rule makes an express reference to the IDI franchise in this sentence to make clear that this capability also must support the marketing of the IDI franchise as a whole or in conjunction with the marketing of its franchise components. Although the final rule does not permit a closing weekend sale as the identified strategy for the reasons discussed above, a sale of the IDI franchise, whether over closing weekend or following a bridge bank period, is an important option in resolution. It is therefore essential that CIDIs maintain the capabilities necessary to support marketing of their IDI franchises as well as their franchise components. The proposal included the requirement that the full resolution submission identify franchise components that are currently separable and marketable in a timely manner. The proposed rule received one comment with respect to this requirement. The commenter stated that there should not be a specified timing requirement for the sale of franchise components and that the imposition of a time period, especially a short one, such as 60 or 90 days, would not be appropriate or realistic. In particular, the commenter stated that it would not work for multiple acquirer exit strategies, which require months to execute. The final rule retains the proposed definition of the term ‘‘franchise E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56632 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations component’’ as discussed above and retains text of the proposed rule with respect to identification of franchise components that are currently separable and are marketable in a timely manner. The intent is to identify franchise components that can be marketed and sold in their current state, i.e., without significant obstacles or the need for restructuring. This will enhance optionality for the FDIC, creating the potential for marketing of the IDI franchise as a whole as quickly as possible following the failure of the CIDI. Thus, the phrase ‘‘timely manner’’ is retained. Although the FDIC did not propose and is not now including a specific time requirement, ‘‘timely’’ marketing capabilities should be measured in days or weeks, not months. The FDIC notes that the adopted approach to separability and marketability of franchise components is distinguishable from the proposed approach taken with respect to the identification of divestiture options to support a multiple acquirer exit from a bridge bank. The multiple acquirer exit is a possible element of an identified strategy, a requirement that applies only to group A CIDIs. Such an exit option may require restructuring and divestiture options that present greater obstacles and that may require a longer period than for a sale of the franchise components. For example, an identified franchise component might be a brokerdealer or mortgage servicing subsidiary within the bank chain, or a material asset portfolio, that is readily separable from the IDI and can be marketed as an option at the time of failure. On the other hand, divestiture options may be the result of a regional breakup of the CIDI or a breakup of business lines that require significant restructuring in order to market the regional or business line segments separately. The proposed rule would have required franchise components identified in a full resolution submission to be sufficient to implement the identified strategy (for group A CIDIs) and to provide meaningful optionality across a range of scenarios if the preferred approach is not available. The requirement to provide meaningful optionality across a range of scenarios is deleted from this paragraph as superfluous. That expectation is subsumed in the first prong of the credibility standard applicable to group A CIDIs, which is discussed above. Consistent with the proposed rule, the final rule sets forth basic informational elements required for each franchise component, including identification of responsible senior management and VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 provision of metrics depicting each franchise component’s size and significance. Useful metrics may include total revenue, net income, percentage market share, and, if applicable and available, total assets and liabilities. The full resolution submission must also include a description of the key assumptions for each franchise component divestiture and all significant impediments and obstacles to execution of a franchise component divestiture, including legal, regulatory, cross-border, or operational challenges. The final rule retains these paragraphs as proposed. The final rule makes no change to the proposed requirement that a full resolution submission must include a description of the CIDI’s capabilities and processes to initiate marketing of the franchise component and provide a description of necessary actions and a timeline for the divestiture supported by a description of the key underlying assumptions. The final rule also adopts the requirement in the proposal that the CIDI describe the process it would use to identify prospective bidders for its franchise components. The FDIC makes every effort to market failed banks—and their assets and business segments—as widely as possible. A requirement that CIDIs provide analysis on identification of prospective bidders of franchise components supports that effort. In addition to describing the process for identification of prospective bidders, identifying those prospective bidders, either specifically or by industry or category, would also be helpful. The final rule incorporates the proposed requirements with respect to a virtual data room (VDR), which, among other things, must include information sufficient to permit a bidder to provide an initial bid on the IDI franchise or the CIDI’s franchise components. One commenter stated that the VDR requirements should be aligned with the DFA rule expectations regarding due diligence rooms. The comment also stated that the FDIC should not require ongoing maintenance of a VDR and not establish a timeframe for setting up the VDR because time requirements may vary across CIDIs. It also stated that the FDIC should note that the list of VDR elements is merely indicative. The VDR requirements in the final rule are consistent with the expectations in the U.S. GSIB guidance 16 issued in connection with the DFA rule that 16 Guidance for section 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). PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 would apply to any divestiture option identified in a DFA resolution plan, which could include any subsidiary or component of the firm’s global organization. Reflecting the different focus of this rule, it provides more detail than the U.S. GSIB guidance about the informational elements that would be appropriate for a VDR to be utilized in the sale of the IDI franchise and the CIDI’s franchise components. The final rule, like the proposal, does not require the ongoing maintenance of a VDR; rather it is focused on the capabilities to establish a VDR in a timely manner. The final rule is unchanged from the proposal with respect to the length of time during which a VDR must be able to be populated, in that it does not provide a prescriptive time. However, the capabilities should support a very short time frame to stand up a VDR and not rely upon a stabilized bridge bank to extend the time available to do so. The final rule requires a description of the length of time and any challenges or obstacles to providing complete and accurate information necessary to support a competitive bid, with an expectation that this time frame will be brief and measured in days. The list of content elements to be included in the VDR is indicative and not comprehensive; the specific information and data that would be appropriate and sufficiently detailed to support prompt and competitive bids will vary among CIDIs. For instance, deposit data and information elements might include a complete, current deposit trial balance reconciled to the general ledger, a description of the largest depositor relationships, information regarding sweeps and brokered deposits, and other data useful to inform a bid. Loan and lending operations information might include a loan tape or loan trial balance reconciled to the general ledger, loan portfolio file samplings, underwriting policies, information regarding real estate owned, and key lending relationships. Where the CIDI has nontraditional business lines, the information provided should be appropriate to the sale of those elements as franchise components or as part of the IDI franchise. The data and information as a whole should support a sale of the IDI franchise as a whole, while providing optionality for the sale of separable franchise components. The final rule was modified from the proposal to make clear that certain of the listed data elements may not apply in some cases, such as for the sale of a franchise component that is a material asset portfolio. E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 Finally, to effect a timely sale of a failed IDI, the FDIC must have access to and control of data in a VDR. Historically, the FDIC has established a VDR controlled by the FDIC and migrated the information into that VDR. As in the proposal, the final rule requires the full resolution submission to include information with respect to access protocols and requirements for the FDIC to use the VDR to carry out the sale of the IDI franchise or the CIDI’s franchise components. It also must include a description as to how the CIDI could support that process, either through providing sufficient access and controls to the CIDI’s virtual data room to the FDIC as receiver for the failed IDI, or by establishing a process to timely and securely migrate all data to an FDIC-controlled VDR, in a suitable format and file structure. Because many of the CIDIs have a broker-dealer subsidiary or parent company affiliate, the final rule also includes, without change, the proposed provision specifically addressing VDR content related to a broker-dealer. It is not the intent of that provision, however, to exclude or limit information related to other nonbanking activities such as insurance or asset management. Material Asset Portfolios The proposed rule would have required CIDIs to include information about ‘‘asset portfolios,’’ including how the assets within the portfolio are valued and recorded in the CIDI’s records. As proposed, a CIDI would have been required to identify and discuss impediments to the sale of each material asset portfolio and to provide a timeline for each material asset portfolio’s disposition. A commenter noted that the concept of ‘‘material asset portfolios’’ appears to be included in the definition franchise components and therefore, a separate requirement regarding material asset portfolios is redundant and unnecessary. The final rule retains the proposed requirement and exclusively utilizes the defined term ‘‘material asset portfolios.’’ With respect to the definition of franchise components, the final rule utilizes the term ‘‘material asset portfolio’’ instead of ‘‘asset pool’’ for clarity and consistency. While a material asset portfolio may be identified as a franchise component, this paragraph requires identification of material asset portfolios whether or not they meet the definition of a franchise component and are identified as such in the full resolution submission. However, where there is overlap with material asset portfolios that are franchise VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 components, the information can be provided once and cross-referenced, if appropriate. Valuation To Facilitate FDIC’s Assessment of Least-Costly Resolution Method As explained in the preamble to the proposal, the requirement that each group A CIDI must provide valuation analysis and develop the related capabilities would support the FDIC’s analysis in conducting valuations in any actual failure scenario, even where there are no bid prices available to establish value. The proposed rule would have required group A CIDIs to demonstrate the capabilities necessary to produce valuations that support the FDIC’s analysis to determine whether a resolution strategy would be the least costly to the DIF in the event of failure. To demonstrate valuation capabilities, the proposed rule would have required a group A CIDI to describe its valuation process in its resolution plan and include a valuation analysis that includes a range of quantitative estimates of value as an appendix to its resolution plan. The proposed valuation analysis required that a group A CIDI provide a narrative description of how it values its franchise components and the CIDI as a whole. It also required qualitative and quantitative valuation analysis assuming both an all-deposits bridge bank and the transfer of insured deposits only to the bridge bank. In all cases, the proposed rule required that the resolution plan describe the CIDI’s approach to gathering information needed to support its analysis and its ability to produce updated and timely valuation information. The FDIC received several comments to the proposal with respect to the proposed requirements for valuation analysis. Several commenters emphasized the importance of valuation to resolution planning. Three commenters supported the replacement of least-cost analysis with a valuation capabilities requirement, but disagreed with the proposed approach to quantitative analysis. One commenter argued that assumptions regarding depositor and potential acquirer behavior would be ‘‘inherently subjective and likely to add little-to-no value to the FDIC.’’ This commenter also stated that the quantitative analysis is not well adapted to CIDIs that lack experience with mergers and acquisitions or large mergers and acquisitions teams, and would require retention of third parties. The FDIC considered commenters’ concerns regarding the requirement for PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 56633 quantitative analyses. The final rule partially retains the requirement for quantitative analysis, with some modifications. There is significant value in a group A CIDI demonstrating that it has the capability to value its deposit franchise, as well as the individual franchise components. The proposed valuation content requirements are not underpinned by an expectation that the resulting ranges of value will accurately anticipate sale proceeds actually received from a disposition at some undetermined future point. Instead, the utility of CIDIs’ valuation analysis is in understanding the methodologies CIDIs determine to be appropriate for estimating the value of their franchise components and the CIDI as a whole, and the degree to which CIDIs would be able to furnish the information and analysis necessary for the FDIC to conduct its statutorily-required analyses in an actual resolution scenario. The evaluation of valuation analyses under the second prong of the credibility standard reflects a recognition of the inherent necessity for application of judgment in the analyses (e.g., selection of appropriate valuation approaches, assignment of weights to the various approaches). As required by the standard, the CIDI’s judgment should be supported by observable and verifiable capabilities and data, as well as reasonable projections. Thus, the FDIC will not evaluate the analysis on the basis of a specific threshold or metric or the specific choices made regarding valuation approaches and methodology, but rather on the comprehensiveness of the analysis, the supportability of the data and capabilities required to conduct the analysis, the reasonableness of the CIDI’s assumptions and selected approaches, and the group A CIDI’s ability to refresh the analyses in a timely manner. The FDIC does not require or expect valuation analysis to be completed by a third-party expert; rather the analysis should be based upon the group A CIDI’s understanding of the nature of its business and its relationships with its depositors. In response to comments, the final rule eliminates the requirement that valuation estimates reflect the ‘‘net present value of proceeds estimated to be received’’ in a sale of the IDI franchise as a whole or under a sum-ofthe-parts analysis. This change recognizes that, while the required valuation analysis will result in a range of reasonable values, the actual proceeds realized in a given transaction will depend on, among other things, the facts and circumstances surrounding the E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56634 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations actual failure and the time for marketing and executing the transaction. In addition, in response to comments, the final rule modifies the proposed requirements to reflect a shift toward qualitative analysis only for § 360.10(d)(12)(ii)(B), eliminating the quantitative analysis relating to the impact on value in the event that losses are imposed on uninsured depositors in connection with the resolution strategy adopted. The presence of unsecured debt on the balance sheet of the failed IDI serves to protect deposits in resolution, and increase the likelihood that an alldeposits bridge bank will meet the requirements of the least-cost test. However, even with the benefits of longterm debt positioned at the CIDI at the time of its failure, it cannot be assured that an all-deposits bridge bank will meet the requirements of the least-cost test in every case. Thus, the final rule, like the proposal, also requires analysis of the impact on value where only insured deposits are passed to the bridge bank. This analysis will assist the FDIC in understanding the impact on value in an insured-only bridge bank, which will assist in weighing whether that outcome is less costly than other available resolution options. While the proposal required quantitative as well as qualitative analysis in this area, in response to comments, the final rule requires a group A CIDI to provide only qualitative analysis of the impact on franchise value that may result from not transferring uninsured deposits to the bridge depository institution. The quantitative analysis provided with respect to an all-deposits bridge bank, together with robust qualitative analysis with respect to an insured-only bridge bank, will support the FDIC’s least-cost determination under both scenarios. This qualitative analysis must include a description of options to mitigate that impact, such as an advance dividend payment to depositors, reflecting different levels of loss. As clarified in the final rule, such a qualitative analysis should reflect reasonable assumptions of customer behavior based upon the group A CIDI’s overall depositor profile and the provision of overall lending and other services to such depositors. For example, insight into the holistic client relationships, including the lending, fee-based, and deposit-based businesses would provide insight into the value impact. Off-Balance Sheet Exposures The final rule incorporates the proposed requirement that a full resolution submission include a description of any material off-balance- VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 sheet exposures, including unfunded commitments, guarantees, and contractual obligations, and that it map those exposures to franchise components, core business lines, and material asset portfolios. Qualified Financial Contracts The final rule includes the proposed requirements for information on qualified financial contracts (QFCs), which are intended to support and enhance information that may be provided under the FDIC’s QFC recordkeeping rule, and would be useful in the event that the CIDI were not subject to the requirements of the QFC recordkeeping rule at the time of its failure.17 The focus of the information required is on the relationship of QFCs to the CIDI’s core business lines and franchise components, and how these transactions are integrated with the CIDI’s business activities and with other services provided to customers. Consistent with the proposal, the final rule also requires CIDIs to provide information about their booking models for risk, and how the CIDI uses QFCs to manage hedging or liquidity needs. This information will help the FDIC to make decisions with respect to transferring QFCs to a bridge bank, and to better understand the impact of any decision not to transfer certain QFCs. The final rule also includes certain revisions to the language of this paragraph, which are intended as clarifying changes. Unconsolidated Balance Sheet; Material Entity and Regulated Subsidiary Financial Statements The final rule adopts the proposed requirement that a CIDI must provide an unconsolidated balance sheet and consolidating schedules for all material entities and regulated subsidiaries that are subject to consolidation with the CIDI. The final rule also adopts the provision permitting CIDIs to aggregate on the consolidating schedule amounts attributed to entities that are not material entities or regulated subsidiaries. The final rule includes clarifying changes intended to more clearly state that all of the requirements apply to regulated subsidiaries as well as material entities. Consistent with the proposal, the final rule requires audited financial statements where they are available. Payment, Clearing, and Settlement Services The final rule adopts, with clarifying changes, the proposed requirement that a full resolution submission provide PO 00000 17 See generally 12 CFR part 371. Frm 00016 Fmt 4701 Sfmt 4700 information regarding each payment, clearing, and settlement (PCS) provider with which it has a direct relationship. The text was revised to make clear that payment, clearing, and settlement systems include services provided by financial market utilities and agent banks, and makes ‘‘PCS service provider’’ a new defined term. Consistent with the proposal, information is required for PCS service providers that are critical services or critical services support. Also consistent with the proposal, the final rule requires CIDIs to map PCS service providers to legal entities, core business lines, and franchise components, and to describe the services provided by these systems, including the value and volume of activities on a per-provider basis. The final rule also adopts the proposed requirement for a full resolution submission to describe PCS services provided by a CIDI and that are material in terms of revenue to or value of any franchise component or core business line of the CIDI. Capital Structure; Funding Sources The final rule adopts, with clarifying changes, the proposed requirements with respect to capital structure and funding sources. Two comments were supportive of the proposed approach. The final rule requires that a full resolution submission describe the current processes used to identify the funding, liquidity, and capital needs of and resources available to each CIDI subsidiary or foreign branch that is a material entity, and to describe the CIDI’s capabilities to project and report its near-term funding and liquidity needs. It requires that the full resolution submission identify the composition of liabilities of the CIDI, as a clarification of the proposed requirement to describe them, and specifies the requisite information to be provided with respect to those liabilities. The final rule also requires a CIDI to identify material funding relationships and material inter-affiliate exposures between the CIDI and its subsidiaries or foreign branches that are material entities, instead of the proposed requirement to describe them. These changes are intended to clarify that the full resolution submission is expected to include quantitative information for these areas, and are complementary to the expectation that the interim supplement will not include any additional narrative apart from the description of material changes as described in § 360.10(e)(2)(i) and (ii). E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations Parent and Parent Company Affiliate Funding, Transactions, Accounts, Exposures, and Concentrations The final rule adopts, with clarifying changes, the proposed requirements with respect to parent and parent company affiliate funding, transactions, accounts, exposures, and concentrations. The final rule requires that a CIDI’s full resolution submission must identify material affiliate funding relationships and material inter-affiliate exposures that the CIDI or its subsidiaries have with the parent company or any parent company affiliate, instead of the proposed requirement to describe them. Similar to above, this clarifying language is intended to make clear that the full resolution submission is expected to include quantitative information and is complementary to the expectation that the interim supplement will not include any additional narrative apart from the description of material changes as described in § 360.10(e)(2)(i) and (ii). The full resolution submission must identify the nature and extent to which the parent company or any parent company affiliate serves as a source of funding to the CIDI and CIDI subsidiaries. The final rule requires that the submission include the terms of any contractual arrangements, including any capital maintenance agreements, the location of related assets, funds or deposits, and the mechanisms for such inter-affiliate transfers, revised to include funds transferred from parent company affiliates. lotter on DSK11XQN23PROD with RULES4 Economic Effects of Resolution The proposed rule would have required CIDIs to identify their activities that are material to a particular geographic area or region of the United States, a particular business sector or product line, or other financial institutions. It also would have required the full resolution submission to describe the potential disruptive impact of the termination of such activities on the geographic area, region, business sector, industry, or product line, or to the U.S. financial industry. The FDIC received several comments to the proposed approach with respect to the requirement that the full resolution submission describe disruptive impacts in resolution. Commenters objected to the proposed approach, arguing that it would require ‘‘speculative’’ assessment of impacts on third parties, that the information may be better available to supervisors with a wider vantage point on impacts, and that the proposal is too broad and vague and should be more clearly defined. The VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 FDIC agrees that the assessment of the potential disruptive impacts on third parties may be difficult and possibly speculative, and would have limited value. Accordingly, the final rule eliminates that requirement and substitutes a narrower requirement: that the full resolution submission discuss whether the identified services or functions are readily substitutable by other providers and other mitigants to the potential impact of the termination of those activities in the event of failure of the CIDI. The CIDIs are the nation’s largest banks, and the FDIC will seek to resolve a CIDI in a way that minimizes the disruptive impact of the resolution to the extent possible. It is therefore important that the FDIC is aware of the activities of the CIDI that are most likely to have significant disruptive effects if terminated in resolution, such as where a CIDI provides a unique function or is a dominant provider of a particular service. While the CIDI may not be able to fully measure or assess those impacts, a CIDI will be able to identify areas where it has a large market share of a particular business segment or geographic region, or where it provides significant services to other financial institutions, such as agent or correspondent banking services. A description of the impact of cessation of these services or functions, and information regarding whether there are other providers with the capacity to readily substitute for the activities of the CIDI or other mitigants to the impact of termination of these services are important to understanding the potential impacts and mitigating actions that may be useful in the FDIC’s resolution planning. Non-Deposit Claims The final rule adopts without change the proposed requirement that a CIDI’s full resolution submission identify and describe its capabilities to identify the non-depositor unsecured creditors of the CIDI and its subsidiaries that are material entities. Consistent with the proposal, the final rule also requires a description of how the CIDI would identify all non-depositor unsecured liabilities, including contingent liabilities like guarantees and letters of credit, as well as the location of the CIDI’s related records and its recordkeeping practices. While related to the requirements in § 360.10(d)(17) addressing capital structure and funding sources, the requirements in this paragraph are intended to provide information specifically helpful to the claims process, and would be in PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 56635 addition to the description of liabilities provided in § 360.10(d)(17). Cross-Border Elements The final rule adopts with certain changes the proposed requirements with respect to cross-border elements in a full resolution submission. The FDIC received one comment on this proposed element, which supported the inclusion of the element as proposed. Consistent with the proposal, the final rule requires a full resolution submission to describe components of cross-border activities of the parent company or parent company affiliates that contribute to value, revenues, or operations of the CIDI. Where the CIDI has a significant interest (e.g., a controlling interest or a significant economic interest) in a foreign joint venture that contributes to revenue or operations of the CIDI, that information should be included. Entities with no meaningful function or contribution to the CIDI’s operations, such as single purpose real estate holding companies, may be excluded. Consistent with the proposal, the final rule also requires that a full resolution submission identify regulatory or other impediments to divestiture, transfer, or continuation of foreign branches, subsidiaries, or offices while the CIDI is in resolution, including retention or termination of personnel and adding in the final rule, transfer or continuation of licenses or authorizations. Further, the final rule adds an express requirement that the full resolution submission must identify all authorities with regulatory or supervisory authority over crossborder operations. This information will assist the FDIC in coordinating with the requisite authorities in resolution. Management Information Systems; Software Licenses; Intellectual Property The final rule adopts without substantive change the proposed requirement that each CIDI’s full resolution submission identify and describe each key management information system and application, and identify any core business line that uses it, and the key personnel needed to support and operate it. In the final rule, the term key personnel is used here instead of ‘‘personnel by title and legal entity employer.’’ Each full resolution submission also is required to identify each system’s and application’s use and function, which core business lines use it, and its physical location, if any, as well as any related third-party contracts or service-level agreements, any related software or systems licenses, and any other related intellectual property. Consistent with the proposal, the final rule also requires a full resolution E:\FR\FM\09JYR4.SGM 09JYR4 56636 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 submission to specifically identify key systems or applications that the CIDI or its subsidiary does not own or license directly from the provider and to discuss how to maintain access to the system or application when the CIDI is in resolution. Like the proposal, the final rule requires a description of the capabilities of the CIDI’s processes and systems to collect, maintain, and produce the information and other data underlying the full resolution submission; identification of all relevant systems and applications; and a description of how the information is managed and maintained. For example, the full resolution submission must describe whether the information is centralized, or organized by region or business line; whether it is automated or manual; and whether the applicable system or application is integrated with other of the CIDI’s systems or applications. The final rule also provides for the CIDI to describe any deficiencies, gaps, or weaknesses in these capabilities and the actions the CIDI intends to take to address promptly any such deficiencies, gaps, or weaknesses, and the time frame for implementing these actions. Digital Services and Electronic Platforms The proposal included a new content element for inclusion in each CIDI’s full resolution submission regarding digital services provided by a CIDI to its customers and the electronic platforms that support these systems. The FDIC received one comment, asserting that the requirement regarding digital services and electronic platforms is vague and potentially duplicative of other requirements, such as critical services, payment, clearing, and settlement, and management information systems. The final rule retains the requirement as proposed. While some of the requirements may overlap with other requirements in the rule, such as whether the services and platforms are provided by a CIDI subsidiary, a parent company affiliate, or a third-party and information on the related intellectual property rights, this paragraph is intended to capture information specific to digital services and electronic platforms. If the information is provided elsewhere, a cross-reference will suffice. The final rule uses the word ‘‘customers’’ instead of ‘‘depositors’’ in the first sentence of the paragraph, to clarify that retail and business customers may include depositors or other customers or clients of the CIDI. As noted in the preamble to the proposal, digital services provided to VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 customers and their electronic platforms is a new and evolving area of banking. The language in the final rule is intended to be flexible enough to adapt to the changing environment, while focusing on the significance of these services to CIDI operations or customer relationships and their relationship to franchise value and depositor behavior. The information required will be helpful to the FDIC in understanding how such services are significant to customer loyalty and franchise value where they are unique, may rely on proprietary intellectual property with low substitutability, may have an impact on stickiness of retail or commercial deposits, or are important to a customer base that relies upon a certain platform or service. Communications Playbook The final rule adopts the proposed requirement that a full resolution submission must include a communications playbook describing the CIDI’s current communications capabilities and how those capabilities could be used from the point of the CIDI’s failure through its resolution. One commenter supported this requirement as proposed, while one commenter suggested elimination of this requirement as unnecessary. The final rule retains the requirement for a communications playbook and adds an express requirement that the playbook include the identification of key personnel responsible for the CIDI’s crisis communications across key stakeholder categories and communications channels and the organizational structure for relevant communications activities. It also clarifies that the stakeholders should include any foreign regulatory authorities as well as domestic regulatory authorities. In a resolution, it is important for the FDIC to be able to quickly identify the right points of contact to assure timely, clear, and coordinated communications to all stakeholders. Corporate Governance The final rule adopts without change the proposed requirements for the governance of the CIDI’s resolution planning processes and preparation and approval of full resolution submissions. CIDI’s Assessment of the Full Resolution Submission The final rule adopts without change the proposal that a full resolution submission must include a description of any contingency planning or similar exercise that the CIDI has conducted since its most recently filed full PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 resolution submission that assesses the viability of the identified strategy (if required) or improves any capabilities described in the full resolution submission. As noted in the preamble to the proposal, the requirement is limited to requiring CIDIs to describe contingency planning or exercises they have done or plan to do; it does not require CIDIs to conduct these types of activities. Any Other Material Factor The final rule requires a CIDI to identify and discuss any other material factor that may impede its resolution. This is unchanged from the proposal. E. Interim Supplement Under the proposal, each CIDI would be required to file interim supplements that address all or parts of certain content elements included in the CIDI’s full resolution submission. The FDIC received comments to the proposed interim supplement requirements and made changes to the final rule in response to those comments. Several commenters argued for narrowing the content required in the interim supplement to focus on data and information that has materially changed since the most recent submission or has a material impact on the full resolution submission. One commenter suggested that any narrative in the interim supplement be limited to an explanation of material changes. Commenters expressed concern that the interim supplement, as proposed, would be burdensome for CIDIs. One commenter suggested that the interim supplement should be based on prior year-end data, rather than data as of the end of the most recent fiscal quarter. Two comment letters recommended that all or most group A CIDIs should move to a three-year cycle for full resolution submissions and interim supplements should be filed either 18 months after that submission, or in each year that a full resolution submission is not made. One of these comment letters recommended that CIDI affiliates of U.S. GSIBs, which are biennial filers under the DFA rule, make full resolution submissions every two years, alternating with DFA resolution plan submissions, and interim supplements would therefore be unnecessary and should not be required. The FDIC considered these comments and has concluded that the content requirements for the interim supplement are appropriate and that the information required will aid the FDIC with planning for and carrying out resolutions. As a result, the final rule E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations retains the proposal’s content requirements for the interim supplement. With the final rule’s shift to a three-year cycle for most CIDIs, the expected utility of the interim supplement is further increased. The FDIC believes the interim submission requirement strikes the right balance between providing the FDIC with valuable updated information to assist with resolution planning while limiting burden on the CIDIs in providing the updated information. The FDIC has focused the interim supplement content requirements on information that is most essential to its resolution planning, that can be readily produced, and that is relatively likely to change year over year. Under the final rule, the FDIC retains the proposed discretion to add or eliminate elements from the interim supplement to ensure that it remains useful, includes the most important information, and can evolve based on lessons learned. In response to comments, the final rule incorporates a requirement to describe all material changes resulting from an extraordinary event, and to describe each material changes applicable to interim supplement content since the CIDI’s most recent full resolution submission or interim supplement (or to affirm that no such material change has occurred). The FDIC does not expect any additional narrative will need to be included in the interim supplement. Also in response to comments, the final rule provides that data in the interim supplement should be as of the most recent fiscal year-end for which the CIDI has financial statements or, if financial information from more recent financial statements would more accurately reflect the CIDI’s operations as of the date of the interim supplement, financial information as of that more recent date. This is reflected in § 360.10(g)(1), which has been revised to incorporate a reference to the interim supplement in additional to full resolution submissions. With this change, the proposal’s § 360.10(e)(2) has been eliminated as it is no longer necessary. Regarding the frequency of interim supplement filings, the final rule makes certain changes for clarity and consistency, and introduces an exception. The final rule retains the annual cadence of interim supplements, and requires an interim supplement on or before the anniversary of the prior full resolution submission or interim supplement, as the case may be, unless the FDIC provides written notice of a different date. Consistent with the proposal, no interim supplement is VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 required in the calendar year in which a CIDI files a full resolution submission. In response to comments, the final rule provides that biennial filers, which are IDI affiliates of U.S. GSIBs, are not required to submit an interim supplement in the year in which they file a DFA resolution plan. This exception applies only to the biennial filers, given their higher frequency of submissions under this rule, and expected annual submission of resolution plans under this rule and by their parent companies under the DFA rule. In addition, particularly for CIDIs identified as material entities and divesture options in the DFA resolution plan, there is sufficient overlap in content to meet the needs of the interim supplement. The final rule makes clear that all CIDIs will receive a written notice specifying the date on which their initial full resolution submission or interim supplement is due. CIDIs that are not filing a full resolution submissions as their first submission following the effective date of the final rule are required to provide interim supplements in the years prior to the date their first full resolution submission is due. F. Credibility; Review of Full Resolution Submissions; Engagement; Capabilities Testing Credibility Criteria The proposal included a credibility standard consisting of two prongs for assessing the credibility of a full resolution submission. The first prong applies only to resolution plans submitted by group A CIDIs. Under this prong, a resolution plan could be found not credible if the identified strategy did not provide timely access to insured deposits, maximize value from the sale or disposition of assets, minimize any losses realized by creditors of the CIDI in resolution, and address potential risks of adverse effects on U.S. economic conditions or financial stability. The second prong applies to full resolution submissions by all CIDIs. Under the second prong, a full resolution submission could be found not credible if the information and analysis in the full resolution submission are not supported with observable and verifiable capabilities and data and reasonable projections, or the CIDI fails to comply in all material respects with the requirements of the rule. Because the interim supplement is simply an update of a subset of information required in a full resolution submission, it will not be separately PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 56637 assessed against the credibility standard. The FDIC considered all comments regarding the credibility standard, and the final rule retains the credibility standard as proposed. One commenter recommended that all full resolution submissions be subject to both credibility assessment prongs as part of a general recommendation to eliminate the distinction between group A CIDIs and group B CIDIs. As discussed above, the FDIC believes that the distinction between group A CIDIs and group B CIDIs is appropriate, and therefore the prong one standard would not be applicable to the informational filings. Another commenter suggested that the requirement that the identified strategy be effective in minimizing losses to creditors was in contradiction with the recent rulemaking proposal by the FDIC and other agencies to require certain large insured depository institutions to have outstanding a specified amount of eligible long-term debt.18 The FDIC believes that the goals of the proposed rulemaking and this final rule are strongly aligned. The longterm debt rule, if adopted, will help reduce losses to creditors and will support an orderly and efficient resolution of an IDI. The FDIC received three comments recommending that the credibility determination be eliminated, or that there should not be any enforcement action based on the credibility standard. These commenters argued that the standard’s first prong would require speculation on conditions at the time of failure and would therefore be subjective and potentially inconsistently applied over time. The FDIC received one comment advocating for changes to the second prong of the credibility standard that would remove the qualifiers ‘‘verifiable’’ and ‘‘observable’’ for capabilities requirements. It is an important goal of the final rule to establish clear expectations with respect to the form and substance of resolution submissions, and a clear standard against which they are assessed for compliance with the rule. The FDIC has experience in evaluating resolution plans and generally expects to conduct horizontal reviews across full resolution submissions of CIDIs that have similar characteristics to gain a broader perspective as well as to assure consistent assessment of the full resolution submissions. 18 See Long-Term Debt Requirements for Large Bank Holding Companies, Certain Intermediate Holding Companies of Foreign Banking Organizations, and Large Insured Depository Institutions, 88 FR 64524 (Sept. 19, 2023). E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56638 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations As described in the preamble to the proposal, the new standard expressly incorporates concepts from the 2012 rule, including the reference to observable and verifiable capabilities and data and reasonable projections. These elements of the credibility standard, which are incorporated into the second prong, have proved useful in past plan reviews and feedback. With respect to prong one of the standard, the FDIC considered comments suggesting that this standard may be subjective or imprecise. The FDIC appreciates the concern that the standard necessarily requires the exercise of judgment in understanding whether value is maximized or losses to creditors are minimized, for example, in a particular strategy under the specified scenario. The FDIC agrees that there is a necessary element of judgment in determining whether an identified strategy meets the goals of the rule as expressed in the first prong of the credibility standard. The application of judgment in the development of the identified strategy is appropriate given the diversity among the group A CIDIs. A well-reasoned and well-supported identified strategy prepared by a group A CIDI will provide the FDIC useful information in assessing its options when confronted with an actual failure scenario. One comment pointed to potential challenges in the element of the first prong that requires that the resolution plan address the potential risk of adverse effects on U.S. economic conditions or financial stability. Some CIDIs have critical operations that are important to financial stability identified in their affiliates’ DFA resolution plans, may be highly interconnected with other financial institutions, may have dominant market share in certain geographic regions or market segments, or their resolution could be disruptive to the U.S. economy or financial stability in other ways. The requirement that the resolution plan address the potential risk of adverse effects on U.S. economic conditions or financial stability is intended to require that the identified strategy take into account the potential for risks to U.S. economic conditions or financial stability arising from the execution of the strategy. Those risks should be described in the resolution plan, and the identified strategy should include specified actions that would mitigate those risks. It is a critical resolution planning objective that the CIDI can be resolved without the need for extraordinary support from the DIF and without reliance on the systemic risk VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 exception to the statutory least-cost requirement under the FDI Act. As discussed in the proposal, the FDIC has considered the particular challenges with respect to the requirement that the identified strategy address the potential for risks to U.S. economic conditions or financial stability for the CIDIs that are part of the largest and most systemic and interconnected U.S. banking organizations, specifically the group A CIDIs that are subsidiaries of U.S. GSIBs. This category of firms comprises the U.S. banking organizations that pose the greatest risk to U.S. financial stability. The FDIC is aware of progress made by the U.S. GSIBs in the development of DFA resolution plans, including their adoption of an SPOE strategy for the resolution of the firm pursuant to which any subsidiary U.S. IDI that is a material entity remains open and operating. Each of these firms has also made progress in increasing the range of scenarios in which that strategy may be actionable and effective through structural and operational changes. Moreover, certain enhanced prudential standards that support resolvability apply only to the U.S. GSIBs. Despite this progress, the availability or success of an SPOE strategy cannot be ensured in all circumstances, and the possibility of a resolution of a CIDI that is a subsidiary of a U.S. GSIB cannot be eliminated. The FDIC believes that it is appropriate to require group A CIDIs within these banking organizations to develop comprehensive resolution plans that include an identified strategy that meets the requirements of the first prong of the credibility standard to support the FDIC’s resolution readiness in the event that such a CIDI should fail. While these CIDIs may have a particular challenge in addressing the risks their identified strategy may present to the U.S. economy and financial stability, where the DFA resolution plan of the CIDI’s parent company contains relevant analysis and information with respect to the risk of potential adverse effects on U.S. financial stability arising from the failure of a subsidiary group A CIDI, the inclusion of that information by crossreference is permitted under (c)(6). In addition, where the strategy for the rapid and orderly resolution of a U.S. GSIB in its DFA resolution plan does not include the resolution of the CIDI under the FDI Act, that strategy may reasonably be identified as a mitigant to the systemic risk, if any, posed by the failure of the CIDI under the FDI Act. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 Full Resolution Submission Review and Credibility Determination The proposal described a process for full resolution submission review and credibility assessment. Like the proposal, the final rule makes no change to the proposed rule with respect to coordination with supervisors related to the review process. The FDIC will review a full resolution submission in consultation with the appropriate Federal banking agency for the CIDI and for its parent company. If after consultation with any such appropriate Federal banking agency (or agencies), the FDIC determines that a CIDI’s full resolution submission is not credible, the FDIC will notify the CIDI in writing of such determination. This written notice will include a description of the material weaknesses in the full resolution submission that resulted in the determination. With respect to the full resolution submission review and the credibility determination process, two commenters emphasized the importance of the FDIC providing timely, clear, and consistent feedback to CIDIs, with one noting that feedback should be provided at least 12 months before the next submission is due. This comment also suggested that the FDIC should institute an intermediate level of feedback between informal feedback and a formal weakness determination to precede a non-credibility finding. The FDIC agrees that timely and clear feedback is an important part of the review process. The extension of the submission cycle to three years for most CIDIs will provide additional assurance of sufficient time to incorporate feedback into the next full resolution submission. The FDIC anticipates that full resolution submissions will improve through an interactive and iterative process, and the FDIC recognizes that there should be multiple communications between the FDIC and the CIDIs to improve the full resolution submissions. While the final rule, like the proposal, does not establish a fixed timing requirement for the delivery of feedback to CIDIs, the FDIC will review full resolution submissions promptly and endeavor to give feedback identifying material weaknesses or significant findings within one year of the full resolution submission date. Any additional observations or other feedback, for instance following engagement, that would impact the next full resolution submission would be given at least 270 days before that submission is due. The FDIC received one comment recommending that any feedback on E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations resolution plans should be treated as confidential supervisory information, except to facilitate coordination between home and host country resolution planning, where applicable. The FDIC received another comment recommending that the FDIC should commit to publishing all future feedback letters, including any that describe weaknesses resulting in a noncredible determination, with confidential supervisory information redacted. In the past, the FDIC has not made public the feedback letters on resolution submissions under the 2012 rule, as these letters may have relied on or disclosed confidential supervisory information. The FDIC has also considered that redacted letters may be incomplete and misunderstood and has treated the letters in a confidential manner, similar to supervisory letters. Any decision with respect to disclosure of feedback letters in the future will consider the confidential nature of any information, as well as the public interest. The FDIC considered the comment recommending an intermediate level of feedback between informal feedback and a finding of a material weakness. The FDIC also considered the approach taken in reviews and feedback for DFA resolution plans, which includes an intermediate level of feedback. The FDIC believes that there is utility in providing feedback that requires correction with an appropriate level of urgency, but that does not trigger the immediate corrective actions spelled out in paragraph (f)(3). Consequently, the final rule establishes the concepts of material weaknesses and significant findings. A material weakness is an aspect of a CIDI’s full resolution submission that the FDIC determines individually or in conjunction with other aspects fails to meet the credibility criteria described in § 360.10(f)(1). The FDIC must identify one or more material weaknesses in determining a CIDI’s full resolution submission is not credible. The final rule requires that within 90 days of receiving a notice by the FDIC pursuant to § 360.10(f)(2) or such shorter or longer period as the FDIC may determine, the CIDI must resubmit a revised full resolution submission, or such other information or material as specified by the FDIC, that addresses any material weaknesses identified by the FDIC and discusses in detail the revisions made to address such material weaknesses. This is consistent with the proposal, with a clarification that in some cases, a full resolution submission may not be required and the FDIC may VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 identify other information or material responsive to the material weakness. Under the final rule, a significant finding is a weakness or gap that raises questions about the credibility of a CIDI’s full resolution submission but does not rise to the level of a material weakness. If a significant finding is not satisfactorily explained or addressed before or in the CIDI’s next full resolution submission, it may be found to be a material weakness in the CIDI’s next full resolution submission. To clarify how the CIDI intends to address the significant findings by the next full resolution submission, the FDIC may require a time-bound project plan from the CIDI that outlines the actions the CIDI will be taking in the interim period to assure that the significant finding is addressed in a timely manner. In some cases, project plans may also be used as a tool to clarify how the CIDI intends to address material weaknesses. The final rule makes clear that the FDIC may identify an aspect of a CIDI’s full resolution submission as a material weakness even if such aspect was not identified as a significant finding in an earlier full resolution submission. The FDIC must notify the CIDI in writing of any significant findings that are identified in the full resolution submission. The difference between a material weakness and a significant finding is one of degree of severity. A material weakness is more likely to be a weakness in the full resolution submission that would significantly impact the FDIC’s ability to undertake an efficient and effective resolution of the CIDI or would increase the risk of a disorderly and value-destructive resolution if not promptly corrected. A significant finding would more likely be feedback that goes to the completeness, sufficiency, and thoroughness of information provided or the adequacy of a capability demonstrated, that could affect the resolution of the CIDI and should be addressed, but is not of the same level of impact and urgency as a material weakness. Other observations that are not material weaknesses or significant findings may be included in the feedback letter or may be provided in other communications throughout the full resolution submission review, capabilities testing, and engagement cycle. Those observations are also intended to provide useful feedback to the CIDIs about areas of focus for further development of their full resolution submissions. The FDIC received two comments that suggested the FDIC should provide general guidance to CIDIs, with one PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 56639 noting that such guidance could cover common issues and best practices following each review cycle. Other commenters suggested additional guidance or specificity with respect to identification of expected capabilities. The final rule is intended to be comprehensive and supersedes the 2012 rule and all prior guidance. In the event the FDIC determines, based on review of full resolution submissions and engagement with the CIDIs, that additional general guidance may be helpful in addition to firm-specific feedback, the FDIC may consider providing such guidance at that time. Another comment suggested that the FDIC provide a list of identified strategies that are presumptively credible. That approach would be inconsistent with the goal of the rule to obtain the insight and analysis of each group A CIDI as to the approach to resolution that best fits with their organization and business structure. The FDIC expects to give appropriate feedback, if needed, on a CIDI’s identified strategy, consistent with the interactive and iterative process described above to improve full resolution submissions and the FDIC’s resolution readiness. Engagement and Capabilities Testing The final rule retains the proposed approach to engagement and capabilities testing, without substantive change, but with some modifications to the organization of the content intended to reflect that engagement and capabilities testing are complementary parts of the review and evaluation process. The changes also clarify the process and identify the communications relative to both engagement and capabilities testing. The FDIC received several comments with respect to engagement and capabilities testing. These comments generally focused on the process, the timing of notices, the scope of engagement and capabilities testing, and the approach to enforcement, including to ensure the FDIC’s approach to resolution planning is sufficiently collaborative. One of these comments also noted that CIDIs—especially, group B CIDIs—will need time to build, improve, and test capabilities prior to undergoing capabilities testing with the FDIC, and suggested capabilities testing should not occur during a CIDI’s initial submission cycle under the final rule. The final rule retains the proposed requirements with respect to engagement between the FDIC and a CIDI, including that each CIDI must provide the FDIC such information and access to personnel of the CIDI that have E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56640 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations sufficient expertise and responsibility to address the informational and data requirements of the engagement. The final rule makes clear that the FDIC will provide timely notification of the scope of any engagement. Because the appropriate advance notice of an engagement will depend on the parameters of the engagement, the final rule does not specify a time period for such a notification. In the past, the FDIC has provided four to eight weeks’ advance notice of any engagement and has taken into account scheduling considerations for the CIDIs, such as other scheduled examinations and supervisory requirements, and expects to continue that practice. The final rule also makes clear that the FDIC will communicate with the CIDI after engagement. The form and content of that communication are not specified in the rule; in general, the FDIC expects to communicate observations from the engagement. In some cases, engagement will inform the review of the full resolution submission itself and engagement findings may support or address findings from the review process and be incorporated in the findings of weaknesses or noncredibility described above. Engagement may take place at any time to provide additional insights to the FDIC and to inform areas of interest for future full resolution submissions. It may also be the case that engagement takes place after the FDIC has provided the CIDI with written notice of its determination with respect to the credibility assessment described above. In some cases, for instance, where an IDI recently has become a CIDI or changed from a group A CIDI to a group B CIDI, engagement may take place before the initial full resolution submission, to provide information on particular resolution matters or areas of future submission content. The FDIC expects that engagement will be useful to the CIDIs by providing a better understanding of the areas of particular interest to the FDIC with respect to its resolution responsibilities, and will help the FDIC to better understand the information in the full resolution submissions and the resolution challenges for a specific CIDI as well as mitigants to those challenges. The final rule also adopts without change the proposed requirement that each CIDI may be required to demonstrate through capabilities testing that it can in fact perform the capabilities described in a full resolution submission, necessary for an identified strategy or required under the rule, and that these capabilities are adaptable to a range of scenarios. The VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 FDIC expects capabilities testing to be an important part of its full resolution submission review process and will begin capabilities testing in the first review cycle. While in some cases time may be necessary to develop capabilities, early assessment is an important first step in that process. As with engagement, the final rule makes clear that the FDIC will provide timely notification of the scope of any capabilities testing. As with engagement, the final rule does not specify a time period for such a notification; in some cases, short notice of the capabilities test may an intended feature of the exercise. However, the FDIC will give notice that is appropriate to the nature of the capabilities testing, and, as with engagement, will take into account scheduling considerations for the CIDIs as noted above. As with engagement, after completion of the capabilities test the FDIC may communicate observations, or the information from the capabilities test may contribute to a letter with findings. Generally, the FDIC anticipates that capabilities testing will be conducted concurrently with the full resolution submission review process and will be conducted across a cohort of CIDIs. Two commenters indicated the FDIC should provide CIDIs with a comprehensive list of capabilities it expects a CIDI to maintain and a description of minimum standards expected for each capability. While the proposed rule was not prescriptive with respect to capabilities, it contained the express requirement that a CIDI’s capabilities are sufficient to support key elements, namely, capabilities necessary to ensure continuity of critical services in resolution, the marketability of franchise components, and, with respect to group A CIDIs, the production of valuations needed in assessing the leastcost test. In addition, an identified strategy in a resolution plan for a group A CIDI must be supported with observable and verifiable capabilities, among the other requirements of the second prong of the credibility standard. The preamble to the proposal also provided additional context with respect to capability expectations for some or all CIDIs that can reasonably be inferred from the content requirements of the full resolution submission as described in the proposal. For example, a requirement to map information clearly implies expectation of a mapping capability; and requirements to identify key depositors, critical services support, or key personnel require the capabilities to support that identification. Examples of the capabilities that a CIDI could be PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 required to demonstrate could include identification of key employees and critical services, as well as capabilities to meet requirements with respect to mapping, such as mapping critical services to material entities. The FDIC might also test capabilities that are necessary to key elements of the full resolution submission content, such as continuity of operations, or marketing of a franchise component or the IDI franchise. An example of such a capabilities test might be the establishment of a virtual data room for one or more franchise components or for the IDI franchise as a whole. The nature of this testing would be tailored to the requirements applicable to each CIDI. For example, while a group A CIDI may be asked to demonstrate its ability to execute capabilities necessary to its identified strategy, or demonstrate necessary capabilities for valuation, the focus for group B CIDIs would be more likely on informational requirements, such as the ability to produce informational items and referenced supporting documents within a specified timeframe. The final rule retains the provisions of the proposal with respect to capabilities with one change, addressed in the discussion of franchise components above. While the FDIC generally expects that engagement or capabilities testing with a particular CIDI would occur no more than once during the three-year or twoyear submission cycle, as applicable, the FDIC also believes that it is important to preserve the flexibility to undertake engagement and capabilities testing with a CIDI as frequently as needed and whenever prudent, based on the circumstances of the particular CIDI. In some instances, no engagement or capabilities testing may be necessary during a submission cycle, while in other cases, such as after changes at the CIDI or as the result of varying economic conditions, more frequent engagement and capabilities testing may be warranted. Because informational filings by group B CIDIs do not include the development of an identified strategy and other elements of a resolution plan, the FDIC expects the engagement and capabilities testing with group B CIDIs will be a key component of its resolution planning for such firms and expects to conduct engagement and capabilities testing with most group B CIDIs in each cycle. In addition to engagement and capabilities testing, the FDIC could also have other interactions with CIDIs, such as questions during the full resolution submission review process or E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations conversations regarding changes to resolvability or updates to information. Finally, the final rule eliminates the specific reference to enforcement of the engagement and capabilities testing requirements that was included in this section as proposed. The FDIC received several comments expressing concern about implications of the specific reference to enforcement with respect to engagement and capabilities testing as proposed, and suggesting that further process is needed to challenge the specific enforcement powers relating to capabilities testing. The inclusion of enforcement language in this paragraph may have given the impression that engagement and capabilities testing might lead to specific enforcement actions that are separate from enforcement of compliance with the rule overall and from the application of the credibility standard to full resolution submissions. The FDIC agrees with commenters that the resolution planning process benefits from ongoing communication between the FDIC and CIDIs, and an interactive and iterative process to improve full resolution submissions and the FDIC’s resolution readiness. The engagement and capabilities testing requirements are important components of the overall requirements of the rule to meet the goal of ensuring resolution readiness based on credible full resolution submissions, information, and analysis. Consequently, the FDIC has eliminated the specific reference to enforcement when addressing engagement and capabilities testing and will instead rely on the overall enforcement provision in § 360.10(j) for all requirements of the rule. date of the submission, financial information as of that more recent date. As addressed in the discussion of interim supplements above, the final rule has been revised to make this provision applicable to interim supplements as well as full resolution submissions. G. No Limiting Effect on FDIC The final rule retains the proposed provision that no full resolution submission provided pursuant to this section will be binding on the FDIC as supervisor, deposit insurer, or receiver for a CIDI, or otherwise require the FDIC to act in conformance with such full resolution submission. The final rule has been revised to make this provision applicable to interim supplements as well as full resolution submissions. H. Form of Full Resolution Submissions; Confidential Treatment of Full Resolution Submissions and Interim Supplements Financial Information The final rule retains the proposed provision that requires a CIDI’s full resolution submission use, to the greatest extent possible, financial information as of the most recent fiscal year-end for which the CIDI has financial statements or, if financial information from more recent financial statements would more accurately reflect the CIDI’s operations as of the VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 Indexing of Information and Analysis to Full Resolution Submission and Interim Supplement Content Requirements The final rule adopts the proposed requirement that a CIDI’s full resolution submission and interim supplement include an index of each content requirement required to be included in that full resolution submission or interim supplement to every instance of its location in the full resolution submission or interim supplement. Combined Full Resolution Submission or Interim Supplements by Affiliated CIDIs The final rule adopts without change the proposed provision to allow CIDIs that are affiliates to submit a single, combined full resolution submission or interim supplement, so long as all affiliated CIDIs submitting the combined submission or supplement are within the same CIDI group, whether group A or group B. The combined full resolution submission or interim supplement must satisfy the content requirements for each CIDI’s separate full resolution submission or interim supplement, as applicable, and the CIDIs must ensure that the portions of a combined full resolution submission or interim supplement for each CIDI can be readily identified. The final rule requires that each CIDI divide its full resolution submission into a public section and a confidential section and describes the required content of a public section. This section also provides the confidentiality provisions of the proposed rule. One commenter recommended that the FDIC generally increase the amount of information disclosed in the public portion of resolution submissions. The FDIC agrees that the public portions should be robust and should usefully address all of the required elements. The FDIC believes that the proposal included the appropriate required elements for the public portion and the paragraph was adopted as proposed with no material change. PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 56641 I. Extensions and Exemptions The final rule adopts without change the proposed provision that the FDIC, on its own initiative or upon written request, may extend, on a case-by-case basis, any of the rule time frames or deadlines and exempt a CIDI from one or more of the requirements of the rule. One commenter recommended including a process for a CIDI to request content exemptions where certain content elements were not important to that CIDI’s resolution. One commenter requested that the FDIC expressly note that inapplicable content should be excluded. The final rule incorporates the requirements that the FDIC believes are appropriate to group A CIDIs and group B CIDIs. To the extent that certain elements are less significant to a CIDI because of its structure, organization, business strategy, or other factors, the CIDI can and should adjust its approach to those content elements. For instance, a CIDI with no cross-border activities would not provide any information other than the confirmation that there are no such activities with respect to that requirement. Accordingly, the FDIC did not incorporate a prescribed exemption process, but retained the flexibility to provide exemptions to one or more content elements of the rule, consistent with the proposal. J. Enforcement Consistent with the proposed rule, the final rule expressly provides that violating any provision of this section constitutes a violation of a regulation and may subject the CIDI to enforcement actions under 12 U.S.C. 1818, including § 360.10(t) thereunder. IV. Expected Effects This final rule amends and restates the 2012 rule, as discussed in more detail above. It establishes two tiers of submission requirements to reflect the different sizes and complexity of CIDIs. Group A CIDIs are required to submit resolution plans that comply with all of the content requirements of the final rule, including the development of an identified strategy for the resolution of the CIDI, and to participate in engagement and capabilities testing. Group B CIDIs are required to submit an informational filing containing information on resolution planning and readiness, and to participate in engagement and capabilities testing. The following describes the expected costs and benefits of this final rule as it applies to the groups of CIDIs, and other economic impacts. As of the quarter ending March 31, 2024, the FDIC insured 4,577 depository E:\FR\FM\09JYR4.SGM 09JYR4 56642 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations institutions. Of these, 33 are group A CIDIs that reported total average assets of $100 billion or more over their four most recent Consolidated Reports of Condition and Income, and 12 are group B CIDIs that reported total assets of at least $50 billion, but less than $100 billion, over their four most recent Consolidated Reports of Condition and Income. In the aggregate, these 45 CIDIs held a combined $17.951 trillion in total assets, accounting for about 74% of total U.S. banking industry assets.19 lotter on DSK11XQN23PROD with RULES4 A. Review of Comments The FDIC received several comments related to its analysis of the expected effects of the NPR. One commenter indicated that the NPR would substantially add to the time and resources required to prepare IDI resolution plans. Another two commenters argued that the analysis of the compliance burden of the NPR significantly understates the cost of the burden, with one noting that the analysis understates the true cost since it only includes internal costs to the IDI and fails to include the costs of outside lawyers, accountants, and risk management specialists that may be involved with resolution planning. A fourth commenter suggested that the estimated time required to develop an IDI’s full resolution submission is not unreasonable and the estimated cost of compliance would be substantially less than the costs of potential bank failures and banking crises. The FDIC has carefully reviewed the burden associated with the compliance requirements for each element in light of changes to the final rule and in consideration of the comments received. Recordkeeping, reporting, and disclosure requirements, like all compliance costs, may vary across institutions and the FDIC’s compliance estimates associated with the Paperwork Reduction Act (PRA) are meant to be overall averages. The FDIC does not have the detailed data that would permit it to precisely estimate the quantitative effect of the final rule for every CIDI. The estimated labor hours needed to comply with certain aspects of the rule are based on the FDIC’s extensive experience with resolution plan submissions and estimating associated burden. Absent any additional data, the FDIC believes the estimates of burden hours are reasonable, considering the recordkeeping, reporting, and disclosure requirements of the final rule. 19 FDIC Consolidated Reports of Condition and Income data as of March 31, 2024. VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 The FDIC received one comment relating to its estimate of the costs of switching from a three-year to a twoyear submission cycle, which stated that the FDIC underestimates the costs associated with a two-year submission cycle when weighing the proposal’s burdens and benefits. Upon further consideration, the FDIC is finalizing a three-year submission cycle for most group A CIDIs and the group B CIDIs, as discussed previously. Certain changes made to the final rule, as compared to the proposal, would result in a change to the economic effect. Those are described below. B. Changes From the Proposed Rule to the Final Rule Group A CIDIs Group A CIDIs in the final rule are defined as IDIs with $100 billion or more in total assets based upon the average of the institution’s four most recent Consolidated Reports of Condition and Income. As of the quarter ending March 31, 2024, 33 IDIs reported total average assets of $100 billion or more over their four most recent Consolidated Reports of Condition and Income. Therefore, for the purposes of this analysis, the FDIC estimates that 33 FDIC-insured depository institutions would be classified as group A CIDIs under the final rule. In aggregate, these 33 group A CIDIs held a combined $17.10 trillion in total assets, accounting for about 71 percent of total U.S. banking industry assets.20 Key Changes to the Final Rule Affecting Group A CIDIs The final rule would make certain changes from the proposal which would materially affect the requirements of the rule with respect to group A CIDIs. First, most group A CIDIs would be required to file resolution plans on a triennial, rather than a biennial basis as proposed, with interim supplements expected each year where a resolution plan is not filed. This change means that these group A CIDIs will file fewer resolution plans over time and a greater number of interim supplements. Specifically, over a six-year period, each group A CIDI would have been expected to file three resolution plans and three interim supplements under the proposed rule and would be expected to file two resolution plans and four interim supplements under the final rule. This change would reduce the estimated economic effect of the final 20 FDIC Consolidated Reports of Condition and Income data as of March 31, 2024. PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 rule on the 24 group A CIDIs that are triennial filers. The final rule would retain the biennial filing cycle for the nine group A CIDIs that are affiliated with U.S. GSIBs, but would make a change that would impact the expected frequency of submission of interim supplements for these biennial filers. Under the final rule, the nine biennial filers would not be required to submit interim supplements in the calendar year in which they file resolution plans under the rule or in the calendar year in which their affiliates submit a DFA resolution plan. DFA resolution plans submitted by these banking organizations are also on a biennial cycle. Because resolution plans under the final rule and DFA resolution plans are expected to be submitted in alternating years, these nine CIDIs would not be expected to submit interim supplements under the final rule. This would reduce the estimated economic effect of the final rule for these biennial filers as compared to the proposal. In light of the changes in filing cycle frequency in the final rule, the FDIC expects to place a greater emphasis on engagement and capabilities testing for the group A CIDIs that are triennial filers. The FDIC estimates that this would result in a modest increase in compliance costs for the 24 group A CIDI triennial filers. Because the final rule does not change the submission cycle from the proposed rule for the nine biennial filers, there would be no change in the FDIC’s expectation of engagement with those CIDIs, and therefore the FDIC’s estimate compliance costs associated with resolution plan filings for these CIDIs would remain unchanged. Group B CIDIs Group B CIDIs are defined as IDIs with $50 billion or more in total assets but less than $100 billion in total assets, based upon the average of the institution’s four most recent Consolidated Reports of Condition and Income. As of the quarter ending March 31, 2024, 12 IDIs reported total average assets of at least $50 billion, but less than $100 billion, over their four most recent Consolidated Reports of Condition and Income. Therefore, the FDIC estimates that 12 IDIs would be classified as group B CIDIs under the final rule. In aggregate, these 12 group B CIDIs held a combined $849 billion in total assets, accounting for about 3.51 percent of total U.S. banking industry assets.21 21 FDIC Consolidated Reports of Condition and Income data as of March 31, 2024. E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations Key Changes to the Final Rule Affecting Group B CIDIs Under the final rule, all group B CIDIs would be required to submit informational filings on a triennial, rather than on a biennial basis as proposed, with interim supplements expected each year where an informational filing is not submitted. This change means that group B CIDIs will file fewer informational filings over time and a greater number of interim supplements. Specifically, over a sixyear period, each group B CIDI would have been expected to file three informational filings and three interim supplements under the proposed rule and would be expected to file two informational filings and four interim supplements under the final rule. This change would reduce the estimated economic effect of the final rule on the 12 group B CIDIs. lotter on DSK11XQN23PROD with RULES4 Other Changes to the Proposal In addition to the specific changes discussed above, the final rule contains several changes to individual content elements to be included in full resolution submissions. These modifications to the proposal are discussed in detail above. They include changes that result in modest decreases in the required content, such as changes to the valuations element, the use of year-end data for interim supplements, the adoption of a change to the definition of material entity, and the reduction of certain content elements relative to franchise components for informational filings. The modifications also include changes that result in modest increases in the required content, such as the requirement for a description of material changes in interim supplements and informational filings, the identification of key communications personnel as part of the communications playbook, the requirement for a description of the methodology for the identification of key depositors, and the identification of regulators and other authorities with respect to cross-border activities. Taking into account these and other elements that both increase and decrease content requirements, the FDIC has determined that there is no net change in estimated compliance costs with respect to the development of resolution plans, informational filings, or interim supplements, other than those related to the changes to submission frequency discussed above. VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 C. Marginal Effect of Changes Compared to the 2012 Rule The final rule would have four primary effects on CIDIs compared to the 2012 rule: (1) change in filing frequency for group A CIDIs affiliated with U.S. GSIBs; (2) the establishment of an interim supplement requirement; (3) changes in full resolution content requirements for group A CIDIs; and (4) changes in full resolution submission requirements for group B CIDIs. The FDIC analyzed expected filings by CIDIs over a six-year period beginning in 2025, the year in which the first submissions are expected to be made under the final rule, and assumes that the total assets reported by existing individual CIDIs for the quarter ending March 31, 2024 would remain constant throughout the period of analysis, notwithstanding assumptions made by the FDIC on the number of new group A CIDIs and group B CIDIs in each filing cycle (discussed below). For the purposes of this analysis, the FDIC generally assumes that compliance costs are directly proportional to the total consolidated assets of the CIDI. While asset size is not a direct measure of complexity, the FDIC believes that asset size is positively correlated with the amount of compliance time necessary for a CIDI to complete full resolution submissions and interim supplements under this final rule. The following discussion addresses each of these primary effects to illustrate their marginal contribution to the aggregate effect. Marginal Effect of Changes to the Biennial Filing Cycle for Group A CIDIs Affiliated With U.S. GSIBs As discussed above, the final rule would adjust the filing cycle for all group A CIDIs that are affiliated with U.S. GSIBs from the current triennial cycle to a biennial cycle. Of the 33 group A CIDIs identified above, nine are affiliated with U.S. GSIBs. To isolate the effect of the potential change from a triennial cycle to a biennial cycle on these CIDIs, the FDIC compared estimated reporting compliance costs of the current triennial cycle under the 2012 rule,22 to the costs of those same compliance requirements on a biennial basis for these nine CIDIs. Over the sixyear period of analysis, the FDIC estimates that the labor hours expended by group A CIDIs that are affiliated with U.S. GSIBs would increase by an average of 107,000 hours annually in order to comply with a biennial cycle. Using a wage estimate of $118.14 an 22 See https://www.reginfo.gov/public/do/ PRAViewICR?ref_nbr=202111-3064-003. PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 56643 hour,23 the FDIC estimates that the change from a triennial cycle to a biennial cycle would result in average additional costs of approximately $12.6 million annually for the nine group A CIDIs affiliated with U.S. GSIBs. Marginal Effect of the Introduction of the Interim Supplement Requirement The final rule introduces a requirement for group A CIDIs and group B CIDIs to submit an interim supplement in the years that they do not file a full resolution submission. As discussed above, the final rule exempts group A CIDIs that are biennial filers from this requirement in years where they file a DFA resolution plan. Because the FDIC assumes that submission dates for the DFA resolution plans and the full resolution submissions under the final rule will be in alternate years for the biennial filers, it is not expected that these nine CIDIs will file interim supplements. The FDIC estimates that the interim supplement will pose 24 labor hours per billion dollars in assets on group A CIDIs that are not affiliated with U.S. GSIBs and group B CIDIs. Using this estimate over the six-year period of analysis, the requirement for interim supplements would result in an estimated average annual increase of approximately 102,000 hours and 17,000 hours for group A CIDI triennial filers and group B CIDIs, respectively. Using a wage estimate of $118.14 an hour,24 the FDIC estimates that the increase in reporting burden hours for group A CIDI triennial filers and group B CIDIs submitting interim supplements will result in average additional annual costs of approximately $12.1 million annually and $2 million, respectively. Thus, the FDIC estimates the total average impact of this specific requirement to be approximately 119,000 hours annually, and about $14.1 million annually. 23 The FDIC’s estimated allocations of labor associated with the reporting compliance burden for full resolution submissions in the final rule (for group A CIDIs and group B CIDIs) reflects an assumption that the majority will be attributable to financial analysts (including accountants and risk management specialists), with executives and managers, and legal occupations accounting for the remaining balance. The estimated weighted average hourly compensation cost of these employees are found by using the 75th percentile hourly wages reported by the Bureau of Labor Statistics (BLS) National Industry-Specific Occupational Employment and Wage Estimates for the relevant occupations in the Depository Credit Intermediation sector, as of May 2022. These wages are adjusted to account for inflation and non-monetary compensation rates for health and other benefits, as of March 2024, to provide a comprehensive estimate of overall compensation. 24 See footnote 23. E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56644 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations Marginal Effect of Proposed Changes in Full Resolution Submission Content for All Group A CIDIs The FDIC’s estimates of labor hours needed by group A CIDIs to comply with the reporting requirements of the final rule for first-time full resolution submissions remain unchanged at 16,000 hours. However, the FDIC has adjusted its estimate for subsequent full resolution submissions by group A CIDIs that are not affiliated with U.S. GSIBs to 73 hours per billion dollars in assets. For group A CIDIs that are affiliated with U.S. GSIBs, the FDIC estimates that they would incur 72 hours of burden per billion dollars in assets for subsequent full resolution submissions. To maintain consistency with the FDIC’s estimates under the 2012 rule, the estimate of labor hours for both engagement and capabilities testing was included in the prior estimates of labor hours per billion in total assets for resolution plan content requirements of group A CIDIs. Thus, the difference in the burden estimate for group A CIDIs that are triennial filers is because in light of the change in submission cycle under the final rule for these CIDIs, the FDIC expects more engagement with these filers. Group A CIDIs that are affiliated with U.S. GSIBs, conversely, will file biennially under the final rule and will have somewhat less engagement between full resolution submissions. Over the six-year period of analysis, beginning in 2025, the FDIC assumes there will be three first-time group A CIDIs that will file full resolution submissions in each triennial filing cycle. This estimate is based on the FDIC’s review of Consolidated Reports of Condition and Income data over the three-year period from 2021 through 2023.25 The FDIC analyzed the effect of changes in these other requirements for group A CIDIs by assuming the same filing frequency exists under the 2012 rule and the final rule, and then compared estimated compliance costs. As previously discussed, the final rule changes the filing frequency for group A CIDIs affiliated with U.S. GSIBs as well as the full resolution submission content and other requirements for group A CIDIs. The preceding subsection of this analysis presented the estimated effects of the final rule’s amendments to the filing frequency for group A CIDIs affiliated with U.S. 25 CIDIs that become group A CIDIs in subsequent filing cycles (i.e., the triennial filing cycle beginning in 2028) will have already filed full resolution submissions as group B CIDIs, and thus are not considered first-time filers for the purposes of estimating burden. VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 GSIBs; from triennial to biennial. To isolate the effects of the final rule’s changes to the full resolution submission content and other requirements for group A CIDIs, the FDIC assumes that group A CIDIs affiliated with U.S. GSIBs file biennially, rather than triennially, and then calculate estimated compliance costs for group A CIDIs associated with the content requirements of the 2012 rule. The analysis then compares the estimated compliance costs for group A CIDIs associated with the content requirements of the 2012 rule with the estimated compliance costs associated with the content requirements established by the final rule. For group A CIDIs filing full resolution submissions in the next and subsequent filing cycles, the FDIC estimates that, over the six-year period of analysis, the changes in the final rule relating to the full resolution submission content requirements will result in an average increase in labor hours to comply with associated reporting requirements of approximately 128,000 hours annually. Using a wage estimate of $118.14 an hour,26 the FDIC estimates that the increase in reporting burden hours for group A CIDIs due to changes to full resolution submission content requirements for group A CIDIs will result in average additional costs of approximately $15.1 million annually to all group A CIDIs. Approximately 63 percent of this increase in estimated annual compliance costs can be attributed to the nine group A CIDIs affiliated with U.S. GSIBs. Marginal Effect of Proposed Changes in Full Resolution Submission Content for All Group B CIDIs The FDIC estimates that the labor hours needed by group B CIDIs to comply with the reporting requirements of the final rule, for both first-time full resolution submissions and subsequent submissions, would be 7,200 hours and 67 hours per billion dollars in assets, respectively. To maintain consistency with the FDIC’s estimates under the 2012 rule, the estimate of labor hours for both engagement and capabilities testing was included in the estimate of 67 hours per billion in total assets for group B CIDIs. The analysis of the estimated compliance costs of the final rule on group B CIDIs is predicated on the assumption that all requirements under the final rule are new for the 12 group B CIDIs, resulting in relatively high initial compliance efforts. Most CIDIs that would be categorized as group B PO 00000 26 See footnote 23. Frm 00026 Fmt 4701 Sfmt 4700 CIDIs under the final rule have not provided resolution submissions of any kind to the FDIC. For those CIDIs that have filed previously, the significant passage of time since that filing, taken together with the significant changes to the applicable requirements for group B CIDIs under the final rule, suggest that it is appropriate to consider them to be first-time filers for the purposes of assessing compliance costs in the first triennial cycle over the six-year period of analysis.27 Accordingly, the 12 group B CIDIs will be considered first-time filers for their initial full resolution submission under the final rule. In addition, over the six-year period of analysis, beginning in 2025, the FDIC assumes there will be five first-time group B CIDIs that will file full resolution submissions in each triennial cycle, based on the FDIC’s review of Reports of Condition and Income data over the three-year period from 2021 through 2023. The FDIC estimates that, over the sixyear period of analysis, the final rule would result in an average increase in reporting burden hours of approximately 35,000 hours annually. Using a wage rate of $118.14 an hour,28 the FDIC estimates that the increase in reporting burden hours for group B CIDIs submitting informational filings will result in average additional costs of approximately $4.1 million annually. Total Estimated Effect on Reporting Compliance Costs to CIDIs Taken together, the total estimated marginal effect of the change to a biennial cycle for group A CIDIs affiliated with U.S. GSIBs, submission content changes for all group A CIDIs and group B CIDIs, and requirements for interim supplements, over the six-year analysis period, would result in an average increase in reporting burden hours of approximately 389,000 annually. Using an estimated wage rate of $118.14 29 per hour, this would amount to total additional estimated reporting costs for all CIDIs of approximately $46 million annually. By comparison, total average annual estimated reporting compliance costs of $46 million are approximately 0.010 percent of total noninterest expenses across all CIDIs.30 27 Of the 12 group B CIDIs identified, only three have submitted resolution plans under the 2012 rule (in either 2015 or 2018). 28 See footnote 23. 29 See footnote 23. 30 FDIC Consolidated Reports of Condition and Income data as of June 30, 2023 through March 31, 2024. E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 D. Effects on Insured Deposits and the Deposit Insurance Fund As previously discussed, the final rule would increase the amount of information CIDIs produce and furnish to the FDIC for the purposes of resolution planning. In the years since the adoption of the 2012 rule, the FDIC has learned which aspects of the resolution planning process are most valuable and gained a greater understanding of the resources that CIDIs expend in meeting the requirements and expectations to comply with the 2012 rule. The FDIC does not have the information necessary to quantify the benefits to the DIF associated with the increase in the amount of resolution planning information for CIDIs. However, the FDIC believes that requiring CIDIs to regularly submit more information on their resolution readiness capabilities would be expected to reduce the costs to the DIF in the event of a failure of such an institution because this information would help the FDIC be more prepared to resolve these CIDIs. E. Additional Economic Considerations and Effects Because some of the methodologies used to estimate reporting costs—for subsequent full resolution submissions and interim supplements—are based on the number of labor hours per billions of dollars in total assets, it is possible for a CIDI’s estimated compliance cost to change solely due to fluctuations in asset size. The FDIC acknowledges that economic trends resulting in, or contributing to, changes in banking industry assets generally would have an impact on the estimates described above, but believes that these potential changes in compliance costs are likely to be modest relative to the size of the IDIs affected by the final rule. CIDIs would likely incur some regulatory costs, in addition to the reporting costs presented above, to transition their internal systems and processes in order to comply with the final rule. The FDIC does not have access to information that would enable it to estimate such costs. However, the FDIC believes that such costs are likely to be small relative to the size of the IDIs affected by the final rule. Finally, the FDIC does not believe that any additional costs incurred as a result of the final rule would have significant adverse impact on the provision of banking services such as originating and servicing loans, processing payments, or VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 various financial market activities that the CIDIs may be involved in. This analysis illustrates that estimated reporting costs in future years only comprise approximately 0.010 percent of current noninterest expenses 31 for all CIDIs. F. Overall Effects In summary, the FDIC believes that the final rule would result in public benefits by improving the FDIC’s ability to effect timely and cost-effective resolutions of large, complex insured institutions. The FDIC estimates the final rule would result in average annual compliance cost increases of approximately $46 million over the sixyear analysis period—which spans two filing cycles (three for group A CIDIs affiliated with U.S. GSIBs) under the final rule. V. Alternatives Considered The FDIC considered several alternatives while developing the final rule. The FDIC first considered leaving the 2012 rule unchanged. The FDIC rejected this alternative because it believes the final rule improves the value of submissions and provides additional clarity to CIDIs regarding requirements by incorporating elements of prior guidance and taking into account the lessons learned from resolution planning under the 2012 rule. The final rule also provides a complete and clear set of requirements with respect to resolution planning submissions and the review and feedback process and bolsters and clarifies the FDIC’s approach to engagement and capabilities testing in a manner useful to both the FDIC and CIDIs. Following review of comments on the proposed rule, the FDIC considered several alternatives in finalizing the rule. First, the FDIC considered finalizing the rule as proposed. Comments received identified certain areas where the rule could be strengthened and improved, particularly with respect to the process and timing of submissions and review of the full resolution submissions as discussed below. The FDIC considered several options with respect to the timing of submissions. First, it considered retaining without change the proposed biennial cycle for all CIDIs. It also 31 FDIC Consolidated Reports of Condition and Income data as of June 30, 2023 through March 31, 2024. PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 56645 considered adopting a triennial cycle for all CIDIs. Finally, it considered the approach adopted in this final rule by imposing a triennial cycle for most CIDIs, and biennial filings for the group A CIDIs affiliated with U.S. GSIBs. The FDIC believes that, for most CIDIs, a triennial cycle, with interim supplements in the off-years, would be an appropriate balance between the burden on CIDIs associated with more frequent filings and the public benefit in having timely and complete submissions. The final rule establishes a biennial cycle for group A CIDIs that are affiliated with U.S. GSIBs. The FDIC believes the biennial filing would be appropriate for these CIDIs, which are part of the largest and most systemic and interconnected U.S. banking organizations. The approach to the timing of submissions adopted in the final rule also has the benefit of allowing the FDIC to have additional time between submissions for engagement with the CIDIs that are triennial filers. The biennial filing schedule for all group A CIDIs resulted in an expectation that engagement with those CIDIs would be limited as a result of the increased time for preparation and review of full resolution submissions. The FDIC expects that the additional time for engagement will improve the FDIC’s understanding of firm-specific resolution matters, and will provide additional opportunity for feedback and observations that may assist the CIDIs in improving their full resolution submission in successive filings. The FDIC considered several alternatives with respect to the timing of interim supplements. First, it considered retaining the proposed approach that would require an interim supplement in any year in which a full resolution submission is not required. Second, it considered not requiring an interim supplement for any CIDI that is an affiliate of a DFA resolution plan filer in a calendar year in which a DFA resolution plan is submitted. Finally, it considered the approach adopted in the final rule, which requires all CIDIs, except the biennial filers, to provide an interim supplement in any calendar year in which a full resolution submission is not submitted. For the biennial filers, the final rule does not require an interim supplement in a calendar year in which a DFA resolution plan from the affiliated banking organization is submitted. This E:\FR\FM\09JYR4.SGM 09JYR4 56646 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations alternative is an appropriate balance of costs and benefits, taking into account biennial filers’ higher frequency of submissions under this rule, and the expected annual submission of resolution plans alternating between submissions under this rule and the DFA rule. The FDIC considered other modifications to the proposal in response to comments, including changes to the identified strategy and other content elements. In each case, the FDIC weighed the proposed change against the alternative of adopting the proposal. The FDIC believes that the changes made, in the aggregate, do not have a significant impact on the cost of preparing the full resolution submissions and interim supplements, and have meaningful benefits in terms of improving the usefulness of the content of the submissions. VI. Regulatory Analysis and Procedures A. Paperwork Reduction Act In accordance with the requirements of the PRA,32 the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. Comments Received The FDIC received comments that appear to relate to the PRA. As stated above, the majority of commenters suggested changes to reduce the costs of submission preparation for filers, including by adjusting the proposed submission cycle, narrowing the proposed scope and content requirements, and enhancing alignment with relevant resolution planning requirements of the DFA rule. Additionally, one commenter raised questions about the FDIC’s burden estimate. The comments received and their respective responses are summarized in the above analysis. The final rule modifies the current filing cycle cadence for group A CIDIs that are affiliated with U.S. GSIBs from triennial to biennial, which will result in these CIDIs sometimes filing multiple full resolution submissions across a given three-year PRA renewal cycle. On content, the final rule does not differ substantially from the proposed rule. The final rule retains the proposed rule’s requirement for group A CIDIs and group B CIDIs to submit interim supplements to the FDIC in calendar years where they are not expected to file full resolution submissions, except in the case of the biennial filers who are also not expected to file in calendar years when they file DFA resolution plans. On engagement and capabilities testing, the final rule is broadly similar to the proposed rule. The change in submission cycle resulted in an increased expectation for engagement with group A CIDI triennial filers, as discussed above. Therefore, the estimate for subsequent full resolution submissions for group A CIDIs which are filing triennially has been increased from 72 hours per billion dollars in assets to 73 hours per billion dollars in assets, which would affect the estimates in Information Collection #2, described in table 1 below. For subsequent plan submissions for group A CIDIs which are filing biennially, the estimate remains at 72 hours per billion dollars in assets. The revisions for this Information Collection Renewal (‘‘ICR’’) in the final rule represent a decrease of 182,238 hours from the PRA estimates in the proposed rule (771,975 hours).33 This decrease is primarily due to the reversion to a triennial cycle for all CIDIs except for group A CIDIs that are affiliated with U.S. GSIBs, and the decision to exempt group A CIDIs that are affiliated with U.S. GSIBs from the interim supplement requirement in calendar years when they file DFA resolution plans. The FDIC will revise this information collection as follows: Title: Resolution Plans and Periodic Engagement and Capabilities Testing Required. OMB Number: 3064–0185. Affected Public: Large and Highly Complex Depository Institutions. TABLE 1—SUMMARY OF ESTIMATED ANNUAL BURDEN [OMB No. 3064–0185] 1. Resolution Plan update by previous filer (biennial filer, group A), 12 FR 360.10(c)(1); 12 FR 360.10(d) (Mandatory). 2. Resolution Plan update by previous filer (triennial filer, group A), 12 FR 360.10(c)(2); 12 FR 360.10(d) (Mandatory). 3. Resolution Plan by new filer (group A), 12 FR 360.10(c)(3); 12 FR 360.10(d) (Mandatory). Reporting (Annual, 2 year filing cycle). 3 1 34 89216:00 267,648 Reporting (Annual, 3 year filing cycle). 8 1 35 18100:58 144,808 Reporting cycle). 1 1 16000:00 16,000 U.S.C. 3501 et seq. revisions for this ICR in the final rule represent an increase of 300,074 estimated annual burden hours from the PRA estimates in the 2021 collection (289,663 hours), and an increase of 16,946 estimated annual burden hours from the PRA estimates in the 2018 collection (572,791 hours). 34 For the PRA renewal cycle corresponding with the expected effective date of the final rule—from 2025 through 2027—there will be a total of nine biennial filers, with total assets (as of the quarter ending March 31, 2024) of approximately $11,152 33 The VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 (Annual, 3-year Number of respondents Time per response (HH:MM) Type of burden (frequency of response) 32 44 lotter on DSK11XQN23PROD with RULES4 Number of responses per respondent Information collection (IC) (obligation to respond) filing billion. The FDIC estimates that these nine CIDIs would incur 72 hours per billion dollars in assets of reporting burden under this IC, and that these nine ICs would file once during this three-year period. Therefore, the total burden is 802,944 hours ($11,152 billion in assets * 72 hours per billion in assets = 802,944 hours) across this period, or 267,648 hours annually. At three respondents a year (9 biennial filers/3 years), this comes out to 89,216 hours per response. 35 For the PRA renewal cycle corresponding with the expected effective date of the final rule—from 2025 through 2027—there will be a total of 24 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 Annual burden (hours) triennial filers, with total assets (as of the quarter ending March 31, 2024) of approximately $5,951 billion. The FDIC estimates that these 24 CIDIs would incur 73 hours per billion dollars in assets of reporting burden under this IC, and that these 24 ICs would file once during this three-year period. Therefore, the total burden is 434,423 hours ($5,951 billion in assets * 73 hours per billion in assets = 434,423 hours) across this period, or approximately 144,807.67 hours annually. At 8 respondents a year (24 triennial filers/3 years), this comes out to 18,100.96 hours per response, or 18,100 hours and 58 minutes per response. E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations 56647 TABLE 1—SUMMARY OF ESTIMATED ANNUAL BURDEN—Continued [OMB No. 3064–0185] Information collection (IC) (obligation to respond) Type of burden (frequency of response) 4. Informational Filing update by previous filer (group B), 12 FR 360.10(c)(2); 12 FR 360.10(d) (Mandatory). 5. Informational Filing by New Filers (group B), 12 FR 360.10(c)(3); 12 FR 360.10(d) (Mandatory). 6. Interim Supplement, 12 FR 360.10(e) (Mandatory). 7. Waiver Requests, 12 FR 360.10(i) (Required to obtain or retain a benefit). 8. Notice of extraordinary event, 12 FR 360.10(c)(4) (Mandatory). Total Annual Burden (Hours) ..... Number of responses per respondent Number of respondents Time per response (HH:MM) Annual burden (hours) Reporting cycle). (Annual, 3-year filing 1 1 36 00:00 0 Reporting cycle). (Annual, 3-year filing 6 1 7200:00 43,200 Reporting (Annual, 3-year filing cycle). Reporting (On Occasion) ................. 30 1 3920:00 117,600 1 1 01:00 1 Reporting (On Occasion) ................. 4 1 120:00 480 ........................................................... ........................ ........................ ........................ 589,737 Source: FDIC. Note: The estimated annual IC time burden is the product, rounded to the nearest hour, of the estimated annual number of responses and the estimated time per response for a given IC. The estimated annual number of responses is the product, rounded to the nearest whole number, of the estimated annual number of respondents and the estimated annual number of responses per respondent. This methodology ensures the estimated annual burdens in the table are consistent with the values recorded in OMB’s consolidated information system. lotter on DSK11XQN23PROD with RULES4 B. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a final rule, to prepare and make available for public comment a final regulatory flexibility analysis that describes the impact of the final rule on small entities.37 However, a final regulatory flexibility analysis is not required if the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has defined ‘‘small entities’’ to include banking organizations with total assets of less than or equal to $850 million.38 36 The estimated time per response for a group B CIDI that has filed previously under the final rule is 67 hours per billion dollars in total assets. However, for the PRA renewal cycle corresponding with the expected effective date of the final rule— from 2025 through 2027—the FDIC estimates that 0 group B CIDIs will be subject to this requirement. For the purposes of estimating annual reporting compliance burden, all group B CIDIs in this period are considered ‘‘new filers’’ and thus will file under IC #5. The FDIC expects that the 17 group B CIDIs under IC #5 (rounded to six annually) would all file under IC #4 in the next three-year PRA renewal cycle, notwithstanding the number of group B CIDIs that may fail, merge with other CIDIs, or experience asset growth such that they no longer would be considered a group B CIDI at the time of their next filing. In recognition that, in future filing cycles, some group B CIDIs will incur burden under this IC, the FDIC uses a placeholder estimate of 0 respondents to retain this information collection. 37 5 U.S.C. 601 et seq. 38 The SBA defines a small banking organization as having $850 million or less in assets, where an organization’s ‘‘assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.’’ See 13 CFR 121.201 (as amended by 87 FR 69118, effective December 19, 2022). In its determination, the ‘‘SBA VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 Generally, the FDIC considers a significant economic impact to be a quantified effect in excess of 5 percent of total annual salaries and benefits or 2.5 percent of total noninterest expenses. The FDIC believes that effects in excess of one or more of these thresholds typically represent significant economic impacts for FDICsupervised institutions. For the reasons described below and under section 605(b) of the RFA, the FDIC certifies that this rule will not have a significant economic impact on a substantial number of small entities. As of the quarter ending March 31, 2024, the FDIC insured 4,577 depository institutions, of which the FDIC identifies 3,272 as a ‘‘small entity’’ for purposes of the RFA.39 The final rule amends resolution submission requirements for IDIs with over $50 billion in total average assets. Therefore, the final rule would apply only to institutions with $50 billion or more in total average assets. As of the quarter ending March 31, 2024 there are no small, FDIC-insured institutions with $50 billion or more in total average counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates.’’ See 13 CFR 121.103. Following these regulations, the FDIC uses an insured depository institution’s affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the insured depository institution is ‘‘small’’ for the purposes of RFA. 39 FDIC Consolidated Reports of Condition and Income data as of December 31, 2023 and March 31, 2024. PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 assets.40 In light of the foregoing, the FDIC certifies that the final rule will not have a significant economic impact on a substantial number of small entities supervised. C. Plain Language Section 722 of the Gramm-LeachBliley Act 41 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The FDIC has sought to present the final rule in a simple and straightforward manner. The FDIC invited comments regarding the use of plain language in the proposed rule but did not receive any comments on this topic. D. Riegle Community Development and Regulatory Improvements Act of 1994 Under section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA),42 in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each FBA must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository 40 FDIC Consolidated Reports of Condition and Income data as of December 31, 2023 and March 31, 2024. 41 Public Law 106–102, section 722, 113 Stat. 1338, 1471 (1999), 12 U.S.C. 4809. 42 12 U.S.C. 4802(a). E:\FR\FM\09JYR4.SGM 09JYR4 56648 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations institutions, as well as the benefits of such regulations. In addition, section 302(b) of the RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.43 E. Congressional Review Act For purposes of the Congressional Review Act (5 U.S.C. 801 et seq.), the OMB makes a determination as to whether a final rule constitutes a ‘‘major rule.’’ If a rule is deemed a ‘‘major rule’’ by the OMB, the Congressional Review Act generally provides that the rule may not take effect until at least 60 days following its publication. The Congressional Review Act defines a ‘‘major rule’’ as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in—(1) an annual effect on the economy of $100 million or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreignbased enterprises in domestic and export markets.44 The OMB has determined that the final rule is not a major rule for purposes of the Congressional Review Act and the FDIC will submit the final rule and other appropriate reports to Congress and the Government Accountability Office for review. List of Subjects in 12 CFR Part 360 Bank deposit insurance, Banks, banking, Holding companies, National banks, Reporting and recordkeeping requirements, Savings associations. Authority and Issuance lotter on DSK11XQN23PROD with RULES4 For the reasons stated in the preamble, the Federal Deposit Insurance Corporation amends 12 CFR part 360 as follows: PART 360—RESOLUTIONS AND RECEIVERSHIPS RULES 1. The authority citation for part 360 is revised to read as follows: ■ 43 12 U.S.C. 4802. 5 U.S.C. 804(2). 44 See VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 Authority: 12 U.S.C. 1811 et seq., 1817(a)(2)(B), 1817(b), 1818(a)(2), 1818(t), 1819(a) Seventh, Eighth, Ninth, and Tenth, 1820(b)(3) and (4), 1820(g), 1821(d)(1), (4), (10)(C), and (11), 1821(e)(1) and (8)(D)(i), 1821(f)(1), 1823(c)(4), and 1823(e)(2). ■ 2. Revise § 360.10 to read as follows: § 360.10 Resolution plans required for insured depository institutions with $100 billion or more in total assets; informational filings required for insured depository institutions with at least $50 billion but less than $100 billion in total assets. (a) Scope and purpose. This section applies to insured depository institutions with $50 billion or more in total assets. It requires a covered insured depository institution with $100 billion or more in total assets (a group A CIDI, as defined in paragraph (b) of this section) to submit a resolution plan that should enable the FDIC, as receiver, to resolve the institution under 12 U.S.C. 1821 and 1823 in a manner that provides depositors timely access to their insured deposits, maximizes the net present value return from the sale or disposition of assets and minimizes the amount of any loss realized by the creditors in the resolution, and addresses risks of adverse effects on U.S. economic conditions or economic stability. Other covered insured depository institutions (group B CIDIs, as defined in paragraph (b) of this section) are required under this section to submit to the FDIC an informational filing containing information relevant to the group B CIDI’s resolution that will support the development of strategic options for resolution of the CIDI by the FDIC. This section also establishes the requirements regarding the submission of resolution plans and informational filings and their contents, as well as procedures for their review by the FDIC. This rule is intended to ensure that each group A CIDI develops a credible strategy to facilitate the FDIC’s resolution of the institution across a range of possible scenarios and, with respect to each group A CIDI and each group B CIDI, the FDIC has access to all of the material information and analysis it needs to resolve efficiently the covered insured depository institution in the event of its failure. (b) Definitions. Affiliate has the same meaning as in 12 U.S.C. 1813(w)(6). Appropriate Federal banking agency has the same meaning as in 12 U.S.C. 1813(q). Biennial filer is defined in paragraph (c)(1) of this section. Bridge depository institution has the same meaning as in 12 U.S.C. 1813(i)(2). Capabilities testing is defined in paragraph (f)(7) of this section. PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 CIDI or covered insured depository institution means a group A CIDI or a group B CIDI. Company has the same meaning as in 12 CFR 362.2(d). Control has the same meaning as in 12 U.S.C. 1813(w)(5). Core business lines means those business lines of the CIDI, including associated operations, services, functions, and support, that, in the view of the CIDI, upon failure would result in a material loss of revenue, profit, or franchise value of the CIDI. Critical services means services and operations, including shared and outsourced services, that are necessary to continue the day-to-day operations of the CIDI, and, in the case of a group A CIDI, to support the execution of the identified strategy, and includes all services and operations that are necessary to continue any critical operation conducted by the CIDI that has been included in the most recent DFA resolution plan of the CIDI’s parent company. Critical services support means resources, including shared and outsourced resources, that are necessary to support the provision of critical services, including systems, technology infrastructure, data, key personnel, intellectual property, and facilities. DFA resolution plan means a resolution plan filed by a CIDI’s parent company under 12 U.S.C. 5365(d). DIF means the deposit insurance fund established by 11 U.S.C. 1821(a)(4). Engagement is defined in paragraph (f)(6) of this section. Failure scenario means a scenario as described in paragraph (d)(2) of this section. Foreign-based company means any company that is not incorporated or organized under the laws of the United States. Franchise component means a business segment, regional branch network, major asset, material asset portfolio, or other key component of a CIDI’s franchise that can be separated and sold or divested. Full resolution submission means a resolution plan for a group A CIDI, and an informational filing for a group B CIDI. Group A CIDI means an insured depository institution with $100 billion or more in total assets, as determined based upon the average of the institution’s four most recent Consolidated Reports of Condition and Income. An insured depository institution that is a group A CIDI remains a group A CIDI until it has less than $100 billion in total assets for each of the institution’s four most recent E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations Consolidated Reports of Condition and Income. In the event of a merger, acquisition of assets, combination, or similar transaction by an insured depository institution that causes it to exceed $100 billion in total assets, the FDIC may alternatively consider, in its discretion, to the extent and in the manner the FDIC considers to be appropriate, one or more of the four most recent Consolidated Reports of Condition and Income of the insured depository institutions that will become a group A CIDI effective as of the date of the consummation of such merger, acquisition, combination, or other transaction. Group B CIDI means an insured depository institution with at least $50 billion but less than $100 billion in total assets, as determined based upon the average of the institution’s four most recent Consolidated Reports of Condition and Income. An insured depository institution that is a group B CIDI remains a group B CIDI until it is a group A CIDI or has less than $50 billion in total assets, in either case, for each of the institution’s four most recent Consolidated Reports of Condition and Income. In the event of a merger, acquisition of assets, combination, or similar transaction by an insured depository institution that causes it to have at least $50 billion but less than $100 billion in total assets, the FDIC may alternatively consider, in its discretion, to the extent and in the manner the FDIC considers to be appropriate, one or more of the four most recent Consolidated Reports of Condition and Income of the insured depository institutions that will become a group B CIDI effective as of the date of the consummation of such merger, acquisition, combination, or other transaction. Identified strategy means the strategy chosen by a group A CIDI for its resolution plan as required pursuant to paragraph (d)(1) of this section, covering the time period from the point of failure to disposition of substantially all of the assets and operations of the group A CIDI through wind-down, liquidation, divestiture, or other return to the private sector. IDI franchise means all core business lines and all other business segments, branches, and assets that constitute the CIDI and its businesses as a whole. Informational filing means the full resolution submission submitted by a group B CIDI pursuant to this section. Insured depository institution has the same meaning as in 12 U.S.C. 1813(c)(2). Key depositors is defined in paragraph (d)(7)(v) of this section. VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 Key personnel means personnel tasked with an essential role in support of a core business line, franchise component, or critical service, or having a function, responsibility, or knowledge that may be significant to the FDIC’s resolution of the CIDI. Key personnel may be employed by the CIDI, a CIDI subsidiary, the parent company, a parent company affiliate, or a third party. Least-cost test means the process for determining the resolution strategy that is least costly to the DIF, as required under 12 U.S.C. 1823(c). Material asset portfolio means a pool or portfolio of assets, such as loans, securities, or other assets that may be sold in resolution by the bridge depository institution or the receivership and is significant in terms of income or value to the CIDI. Material change means a change in organization, operations, or strategic direction of the CIDI that results from an extraordinary event or other circumstance that could reasonably be foreseen to have a material effect on the resolvability of the CIDI. Such changes include, but are not limited to: (i) The identification of a new core business line; (ii) The identification of a new material entity or the de-identification of a material entity; (iii) Legal or functional organizational structure; (iv) Overall deposit structure; (v) Critical services or critical services support; (vi) The identification or deidentification of a franchise component; (vii) The acquisition or disposition of a material asset portfolio; or (viii) Cross-border elements. Material entity means a company, a domestic branch, or a foreign branch as defined in 12 U.S.C. 1813(o) that is significant to the activities of a critical service or core business line, and includes all IDIs that are subsidiaries or affiliates of the CIDI. Multiple-acquirer exit means an exit from a bridge depository institution through the sale of all or nearly all of the CIDI’s IDI franchise to multiple acquirers, such as a regional breakup of the CIDI’s IDI franchise or a sale of business segments to multiple acquirers, and may also include the wind-down or other disposition of franchise components, or material asset portfolios incidental to the divestitures of going concern elements, as applicable. Parent company means the company that controls, directly or indirectly, an insured depository institution. In a multi-tiered holding company structure, PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 56649 parent company means the top-tier of the multi-tiered holding company only. Parent company affiliate means any affiliate of the parent company other than the CIDI and the CIDI’s subsidiaries. Payment, clearing, and settlement service provider (PCS service provider) is defined in paragraph (d)(16) of this section. Qualified financial contract has the same meaning as in 12 U.S.C. 1821(e)(8). Regulated subsidiary is defined in paragraph (d)(4)(v) of this section. Resolution plan means the full resolution submission submitted by a group A CIDI pursuant to this section. Subsidiary has the same meaning as in 12 U.S.C. 1813(w)(4). Total assets has the meaning given in the instructions for the filing of Reports of Condition and Income. Triennial filer is defined in paragraph (c)(2) of this section. United States has the same meaning as the term State as defined in 12 U.S.C. 1813(a)(3). Virtual data room means an online repository where information pertinent to a sale or disposition of a CIDI or its franchise components is maintained in a secure and confidential manner to facilitate, whether by the CIDI or the FDIC, such sale or disposition to one or more third party acquirers. (c) Full resolution submissions required—(1) Biennial filers—(i) Definition. Biennial filer means a CIDI affiliate of a biennial filer, as defined in § 381.4(a)(1) of this chapter. (ii) Submission date. Each biennial filer must provide a full resolution submission to the FDIC on or before the date that is two years after the date of its most recent full resolution submission (or first business day thereafter), unless it has received written notice of a different date from the FDIC. All biennial filers will receive a written notice specifying the date on which their initial full resolution submission or interim supplement is due, which will be at least 270 days after October 1, 2024. (2) Triennial filers—(i) Definition. Triennial filer means all CIDIs that are not biennial filers. (ii) Submission date. Each triennial filer must provide a full resolution submission to the FDIC on or before the date that is three years after the date of its most recent full resolution submission (or first business day thereafter), unless it has received written notice of a different date from the FDIC. All triennial filers will receive a written notice specifying the date on which their initial full resolution E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56650 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations submission or interim supplement is due, which will be at least 270 days after October 1, 2024. (3) Full resolution submission by new CIDIs. An insured depository institution that becomes a CIDI after October 1, 2024, must submit its initial full resolution submission on or before the date specified in writing by the FDIC. Such date will occur no earlier than 270 days after the date on which the insured depository institution became a CIDI. A CIDI that transitions between groups will file a full resolution submission or interim supplement, as applicable, pursuant to the requirements applicable to its new filing group on or before the date that its next full resolution submission or interim supplement is due, unless it receives written notice of a different date from the FDIC. (4) Notice of extraordinary event. (i) Requirements. Each CIDI must provide the FDIC with a notice no later than 45 days after any material merger, acquisition or disposition of assets, or similar transaction or fundamental change to the CIDI’s organizational structure, core business lines, size, or complexity. Such notice must describe the extraordinary event and explain how the event impacts the resolvability of the CIDI. The CIDI must address any material changes resulting from the extraordinary event with respect to which it has provided notice pursuant to this paragraph (c)(4)(i) in the subsequent full resolution submission or interim supplement submitted by the CIDI. (ii) Exception. A CIDI is not required to submit a notice under paragraph (c)(4)(i) of this section if the date by which the CIDI would be required to submit the notice under paragraph (c)(4)(i) of this section would be within 90 days before the date on which the CIDI is required to make a full resolution submission under this section. (5) Approval by the CIDI board of directors. The CIDI’s board of directors or, in the case of an insured branch only, a delegee acting under the express authority of the CIDI’s board of directors, must approve the full resolution submission. That approval or delegation of express authority must be noted in the minutes of the board of directors. (6) Incorporation from other sources— (i) Sources. A CIDI may incorporate information or analysis into the confidential section of its full resolution submission or its interim supplement from one or more of the following without seeking the authorization for disclosure of FDIC confidential VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 information required under 12 CFR part 309: (A) The most recent full resolution submission submitted by the CIDI or an affiliate of the CIDI. (B) The most recent DFA resolution plan of a company that is a CIDI affiliate. (C) Any other regulatory filing by the CIDI or a CIDI affiliate with the FDIC. (ii) Requirements for incorporation from other sources. A CIDI may incorporate information from other sources only if: (A) The full resolution submission seeking to incorporate information or analysis from other sources clearly indicates the source and as-of date of the information or analysis the CIDI is incorporating, and the information or analysis required by this section is readily distinguishable from any extraneous parent company (or parent company affiliate) information or analysis, with a description of any material differences. (B) The CIDI certifies that the information or analysis the CIDI is incorporating from other sources remains accurate in all respects that are material to the CIDI’s full resolution submission. (d) Content of the full resolution submissions for CIDIs. Each group A CIDI must submit a resolution plan that includes all content specified in this paragraph (d). Each group B CIDI must submit an informational filing that includes the content specified in paragraphs (d)(4) through (9), (d)(10)(i) through (iii) and (vii) through (viii), (d)(11), and (d)(13) through (27) of this section, inclusive; a description of each material change since the submission of its prior informational filing or, where relevant, interim supplement (or affirmation that no such material change has occurred); and a discussion of the changes to the CIDI’s previously submitted informational filing resulting from any change in law or regulation, guidance, or feedback from the FDIC, or material change. (1) Identified strategy. (i) Each resolution plan must include an identified strategy for the resolution of the CIDI in the event of its failure that meets the credibility criteria in paragraph (f)(1) of this section. (ii) A CIDI must utilize as its identified strategy the formation and stabilization of a bridge depository institution that continues operation through the completion of the resolution and exit from the bridge depository institution unless the CIDI determines and demonstrates in its resolution plan why another strategy: PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 (A) Would be more appropriate for the size, complexity, and risk profile of the CIDI; (B) Reasonably could be executed by the FDIC across a range of likely failure scenarios; and (C) Best addresses the credibility criteria described in paragraph (f)(1) of this section. (iii) The identified strategy must include meaningful optionality for execution across a range of scenarios. The exit from the bridge depository institution may be through a multiple acquirer exit, or any other exit strategy following the stabilization of the operations of the bridge depository institution. The identified strategy may not be based upon a sale or other disposition to one or more acquirers over resolution weekend. (2) Failure scenario. For the identified strategy, the CIDI must use a failure scenario that demonstrates that the CIDI is experiencing material financial distress, such that the quality of the CIDI’s asset base has deteriorated and high-quality liquid assets have been depleted or pledged in the stress period before failure due to high, unexpected outflows of deposits and increased liquidity requirements from counterparties that would impact the CIDI’s ability to pay its obligations in the normal course of business before the FDIC’s appointment as receiver. Though the immediate failure event may be liquidity-related and associated with a lack of market confidence in the financial condition of the CIDI before the final recognition of losses, the identified strategy must also consider the depletion of capital before and at the time of the appointment of the FDIC as receiver. The CIDI may not assume any regulatory waivers in connection with the actions proposed to be taken before or in resolution. To the extent that the CIDI assumes that DIF funding is used during the resolution by a bridge depository institution, it must demonstrate the capacity for such borrowing on a fully secured basis and the source of repayment. The identified strategy must take into account that failure of the CIDI will occur under severely adverse economic conditions developed by the Board of Governors of the Federal Reserve System pursuant to 12 U.S.C. 5365(i)(1)(B), and must assume that the U.S. parent company (if any) is in resolution under 11 U.S.C. 101 et seq. or another applicable insolvency regime. The FDIC may provide a CIDI additional or alternative parameters for the failure scenario detailed in this paragraph (d)(2). The FDIC will endeavor to provide a CIDI notice of such additional or alternative E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations parameters for the failure scenario at least one year before the applicable resolution plan is due. Any such additional or alternative parameters: (i) May be applicable to all CIDIs or only specific individual CIDIs; and (ii) May include additional conditions, such as different macroeconomic stress scenario information or assumptions with respect to the cause of failure. If the FDIC provides such additional or alternative parameters, the CIDI must use the additional or alternative parameters rather than the conditions specified in paragraph (d)(2) of this section, to the extent inconsistent with the conditions specified in paragraph (d)(2) of this section. (3) Executive summary. A resolution plan must include an executive summary providing: (i) A description of the key elements of the identified strategy; (ii) An overview of the CIDI’s core business lines and franchise components; (iii) A description of each material change since the prior resolution plan addressing the changed element (or affirmation that no such material change has occurred); (iv) A discussion of the changes to the CIDI’s previously submitted resolution plan resulting from any change in law or regulation, guidance, or feedback from the FDIC, or material change; and (v) A discussion of any actions taken by the CIDI since the submission of its prior resolution plan to further develop the quality or comprehensiveness of the information and analysis included in the resolution plan, including the identified strategy, or to improve its capabilities to develop and timely deliver that information and analysis. (4) Organizational structure: legal entities; core business lines; and branches. A full resolution submission must: (i) Identify and describe the CIDI’s, the parent company’s, and the parent company affiliates’ legal and functional structures, including all material entities. (ii) Identify and describe each of the CIDI’s core business lines, including whether any core business line draws additional value from, or relies on the operations of, the parent company or a parent company affiliate, and identify any such operations that are crossborder. Provide information about the assets and annual revenue for each core business line, clearly identifying revenue to the CIDI. (iii) Map franchise components to core business lines, and franchise components and core business lines to VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 material entities and regulated subsidiaries. (iv) Describe the CIDI’s branch organization, both domestic and foreign, including the address and total domestic and foreign deposits of each branch. (v) Identify each CIDI subsidiary that is one of the following legal entities (each a ‘‘regulated subsidiary’’), and provide the address and asset size of each regulated subsidiary: (A) A broker or dealer that is registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); (B) A registered investment adviser, properly registered by or on behalf of either the Securities and Exchange Commission or any State, with respect to the investment advisory activities of such investment adviser and activities incidental to such investment advisory activities; (C) An investment company that is registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.); (D) An insurance company, with respect to insurance activities of the insurance company and activities incidental to such insurance activities, that is subject to supervision by a State insurance regulator; (E) A legal entity that is subject to regulation by, or registration with, the Commodity Futures Trading Commission, with respect to activities conducted as a futures commission merchant, commodity trading adviser, commodity pool, commodity pool operator, swap execution facility, swap data repository, swap dealer, major swap participant, and activities that are incidental to such commodities and swaps activities; (F) A corporation organized under 12 U.S.C. 611 et seq. or a corporation having an agreement or undertaking with the Federal Reserve Board under 12 U.S.C. 601 et seq.; or (G) Any legal entity that is organized under the law of any jurisdiction other than the United States and that is authorized or supervised by a regulatory authority of such jurisdiction in a manner generally comparable to the U.S. legal entities and authorities described in paragraphs (d)(4)(v)(A) through (E) of this section, and includes any subsidiary that takes deposits or conducts the business of banking under the laws of such jurisdiction. (vi) Identify all of the CIDI’s subsidiaries, offices, and agencies with cross-border operations associated with the operations of any core business line or franchise component. For each such subsidiary, office, or agency, provide PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 56651 metrics that appropriately depict its size and significance, and the location of each such subsidiary, office, and agency. (5) Methodology for material entity designation. A full resolution submission must describe the CIDI’s methodology for identifying material entities. The methodology must be appropriate to the nature, size, complexity, and scope of the CIDI’s operations. (6) Separation from parent; potential barriers or material obstacles to orderly resolution. The full resolution submission must address the CIDI’s ability to operate separately from the parent company’s organization, and any impact on maintaining economic viability and preservation of franchise value in a bridge depository institution, with the assumption that the parent company and parent company affiliates are in resolution under 11 U.S.C. 101 et seq. or another applicable insolvency regime. The full resolution submission must describe the actions necessary to separate the CIDI and its subsidiaries from the organizational structure of its parent company in a cost-effective and timely fashion. The full resolution submission must identify potential barriers or other material obstacles to an orderly resolution of the CIDI that may occur upon the CIDI’s separation from the parent company’s organization, as well as risks to the identified strategy (if required), and inter-connections and inter-dependencies that may hinder the timely and effective resolution of the CIDI, and include the remediation steps or mitigating responses necessary to eliminate or minimize such barriers or obstacles. (7) Overall deposit activities. A full resolution submission must: (i) Describe the CIDI’s overall deposit activities, including, insured and uninsured deposits, and particular deposit concentrations or other aspects of the deposit base or underlying systems that may create operational complexity for the FDIC. Describe how any types or groups of deposits are related to a core business line, business segment, or franchise component, and if so, how those types or groups of deposits are identified on the records or systems of the CIDI. (ii) Identify the total amount of foreign deposits by jurisdiction and what percentage of foreign deposits is dually payable in the United States. Describe any relationship between foreign deposits and core business lines and any deposit sweep arrangements with foreign branches, subsidiaries, and affiliates. E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56652 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations (iii) Identify and describe deposit sweep arrangements, if any, that the CIDI has with the parent company, parent company affiliates, or third parties, and identify contracts governing such deposit sweep arrangements. Describe the CIDI’s reporting capabilities on sweep deposits, including whether such reporting is automated and any data lag that affects the accuracy of such reports. If the CIDI receives significant amounts of deposits through such deposit sweep arrangements with the parent company or parent company affiliates, include a detailed discussion of such relationships and the business objectives of such deposit sweep arrangements. (iv) Identify all omnibus, deposit sweep, and pass-through accounts, and identify the accountholder, the location of relevant contracts, and the system on which the accounts are maintained. Provide a detailed discussion of the capabilities and timeliness of deposit reporting systems and capabilities to generate accurate and timely contact information with respect to any omnibus, deposit sweep, or passthrough accounts. (v) Provide a report regarding the CIDI’s depositors that hold or control the largest deposits (whether in one account or multiple accounts) that collectively are material to one or more business segments (‘‘key depositors’’). The report must identify key depositors by name and business segment and the amount of deposit of each key depositor, and for each key depositor must identify other services provided by the CIDI to that depositor, such as lending, wealth management, brokerage services, or custody services. The full resolution submission must describe the CIDI’s approach to identifying these key depositors and must describe how long it would take the CIDI to generate such a report and the timeliness of the information provided. (8) Critical services. A CIDI must be able to demonstrate capabilities necessary to ensure continuity of critical services in resolution. In order to support these capabilities, a full resolution submission must: (i) Identify and describe the CIDI’s critical services and critical services support, including whether they are provided, in whole or in part, by or through: (A) The CIDI or a CIDI subsidiary or branch (and further indicate whether those critical services or critical services support are ultimately provided by a third party), or (B) The parent company or a parent company affiliate (and further indicate VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 whether those critical services or critical services support are ultimately provided by a third party). (ii) Describe the CIDI’s process for identifying critical services and critical services support. Describe the CIDI’s process for collecting and monitoring the terms of contracts governing critical services and critical services support, and whether services provided pursuant to such contracts and associated costs can be segmented by the material entity, core business line, or franchise component that receives the critical service or critical service support. (iii) Map critical services support to the legal entities that own, contract for, or employ them, and map critical services to the material entities, core business lines, and franchise components that they support. (iv) Identify the physical locations and jurisdictions of critical service providers and critical services support that are located outside of the United States. (v) Identify the critical services and critical services support that may be at risk of interruption in the event of the CIDI’s failure and describe the process used to make this determination. Describe the CIDI’s approach for continuing critical services in the event of the CIDI’s failure. Identify contracts for critical services that contain provisions that, upon the insolvency of the CIDI or the FDIC being appointed receiver of the CIDI, purport to permit the service provider to stop providing services, to alter pricing, or to alter other terms of service. Discuss potential obstacles to maintaining critical services that could occur in the event of the CIDI’s failure and steps that could be taken to remediate or otherwise mitigate the risk of interruption, to include those critical services and critical services support provided by the parent company or a parent company affiliate and addressing: (A) Whether the CIDI and the parent company or parent company affiliate have entered into a written agreement and whether the written agreement has a cost plus or arms’ length pricing rate, and the processes used by the CIDI to identify and project liquidity needs associated with those costs; and (B) The impact on continuity of critical services or critical services support provided by the parent company or a parent company affiliate if the parent company or parent company affiliate is in resolution under 11 U.S.C. 101 et seq. or other applicable insolvency regime. (9) Key personnel. A full resolution submission must: PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 (i) Identify all key personnel by title, function, location, core business line, and employing legal entity. (ii) Describe the CIDI’s methodology for identifying key personnel. (iii) Provide a recommended approach for retaining key personnel during the CIDI’s resolution. (iv) Identify all employee benefit programs provided to key personnel, including health insurance, defined contribution and defined benefit retirement programs, and any other employee wellness programs, as well as any collective bargaining agreements or other similar arrangements. Identify the legal entity sponsor of each employee benefit program, and provide a description of and points of contact (by title) for such programs. (10) Franchise components. A CIDI must be able to demonstrate the capabilities necessary to ensure that franchise components and the IDI franchise are marketable in resolution. A full resolution submission must: (i) Identify franchise components that are currently separable, and are marketable in a timely manner in resolution. For a resolution plan of a group A CIDI, the franchise components identified must be sufficient to implement the identified strategy. (ii) Provide metrics that depict the size and significance of each franchise component. (iii) Identify by position the senior management officials of the CIDI who are primarily responsible for overseeing the business activities underlying the franchise component. (iv) Describe the CIDI’s current capabilities and process to initiate marketing of franchise components to potential third party acquirers, and describe the process by which the CIDI would identify prospective bidders for such franchise components. (v) Describe the key assumptions (such as market conditions, available time to market assets, and anticipated client behaviors) underpinning each franchise component divestiture. (vi) Describe any significant impediments and obstacles to execution, including significant legal, regulatory, cross-border or operational challenges to the divestiture of each franchise component. This description must also address impediments and obstacles to maintaining internal operations (for example, shared services, information technology requirements, and human resources) and to maintaining access to financial market utilities. Identify the material actions that would be needed to facilitate the sale or disposition of each franchise component and, based on the E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations CIDI’s current capabilities, describe the projected time frame to prepare for and execute the disposition of each franchise component. (vii) If a CIDI subsidiary or a parent company affiliate is a broker-dealer that provides services to the CIDI or customers of the CIDI, describe such services and the integration of the broker-dealer with the CIDI’s business and operations. Provide an analysis discussing the challenges that could arise upon the discontinuation of services if the CIDI were separated from the broker-dealer, and actions to mitigate such challenges. (viii) Describe the CIDI’s current capabilities and processes to establish a virtual data room promptly in the runup to or upon failure of the CIDI that could be used to carry out sale of the IDI franchise as well as any or all of the CIDI’s franchise components, including a description of the organizational structure of information within the virtual data room. Information in the virtual data room must support the ability of the FDIC to market and execute a timely sale or disposition of the IDI franchise or the CIDI’s franchise components, be appropriate for a buyer to conduct due diligence for a timely sale or disposition of the IDI franchise or the CIDI’s franchise components, and be sufficient to permit a bidder to provide a competitive bid on the IDI franchise or the CIDI’s franchise components. A full resolution submission must also describe expected access protocols and requirements for the FDIC to use the virtual data room in order to carry out the sale of the IDI franchise or the CIDI’s franchise components, including the FDIC’s ability to facilitate bidder due diligence, and describe how information populated within the virtual data room could be transferred to a virtual data room hosted by the FDIC. The full resolution submission should identify the time required to capture all elements of information in the virtual data room, indicating number of days it would take to populate each category of information described below, and the process for each, including any potential obstacles or impediments in producing accurate, timely, and complete information in a useful format. The content of the virtual data room must include the following elements, or those that are applicable in the case of a sale of a franchise component: (A) Financial information, including annual and interim financial statements, including carve-out financial statements for franchise components, general ledger, and relevant financial information; VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 (B) Deposit data and information; (C) Loan and lending operations information; (D) Securities information, including relevant information describing the CIDI’s securities and investment portfolio; (E) Corporate organization information, including current organizational chart; (F) Employee information, including organization charts, compensation, and benefits; (G) Material contracts and critical services information, including key critical services agreements, leases, and bond indentures; and (H) Other information necessary to facilitate a rapid and effective due diligence process for the sale of the IDI franchise or the CIDI’s franchise components. (11) Material asset portfolios. A full resolution submission must identify each material asset portfolio by size, and by category and classes of assets within such material asset portfolio, and include a breakdown of those assets within a material asset portfolio that are held by a foreign branch or regulated subsidiary. For each material asset portfolio, describe how the assets within the portfolio are valued and how they are maintained on the books and records of the CIDI. Identify and discuss impediments to the sale of each material asset portfolio identified and provide a timeline for such sale. (12) Valuation to facilitate FDIC’s assessment of least-costly resolution method. A CIDI must be able to demonstrate the capabilities necessary to produce valuations needed in assessing the least-cost test. A resolution plan must: (i) Provide a detailed description of the approaches the CIDI would employ for determining the values of the franchise components and the IDI franchise as a whole, including the underlying assumptions and rationale. Describe the CIDI’s approach to the development of the information needed to support valuation analysis, including a description of the CIDI’s current ability to produce updated projections, timely if necessary, to support the FDIC’s analysis to determine whether a resolution strategy would be the least costly to the Deposit Insurance Fund in the event of failure. (ii) Provide the following valuation analysis based upon the failure scenario assumed in the development of the identified strategy, with such adjustments to the scenario as may be necessary to demonstrate the analysis required under paragraph (d)(12)(ii)(B) of this section: PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 56653 (A) Valuation estimates of the IDI franchise, and where a multiple acquirer exit strategy is incorporated in the identified strategy, a sum-of-the-parts analysis. In determining these valuation estimates, the CIDI must consider appropriate valuation approaches, such as the income-based approach, assetbased approach, and market-based approach. In deriving a range of estimates of value, the CIDI must assess and provide a reasoned quantitative or qualitative analysis in support of whether the conclusion of value should reflect the results of one valuation approach and method, or a combination of the results of more than one valuation approach and method; as appropriate, the resolution plan must discuss the relevance and weight given to the different valuation approaches and methods used. (B) A qualitative analysis of the impact on franchise value that may result from not transferring any uninsured deposits to the bridge depository institution, including a narrative describing any options to mitigate franchise value destruction where there is not a transfer of all deposits to a bridge depository institution such as, an advance dividend payment to depositors that takes into account the expected loss to depositors, and the impact of such an advance dividend on depositor behavior and preservation of franchise value at different levels of loss. Such qualitative analysis should reflect reasonable assumptions of customer behavior based upon the CIDI’s range of services provided to, and interconnections with, depositors. (iii) Provide all content responsive to paragraph (d)(12)(ii) of this section as an appendix to the resolution plan, including any analysis of liquidity and deposit runoff assumptions and factors underlying such runoff estimates. (13) Off-balance-sheet exposures. A full resolution submission must describe any material off-balance-sheet exposures (including the amount and nature of unfunded commitments, guarantees, and contractual obligations) of the CIDI and map those exposures to core business lines, franchise components, and material asset portfolios. (14) Qualified financial contracts. A full resolution submission must: (i) Describe the types of qualified financial contract transactions the CIDI is involved with in respect of its customers and business activities, the core business lines and franchise components with which such transactions are associated, and how the CIDI offsets position risk from such E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56654 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations transactions. Identify customers of the CIDI that are counterparties to qualified financial contracts transactions with the CIDI that are significant in terms of gross notional amounts or volumes of transactions. (ii) Describe the booking models for risk from derivative transactions, including whether customer-facing risk or other dealer-facing risk resides in the CIDI while the position risk hedging is performed by a parent company affiliate. Describe the CIDI’s use of any ‘‘global risk book,’’ ‘‘remote bookings,’’ or ‘‘back-to-backs’’ booking model, identify the challenges these booking models present to the transfer or unwind of such related derivatives, and analyze approaches for addressing those challenges. (iii) Describe how the CIDI uses qualified financial contracts to manage its hedging or liquidity needs, including specifying the hedged items (including underlying risk, cash flow, assets or liability being hedged) and the applicable core business line, as well as the approach used to mitigate such risks. (iv) For each of paragraphs (d)(14)(i) through (iii) of this section, identify hedges that receive hedge accounting treatment, core business line-specific hedges, and reporting capabilities and practices for hedge accounting information and other end-user hedges. (15) Unconsolidated balance sheet; material entity and regulated subsidiary financial statements. A full resolution submission must provide an unconsolidated balance sheet for the CIDI and a consolidating schedule for all material entities and regulated subsidiaries that are subject to consolidation with the CIDI. Amounts attributed to legal entities that are not material entities or regulated subsidiaries may be aggregated on the consolidating schedule. Provide financial statements for each material entity and regulated subsidiary. When available, audited financial statements should be provided. (16) Payment, clearing, and settlement. A full resolution submission must identify each provider of payment, clearing, and settlement services, and agent banks, and other financial market utilities (each, a ‘‘PCS service provider’’), of which the CIDI directly is a member or has a direct relationship that is a critical service or a critical service support. For each such PCS service provider: (i) Map those PCS service providers to the CIDI’s legal entities, core business lines, and franchise components; (ii) Describe the PCS services provided by such PCS service providers, VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 including the value and volume of activities on a per-provider basis; and (iii) Describe the CIDI’s role as a PCS service provider that is material in terms of revenue to, or value of, any franchise component or core business line. (17) Capital structure; funding sources. A full resolution submission must: (i) Provide descriptions of the current processes used by the CIDI to identify the funding, liquidity, and capital needs of and resources available to each material entity that is a CIDI subsidiary or foreign branch. Describe the current capabilities of the CIDI to project and report its funding and liquidity needs (e.g., next day, cumulative next five days, cumulative next 30 days). (ii) Identify the composition of the liabilities of the CIDI including the types and amounts of short-term and long-term liabilities by type and term to maturity, secured and unsecured liabilities, and subordinated liabilities. Such information must include whether such liabilities are held by affiliates, whether they are publicly issued, their maturity, any call rights provided, and, where applicable, the identity of their indenture trustees. (iii) Identify the material funding relationships and material inter-affiliate exposures between the CIDI and any CIDI subsidiary or foreign branch that is a material entity, including material inter-affiliate financial exposures, claims or liens, lending or borrowing lines and relationships, guaranties, deposits, and derivatives transactions. (18) Parent and parent company affiliate funding, transactions, accounts, exposures, and concentrations. A full resolution submission must: (i) Identify material affiliate funding relationships, and material inter-affiliate exposures, including terms, purpose, and duration, that the CIDI or any CIDI subsidiary has with the parent company or any parent company affiliate. Such information must include material affiliate financial exposures, claims or liens, lending or borrowing lines and relationships, guaranties, deposits, and derivatives transactions. (ii) Identify the nature and extent to which the parent company or any parent company affiliate serves as a source of funding to the CIDI and CIDI subsidiaries, the terms of any contractual arrangements, including any capital maintenance agreements, the location of related assets, funds, or deposits, and the mechanisms by which funds are transferred from the parent company or any parent company affiliate to the CIDI and CIDI subsidiaries. PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 (19) Economic effects of resolution. A full resolution submission must identify any activities of the CIDI that provide a service or function that is material: (i) To a geographic area or region of the United States; (ii) To a business sector or product line in that geographic area or region, or nationally; or (iii) To other financial institutions. The full resolution submission must include a discussion of mitigants to the potential impact of termination of those activities in the event of failure of the CIDI, including whether the activity is readily substitutable. (20) Non-deposit claims. A full resolution submission must identify and describe the CIDI’s systems and processes used to identify the unsecured creditors of the CIDI that are not depositors, as well as the unsecured creditors of each CIDI subsidiary that is a material entity. Such description must identify the location of the CIDI’s records and recordkeeping practices regarding unsecured debt issued by the CIDI and any inter-creditor agreements for unsecured debt. The description must include a description of the CIDI’s capabilities to identify each such unsecured creditor by name, address, nature of the liability, and amount owed by the CIDI and each CIDI subsidiary or, in the case of indentured securities, the identity of the indenture trustee. (21) Cross-border elements. A full resolution submission must describe all components of the parent company’s and parent company affiliates’ operations that are based or located outside the United States, including regulated subsidiaries, and foreign branches and offices that contribute to the value, revenues, or operations of the CIDI. A full resolution submission must also identify all authorities with regulatory or supervisory authority over these operations, and identify regulatory or other impediments to divestiture, transfer, or continuation of any of the CIDI’s foreign branches, subsidiaries, and offices in resolution, including with respect to retention or termination of personnel and transfer or continuation of licenses or authorizations. (22) Management information systems; software licenses; intellectual property. A full resolution submission must: (i) Provide a detailed inventory and description of the key management information systems and applications, including systems and applications for risk management, accounting, and financial and regulatory reporting, as well as those used to provide the information required to be provided in the full resolution submission, used by E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations or for the benefit of the CIDI and CIDI subsidiaries. For each system or application the description must identify the legal owner or licensor, the key personnel needed to support and operate the system or application, the system or application’s use and function, any core business line that uses the system or application, its physical location (if any), any related third party contracts or service-level agreements, any related software or systems licenses, and any other related intellectual property. (ii) For any key management information system or application for which the CIDI or CIDI subsidiary is not the owner or licensor, describe both any obstacles to maintaining access to such system or application when the CIDI is in resolution, and approaches for maintaining access to such system or application when the CIDI is in resolution, including the projected costs of maintaining access when the CIDI is in resolution. (iii) Describe the capabilities of the CIDI’s processes and systems to collect, maintain, and produce the information and other data underlying the full resolution submission. Identify all relevant management information systems and applications, and describe how the information is managed and maintained. Describe any deficiencies, gaps, or weaknesses in such capabilities and the actions the CIDI intends to take to address promptly any such deficiencies, gaps, or weaknesses, and the time frame for implementing such actions. (23) Digital services and electronic platforms. A full resolution submission must: (i) Describe all digital services and electronic platforms offered to customers to support banking transactions for retail or business customers. (ii) Identify whether such services and platforms are provided by the CIDI, a CIDI subsidiary, a parent company affiliate, or a third party, and which of them owns the related intellectual property or is the licensee. (iii) Discuss how these services or platforms are significant to the operations or customer relationships of the CIDI, and their impact on franchise value and depositor behavior. (24) Communications playbook. A full resolution submission must include a communications playbook that describes the CIDI’s current communication capabilities, including capabilities to communicate with personnel, customers, and counterparties, and how those capabilities could be used from the VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 point of the CIDI’s failure through the CIDI’s resolution. The description must: (i) Identify categories of key stakeholders addressed in the CIDI’s communications plans including, counterparties, domestic and foreign regulatory authorities, customers, and personnel. (ii) Identify communication channels for each key stakeholder category and describe the logistics and limitations of the use of each communication channel. (iii) Describe the procedures to generate contact lists for each key stakeholder category and estimate the time required to generate each list. (iv) Describe procedures for coordinating communications across key stakeholder categories and communications channels, including cross-border communications, if any. (v) Identify key personnel that are responsible for the CIDI’s crisis communications across key stakeholder categories and communications channels and the functional and legal entity organization of relevant communications activities. (25) Corporate governance. A full resolution submission must include a detailed description of: how resolution planning is integrated into the corporate governance structure and processes of the CIDI; the CIDI’s policies, procedures, and internal controls governing preparation and approval of the full resolution submission; and the identity and position of the senior management official of the CIDI who is primarily responsible and accountable for the development, maintenance, and filing of the full resolution submission, and for the CIDI’s compliance with this section. (26) CIDI’s assessment of the full resolution submission. A full resolution submission must describe the nature, extent, and results of any contingency planning or similar exercise conducted by the CIDI since the date of the most recently filed full resolution submission to assess the viability of the identified strategy (if required) or improve any capabilities described in the full resolution submission. (27) Any other material factor. A full resolution submission must identify and discuss any other material factor that may impede the resolution of the CIDI. (e) Interim supplement. Each CIDI must submit interim supplements containing current and accurate information regarding the specified full resolution submission content items in accordance with this paragraph (e). (1) Submission date. (i) Each interim supplement must be submitted to the FDIC on or before the anniversary date (or first business day thereafter) of its most recent full resolution submission, PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 56655 or its most recent interim supplement, unless the CIDI has received written notice of a different date from the FDIC. (ii) Notwithstanding paragraph (e)(1)(i) of this section, with respect to all CIDIs, no interim supplement is required in the calendar year in which a full resolution submission is made and, with respect to a biennial filer, no interim supplement is required in the calendar year in which it submits a DFA resolution plan. (2) Content items for interim supplement. Each CIDI must submit interim supplements that address each of the following content items: (i) A description of all material changes resulting from an extraordinary event; (ii) A description of each material change applicable to interim supplement content items since the submission of its prior full resolution submission (or affirmation that no such material change has occurred); (iii) The content required under paragraph (d)(4) of this section; (iv) From paragraph (d)(7) of this section, the content required under paragraph (d)(7)(i), the first sentence of paragraph (d)(7)(ii), the first sentence of paragraph (d)(7)(iii), the first sentence of paragraph (d)(7)(iv), and the first two sentences of paragraph (d)(7)(v) of this section; (v) From paragraph (d)(8) of this section, the content required under paragraphs (d)(8)(i) and (iv) of this section; (vi) From paragraph (d)(9) of this section, the content required under paragraph (d)(9)(i) of this section; (vii) From paragraph (d)(10) of this section, the content required under paragraphs (d)(10)(i) through (iii) of this section; (viii) From paragraph (d)(11) of this section, the content required under the first sentence of paragraph (d)(11) of this section; (ix) The content required under paragraph (d)(13) of this section, excluding the requirement to ‘‘map those exposures to core business lines, franchise components and material asset portfolios’’; (x) The content required under paragraph (d)(15) of this section; (xi) From paragraph (d)(16) of this section, the content required under the first sentence of paragraph (d)(16) of this section; (xii) From paragraph (d)(17) of this section, the content required under the first sentence of paragraph (d)(17)(ii) of this section; (xiii) The content required under paragraph (d)(21) of this section; E:\FR\FM\09JYR4.SGM 09JYR4 lotter on DSK11XQN23PROD with RULES4 56656 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations (xiv) From paragraph (d)(22) of this section, the content required under paragraph (d)(22)(i) of this section; and (xv) Any other content element expressly identified for the next interim supplement by the FDIC. (f) Credibility; review of full resolution submissions; engagement; capabilities testing—(1) Credibility criteria. Each full resolution submission must be credible. The FDIC may, at its sole discretion, determine that the full resolution submission is not credible if: (i) The identified strategy would not provide timely access to insured deposits, maximize value from the sale or disposition of assets, minimize any losses realized by creditors of the CIDI in resolution, and address potential risk of adverse effects on U.S. economic conditions or financial stability; or (ii) The information and analysis in the full resolution submission is not supported with observable and verifiable capabilities and data and reasonable projections or the CIDI fails to comply in any material respect with the requirements of paragraph (d) or (e) of this section. (2) Resolution submission review and credibility determination. The FDIC will review the full resolution submission in consultation with the appropriate Federal banking agency for the CIDI and its parent company. If, after consultation with the appropriate Federal banking agency for the CIDI, the FDIC determines that the full resolution submission of a CIDI is not credible pursuant to paragraph (f)(1) of this section, the FDIC must notify the CIDI in writing of such determination. Any notice provided under this paragraph (f)(2) must include a description of the material weaknesses in the full resolution submission identified by the FDIC that resulted in the determination that the full resolution submission is not credible. A material weakness is an aspect of a CIDI’s full resolution submission that individually or in conjunction with other aspects fails to meet the credibility criteria described in paragraph (f)(1). (3) Resubmission of a full resolution submission. Within 90 days of receiving a notice issued by the FDIC pursuant to paragraph (f)(2) of this section that the full resolution submission is not credible based on identified material weaknesses, or such shorter or longer period as the FDIC may determine, a CIDI must submit a revised full resolution submission, or such other information or material specified by the FDIC, to the FDIC that addresses any material weaknesses identified by the FDIC and discusses in detail the VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 revisions made to address such material weaknesses. (4) Failure regarding resubmission. If the CIDI fails to submit the revised full resolution submission within the required time-period under paragraph (f)(3) of this section or the FDIC determines that the revised full resolution submission fails to address adequately the material weaknesses identified in the notice issued by the FDIC, the FDIC may take enforcement action against the CIDI in accordance with paragraph (j) of this section. (5) Significant findings. The FDIC may also identify significant findings and other observations after review of a full resolution submission. A significant finding is a weakness or gap that raises questions about the credibility of a CIDI’s full resolution submission but does not rise to the level of a material weakness. If a significant finding is not satisfactorily explained or addressed before or in the CIDI’s next full resolution submission, it may be found to be a material weakness in the CIDI’s next full resolution submission. The FDIC may require a project plan with identified milestones to assure that the significant finding is timely addressed. The FDIC may identify an aspect of a CIDI’s full resolution submission as a material weakness even if such aspect was not identified as a significant finding in an earlier full resolution submission. The FDIC must notify the CIDI in writing of any significant findings that are identified in the full resolution submission. (6) Engagement. Each CIDI must provide the FDIC such information and access to such personnel of the CIDI as the FDIC in its discretion determines is relevant to any of the provisions of this section (‘‘engagement’’). Personnel made available must have sufficient expertise and responsibility to address the informational and data requirements of the engagement. Engagement between the CIDI and the FDIC may be required at any time. This engagement may include the FDIC requiring the CIDI to provide information or data to support the content items required by paragraph (d) or (e) of this section, other information related to a group A CIDI’s identified strategy, or, for any CIDI, other resolution options being considered by the FDIC. The FDIC will provide the CIDI with timely notification of the scope of any engagement before such engagement begins and will notify the CIDI on the conclusion of the engagement. (7) Capabilities testing. At the discretion of the FDIC, the FDIC may require any CIDI to demonstrate the CIDI’s capabilities described, or PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 required to be described, in the full resolution submission, including the ability to provide the information, data and analysis underlying the full resolution submission (‘‘capabilities testing’’). The CIDI must perform such capabilities testing promptly, and provide the results in a time frame and format acceptable to the FDIC. Capabilities testing may be included in connection with full resolution submission review under paragraph (f)(2) of this section or any engagement under paragraph (f)(6) of this section. The FDIC will provide the CIDI with timely notification of the scope of any capabilities testing before such capabilities testing begins and will notify the CIDI on the conclusion of the capabilities testing. (g) No limiting effect on FDIC. No full resolution submission or interim supplement provided pursuant to this section will be binding on the FDIC as supervisor, deposit insurer, or receiver for a CIDI or otherwise require the FDIC to act in conformance with such full resolution submission or interim supplement. (1) Financial information. The full resolution submission or interim supplement must, to the greatest extent possible, use financial information as of the most recent fiscal year-end for which the CIDI has financial statements or, if the use of financial information as of a more recent date as of which the CIDI has financial statements would more accurately reflect the operations of the CIDI on the date of the submission, financial information as of that more recent date. (2) Indexing of information and analysis to full resolution submission and interim supplement content requirements. A full resolution submission or interim supplement must include an index of each content requirement in paragraph (d) or (e)(2) of this section, as applicable, required to be included in that full resolution submission or interim supplement, as applicable, to every instance of its location in the full resolution submission, or interim supplement, as applicable. (3) Combined full resolution submission or interim supplements by affiliated CIDIs. CIDIs that are affiliates may submit a single, combined full resolution submission or interim supplement, but only if all affiliated CIDIs submitting the combined full resolution submission or interim supplement are within the same CIDI group, whether group A or group B. The combined full resolution submission or interim supplement must satisfy the content requirements for each CIDI’s full E:\FR\FM\09JYR4.SGM 09JYR4 Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations lotter on DSK11XQN23PROD with RULES4 resolution submission or interim supplement, as applicable, and the FDIC must be able to readily identify the portions of a combined full resolution submission or interim supplement that comprise each CIDI’s full resolution submission or interim supplement. (h) Form of full resolution submissions; confidential treatment of full resolution submissions and interim supplements. (1) Each full resolution submission must be divided into a Public Section and a Confidential Section. Each CIDI must segregate and separately identify the Public Section from the Confidential Section. The Public Section must consist of a summary overview of the full resolution submission that describes the business of the CIDI. For each CIDI, the Public Section must include, to the extent material to the CIDI’s full resolution submission: (i) The names of material entities; (ii) A description of core business lines; (iii) Consolidated financial information regarding assets, liabilities, capital and major funding sources; (iv) A description of derivative activities and hedging activities; (v) A list of PCS service providers; (vi) A description of foreign operations; (vii) The identities of material supervisory authorities; VerDate Sep<11>2014 20:19 Jul 08, 2024 Jkt 262001 (viii) The identities of the principal officers; (ix) A description of the corporate governance structure and processes related to resolution planning; (x) A description of material management information systems; and (xi) For group A CIDIs only, a description, at a high level, of the CIDI’s identified strategy. (2) The confidentiality of full resolution submissions and interim supplements must be determined in accordance with applicable exemptions under the Freedom of Information Act (5 U.S.C. 552(b)) and the FDIC’s Disclosure of Information Rules (12 CFR part 309). (3) Any CIDI submitting a full resolution submission, interim supplement, or related materials pursuant to this section that desires confidential treatment of the information submitted pursuant to 5 U.S.C. 552(b)(4) and 12 CFR part 309 and related policies may file a request for confidential treatment in accordance with those rules. (4) To the extent permitted by law, information comprising the Confidential Section of a full resolution submission and the information comprising an interim supplement will be treated as confidential. (5) To the extent permitted by law, the submission of any non-publicly PO 00000 Frm 00039 Fmt 4701 Sfmt 9990 56657 available data or information under this section will not constitute a waiver of, or otherwise affect, any privilege arising under Federal or State law (including the rules of any Federal or State court) to which the data or information is otherwise subject. Privileges that apply to full resolution submissions and related materials are protected pursuant to 12 U.S.C. 1828(x). (i) Extensions and exemptions—(1) Extension. Notwithstanding the general requirements of paragraph (c) of this section, on a case-by-case basis, the FDIC may extend, on its own initiative or upon written request, any time frame or deadline of this section. (2) Waiver. The FDIC may, on its own initiative or upon written request, exempt a CIDI from one or more of the requirements of this section. (j) Enforcement. Violating any provision of this section constitutes a violation of a regulation and may subject the CIDI to enforcement actions under 12 U.S.C. 1818, including paragraph (t) thereunder. Federal Deposit Insurance Corporation. By order of the Board of Directors. Dated at Washington, DC, on June 20, 2024. James P. Sheesley, Assistant Executive Secretary. [FR Doc. 2024–13982 Filed 7–8–24; 8:45 am] BILLING CODE 6714–01–P E:\FR\FM\09JYR4.SGM 09JYR4

Agencies

FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Rules and Regulations]
[Pages 56620-56657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13982]



[[Page 56619]]

Vol. 89

Tuesday,

No. 131

July 9, 2024

Part IV





Federal Deposit Insurance Corporation





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12 CFR Part 360





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

Federal Register / Vol. 89 , No. 131 / Tuesday, July 9, 2024 / Rules 
and Regulations

[[Page 56620]]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AF90


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

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is adopting this final rule to require the submission 
of resolution plans by insured depository institutions (IDIs) with $100 
billion or more in total assets and informational filings by IDIs with 
at least $50 billion but less than $100 billion in total assets. The 
final rule modifies the current rule requirements regarding the content 
and timing of full resolution submissions, as well as interim 
supplements to those submissions provided to the FDIC, in order to 
support the FDIC's resolution readiness in the event of material 
distress and failure of these large IDIs. The final rule also enhances 
how the credibility of full resolution submissions will be assessed, 
expands expectations regarding engagement and capabilities testing, and 
explains expectations regarding the FDIC's review, feedback, and 
enforcement of IDIs' compliance with the rule.

DATES: The rule is effective October 1, 2024.

FOR FURTHER INFORMATION CONTACT: Kent R. Bergey, Associate Director, 
Division of Complex Institution Supervision and Resolution, 917-320-
2834, [email protected]; Laura Porfiris, Associate Director, Division 
of Complex Institution Supervision and Resolution, 212-657-9974, 
[email protected]; Elizabeth Falloon, Senior Advisor, Division of 
Complex Institution Supervision and Resolution, 202-898-6626, 
[email protected]; Mark Haley, Chief, Policy Analysis, Division of 
Complex Institution Supervision and Resolution, 917-320-2911, 
[email protected]; Dora Douglass Kochman, Senior CFI Policy Specialist, 
Division of Complex Institution Supervision and Resolution, 202-898-
3633, [email protected]; Audra Cast, Deputy Director, Division 
of Resolutions and Receiverships, 312-382-7577, [email protected]; 
Varanessa Marshall, Assistant Director, Division of Resolution and 
Receiverships, 678-916-2233, [email protected]; Benjamin M. DeMaria, 
Counsel, Legal Division, 202-898-7391, [email protected]; Vickie R. 
Olafson, Counsel, Legal Division, 703-489-5873, [email protected]; 
Esther Rabin, Counsel, Legal Division, 202-898-6860, [email protected]; 
F. Angus Tarpley, III, Counsel, Legal Division, 202-898-8521, 
[email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
    A. Background
    B. Overview of the Proposed Rule
II. Overview of Comments
III. Final Rule
    A. Scope and Purpose
    B. Definitions
    C. Full Resolution Submissions Required
    D. Content of the Full Resolution Submissions for CIDIs
    E. Interim Supplement
    F. Credibility; Review of Full Resolution Submissions; 
Engagement and Capabilities Testing
    G. No Limiting Effect on FDIC
    H. Form of Full Resolution Submissions; Confidential Treatment 
of Full Resolution Submissions and Interim Supplements
    I. Extensions and exemptions
    J. Enforcement
IV. Expected Effects
    A. Review of Comments
    B. Changes From the Proposed Rule to the Final Rule
    C. Marginal Effect of Changes Compared to the 2012 Rule
    D. Effects on Insured Deposits and the Deposit Insurance Fund
    E. Additional Economic Consideration and Effects
    F. Overall Effects
V. Alternatives Considered
VI. Regulatory Analysis and Procedures
    A. Paperwork Reduction Act
    B. Regulatory Flexibility Act
    C. Plain Language
    D. Riegle Community Development and Regulatory Improvement Act 
of 1994
    E. Congressional Review Act

I. Introduction

    The FDIC's regulation ``Resolution plans required for insured 
depository institutions with $50 billion or more in total assets,'' 
issued in 2012 \1\ (2012 rule), requires IDIs with $50 billion or more 
in total assets (CIDIs) to submit resolution plans periodically. This 
resolution plan requirement was established to facilitate the FDIC's 
readiness to resolve a CIDI under the Federal Deposit Insurance Act of 
1950, as amended (FDI Act), in the event of its insolvency.
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    \1\ 12 CFR 360.10. The 2012 rule was published as an interim 
final rule with an effective date of January 1, 2012, 76 FR 2011 
(Sept. 11, 2011); the 2012 rule was effective April 1, 2012, 77 FR 
3075 (Jan. 23, 2012).
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    This final rulemaking to amend and restate the 2012 rule builds on 
the FDIC's more than a decade-long experience implementing the 2012 
rule, providing guidance and feedback to CIDIs, and leveraging the 
content of submissions for the FDIC's development of resolution 
strategies. Through this process, the FDIC has gained a better 
understanding of the challenges of resolving CIDIs and the essential 
information needed in resolution plans and other related submissions to 
facilitate the FDIC's readiness in the event of a failure of one of 
these CIDIs. Therefore, this final rule supersedes all prior guidance, 
including the Statement (as defined below).
    Part of the challenge in resolving CIDIs arises from the wide range 
of business models and structures among these banks. While many of the 
CIDIs are engaged largely in traditional commercial and retail banking 
activities, with nearly all assets and activities conducted within the 
CIDI or its subsidiaries (the bank chain), others conduct significant 
non-banking activities. Many of the CIDIs have a broker-dealer 
subsidiary or affiliate that provides services to bank customers. The 
CIDIs also include banks primarily engaged in a particular business 
segment, such as credit card services, as well as U.S. IDIs that are 
part of large foreign banking organizations. There is no one-size-fits-
all resolution approach for these institutions; rather, the FDIC must 
be prepared to execute a range of resolution options, recognizing the 
trade-offs among those options. The FDIC's development of resolution 
strategies--and its assessment of the options and trade-offs that 
inform them--benefit from the CIDI's knowledge of its own firm, an 
understanding of the CIDI's relevant capabilities, and an awareness of 
the impediments to executing an orderly resolution of the CIDI. Across 
the different CIDI business models and structures, there is a variety 
of factors that increases the challenges and complexity of resolution 
in the event of the failure of one of these large banks. Key factors 
include size, organizational complexity, and deposit profile, among 
others.
    The importance of advance resolution planning was recently 
underscored in the failures of three large banks--all over $100 billion 
in size \2\--in the spring

[[Page 56621]]

of 2023: Silicon Valley Bank (SVB), Signature Bank, and First Republic 
Bank (First Republic).
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    \2\ The failure of Washington Mutual Bank in 2008 remains the 
largest bank failure in U.S. history. At the time of its failure, 
its assets totaled approximately $300 billion. First Republic, SVB, 
and Signature Bank, respectively, were the second, third, and fourth 
largest bank failures in history.
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    The failures of SVB and Signature Bank on March 10 and 12, 2023, 
respectively, were triggered by illiquidity resulting from withdrawals 
by uninsured depositors at unprecedented speed and volumes. As a result 
of the sudden failures, there was no opportunity for pre-failure 
marketing. For both IDIs, the FDIC established a bridge depository 
institution (bridge bank) to continue bank operations post-failure to 
allow time to market the bank. Less than two months following those 
failures, First Republic was placed in receivership and sold. First 
Republic's failure was largely a result of contagion from the prior two 
failures and the bank was able to manage its liquidity for several 
weeks prior to failure, which allowed additional time to market the 
bank. The FDIC facilitated a transaction that resulted in transfer of 
all of the assets and liabilities to a single acquirer without 
establishing a bridge bank, although the FDIC stood ready to exercise 
the authority to form a bridge bank, if needed.
    The challenges associated with the rapidity of the failures were 
exacerbated because the FDIC lacked important resolution planning 
information to facilitate marketing for SVB and Signature Bank. While 
SVB and First Republic had filed resolution plans just a few months 
before their failures, the FDIC neither had completed review nor had 
the opportunity to provide feedback on those plans. Signature Bank had 
not yet filed any resolution plan at the time of its failure; its first 
submission would have been due in June 2023. Current and thorough 
resolution planning information would have facilitated the FDIC's 
preparations to effectively and efficiently market the failed IDIs.
    The size of an IDI can significantly impact the resolution options 
available to the FDIC under the FDI Act. In particular, as IDIs 
increase in size, the likelihood of a timely sale to a single acquirer 
diminishes. Currently, there are 45 CIDIs, of which 33 have total 
assets over $100 billion. As a group, these 45 CIDIs represent 
approximately $12.9 trillion in total deposits.\3\ While a closing 
weekend sale may be an option in some cases, its availability cannot be 
assumed in view of the size, complexity, and potential speed of failure 
of a CIDI. This is particularly true for the largest CIDIs with $100 
billion or more in total assets because the pool of potential acquirers 
for these institutions is limited, and any possible transaction would 
be complex. While there is a larger pool of possible acquiring 
institutions for CIDIs in the $50 to $100 billion total asset range, 
some of these institutions engage in highly complex activities and pose 
similar levels of operational complexity as those over $100 billion in 
total assets.
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    \3\ FDIC Consolidated Reports of Condition and Income data as of 
March 31, 2024.
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    The CIDIs also tend to have a more significant proportion of 
uninsured deposits as compared to smaller banks. In the aggregate, more 
than 43.4 percent of deposits of IDIs with over $50 billion in total 
assets are uninsured.\4\ Under the FDI Act, any transaction using FDIC 
assistance--including where assistance is provided in connection with 
the establishment of a bridge bank--must meet the least-cost test, 
absent a systemic risk exception. Under the least-cost test, the cost 
to the deposit insurance fund (DIF) resulting from any resolution needs 
to be less than the cost to the DIF than all other alternatives. Where 
the proportion of insured deposits is very low, the potential cost to 
the DIF of a resolution in which only insured deposits are protected is 
more likely to be less costly than a resolution in which all deposits 
are protected.
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    \4\ Id.
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    These and other characteristics of large banks add to resolution 
challenges and increase the importance of robust and ongoing resolution 
planning for the CIDIs. The content of the full resolution submissions 
under this final rule will support planning for strategic options, 
including use of a bridge bank, and is important to the FDIC's 
readiness to resolve these banks.

A. Background

    Since issuing the 2012 rule, the FDIC has provided guidance and 
feedback to CIDIs to assist in development of their resolution plans.
    In 2014, following the first submissions, the FDIC provided 
guidance and direction for the preparation of subsequent CIDI 
resolution plans with a focus on the discussion of failure scenario, 
resolution strategies, least-cost analysis, and identified obstacles. 
In addition, following each resolution plan submission cycle, the FDIC 
issued feedback letters to CIDIs with information for the subsequent 
plan submission.
    After several plan submission cycles, in 2018, the FDIC instituted 
a moratorium on the 2012 rule's requirements for all CIDIs pending 
completion of a new rulemaking. At the time the moratorium was adopted, 
the FDIC also published an advance notice of proposed rulemaking 
(ANPR),\5\ which requested comment on how to tailor and improve the 
2012 rule, including how to reduce the burden associated with the 
least-cost test analysis and whether requirements should be tiered 
based on size or complexity factors of cohorts of CIDIs. The ANPR also 
requested comment on potential enhancement of engagement and 
capabilities testing. At that time, the FDIC extended the due date for 
future plan submissions pending completion of the rulemaking process.
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    \5\ 84 FR 16620 (April 22, 2019).
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    Following the issuance of the ANPR, the FDIC continued to develop 
its thinking regarding resolution planning for large IDIs, including 
how to maximize the FDIC's resolution readiness. In 2020 and 2021, the 
FDIC undertook targeted engagement with select CIDIs on their 2018 plan 
submissions, a step consistent with the enhanced emphasis on engagement 
and capabilities testing envisioned under the ANPR.
    In January 2021, the FDIC Board took action to lift the moratorium 
on the resolution plan requirement for CIDIs with $100 billion or more 
in assets and, in June 2021, the FDIC issued a policy statement 
(Statement) \6\ to describe how it planned to implement certain aspects 
of the 2012 rule. The Statement superseded all prior guidance and 
feedback. For CIDIs with total assets of at least $50 billion and less 
than $100 billion, the moratorium on submission of resolution plans 
remained in effect. CIDIs with $100 billion or more in total assets 
submitted resolution plans in accordance with a schedule established by 
the FDIC from December 1, 2022 through December 1, 2023. Consistent 
with the Statement, each of these CIDIs received exemptions from 
certain content requirements under the 2012 rule and could submit 
streamlined resolution plans for review.
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    \6\ Statement on Resolution Plans for Insured Depository 
Institutions (June 25, 2021), https://www.fdic.gov/resources/resolutions/resolution-authority/idi-statement-06-25-2021.pdf.
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    On September 19, 2023, the FDIC published for comment a Notice of 
Proposed Rulemaking, ``Resolution Plans Required for Insured Depository 
Institutions with $100 Billion or More in Total Assets; Informational 
Filings Required for Insured Depository Institutions with At Least $50 
Billion but Less Than $100 Billion in Total Assets'' (NPR).\7\ The FDIC 
received and

[[Page 56622]]

considered 12 comment letters, which are discussed below.\8\
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    \7\ 88 FR 64579 (Sept. 19, 2023).
    \8\ FDIC staff also met with staff of two commenters.
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    In addition to enacting and implementing the 2012 rule, the FDIC 
has instituted several rulemakings that support its mission as deposit 
insurer to make timely insured deposit payments and to resolve a failed 
IDI in the manner that is least costly to the DIF. These separate 
rulemakings address certain difficulties the FDIC could face in the 
closing of a large, complex IDI, and include Recordkeeping for Timely 
Deposit Insurance Determination (part 370) and Recordkeeping 
Requirements for Qualified Financial Contracts (part 371).\9\ Part 370 
requires covered institutions, namely IDIs with two million or more 
deposit accounts, to put in place mechanisms to facilitate prompt 
deposit insurance determinations. Part 371 requires IDIs in a troubled 
condition to keep detailed records in a specified, standard format 
regarding their qualified financial contracts. This information would 
be used by the FDIC, were it appointed receiver, in making a 
determination of which qualified financial contracts entered into by 
the failed institution (if any) will be transferred within the brief 
statutory window.
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    \9\ Codified at 12 CFR part 370 and 12 CFR part 371, 
respectively.
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    Separate from the FDI Act and this rule's requirements, section 
165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act, as amended (Dodd-Frank Act),\10\ and the related joint rulemaking 
published by the Board of Governors of the Federal Reserve System (FRB) 
and the FDIC in November 2019 (DFA rule) \11\ mandate that certain bank 
holding companies and nonbank financial companies (covered companies) 
submit resolution plans (DFA resolution plans) for the rapid and 
orderly resolution of the covered company under the U.S. Bankruptcy 
Code.
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    \10\ 12 U.S.C. 5365(d).
    \11\ 84 FR 59194 (Nov. 1, 2019), codified at 12 CFR 381 (FDIC) 
and 243 (FRB).
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    There are some noteworthy differences between the DFA rule 
requirements and this rule. First of all, Section 165(d) of the Dodd-
Frank Act and the DFA rule focus on resolution of the organization by 
the organization itself under the U.S. Bankruptcy Code or other 
ordinary resolution regime. While some DFA resolution plans utilize a 
strategy where the IDI is resolved under the FDI Act, they must address 
resolution of the organization as a whole, including the holding 
company and non-bank affiliates. In addition, the statutory purpose of 
a DFA resolution plan is to reduce the likelihood that the financial 
distress or failure of a covered company would have serious adverse 
effects on financial stability in the United States by requiring 
covered companies to submit plans for rapid and orderly resolution 
without any assumptions of reliance on public support. By contrast, 
this rule focuses only on the CIDI itself, and the strategic analysis 
and information needed to support a resolution using the FDIC's 
traditional resolution tools under the FDI Act.
    Presently, all U.S. global systemically important banking 
organizations \12\ (U.S. GSIBs), which are the largest and most 
systemic and interconnected banking organizations in the United States, 
have developed DFA resolution plans that use a single-point-of-entry 
(SPOE) strategy. Under an SPOE strategy, the top tier holding company 
is placed into bankruptcy and generally all material operating 
subsidiaries, including any IDIs in the group, remain open and 
operating. In an SPOE resolution, the FDIC would not be called upon to 
resolve the IDI under the FDI Act. The SPOE approach may minimize 
disruption and preserve franchise value, as well as reduce systemic 
risk, particularly in a firm with a complex structure that includes 
multiple material operating entities outside of the bank chain. In 
contrast, most other banking organizations subject to the DFA 
resolution plan submission requirements currently utilize a strategy in 
which the top tier holding company is placed into bankruptcy and the 
IDI is resolved under the FDI Act.
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    \12\ As defined by rules promulgated by the FRB, see 12 CFR 
217.402 (Identification as a global systemically important BHC).
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    Firms that have submitted DFA resolution plans adopting an SPOE 
strategy must have or develop the capabilities and may need to make 
improvements to their organizational structures to support 
implementation of that strategy. However, the FDIC still must be 
prepared to use its resolution authorities if necessary to achieve an 
orderly resolution of the firm, including its authority to resolve a 
CIDI under the FDI Act, or, if necessary, the extraordinary backup 
orderly resolution authorities provided in Title II of the Dodd-Frank 
Act.
    A resolution using Title II orderly liquidation authorities, which 
supports a group-wide SPOE approach, is a backup authority to be used, 
if necessary, to resolve a financial company whose resolution under the 
Bankruptcy Code would have serious adverse effects on U.S. financial 
stability. That extraordinary authority may not be called upon to 
resolve the firm, however, if the resolution of the IDI under the FDI 
Act would avoid the serious adverse effects of the firm's failure. By 
the same token, a resolution under the FDI Act is particularly likely 
for large regional banks with less significant non-bank activities, 
predominately domestic operations, and few or no systemically important 
identified critical operations.
    The requirements of the DFA rule and this rule support their 
respective differing purposes; at the same time, both rules serve the 
broader objective of facilitating orderly resolutions. Consistent with 
the proposal, this final rule specifically allows the incorporation of 
information from an affiliate's DFA resolution plan into a CIDI's full 
resolution submission or interim supplement. In providing feedback or 
making determinations with respect to any submission under this final 
rule, the FDIC will consider feedback and determinations provided with 
respect to DFA resolution plans with similar content, to promote 
consistency across the two planning requirements, and, where 
appropriate, taking into account the differences in the requirements of 
the two rules and the approaches to resolution strategy and regime.

B. Overview of the Proposed Rule

    The proposal provided for two distinct groups of CIDIs based on 
size, with differing obligations for each group. The first group 
comprised those IDIs with $100 billion or more in total assets (group A 
CIDIs). The proposed rule would have required group A CIDIs to submit 
full resolution plans containing an identified strategy appropriate to 
the CIDI for its orderly and efficient resolution, as well as providing 
all other content elements described in the proposed rule.
    The second group comprised those IDIs with at least $50 billion but 
less than $100 billion in total assets (group B CIDIs). The proposed 
rule would have required full resolution submissions from group B CIDIs 
with more limited requirements, in the form of an informational filing.
    The proposal was intended to:
     Clarify and enhance requirements applicable to IDIs with 
$50 billion or more in total assets, including resolution plans 
submitted by group A CIDIs and informational filings submitted by group 
B CIDIs;
     Require each group A CIDI to provide an identified 
strategy for resolution that ensures timely access to

[[Page 56623]]

insured deposits, maximizes value from the sale or disposition of 
assets, minimizes any losses realized by creditors of the group A CIDI 
in resolution, and addresses potential risks of adverse effects on U.S. 
economic conditions or financial stability;
     Clarify requirements with respect to the assumptions for 
the failure scenario used by group A CIDIs in resolution plans and 
reserve the ability of the FDIC to provide additional parameters for 
the failure scenario for all group A CIDIs or specific individual group 
A CIDIs in future plan submission cycles;
     Strengthen full resolution submission content elements and 
associated requirements regarding capabilities to support optionality 
available to the FDIC and ensure that the FDIC's development of 
resolution strategies reflects considerations related to the 
characteristics of the individual CIDI and potential challenges that 
could be faced in resolution;
     Refine the requirements for group A CIDIs with respect to 
least-cost analysis and focus on ensuring that the FDIC has the 
building blocks and capabilities it needs to undertake the least-cost 
test in resolution in the event of failure of a group A CIDI;
     Establish an enhanced credibility standard for full 
resolution submissions and clarify the process for review and feedback 
to identify and address weaknesses in full resolution submissions and 
enforce the rule;
     Establish a requirement for informational filings to be 
submitted by group B CIDIs that is focused on information most 
important and appropriate for resolution of those CIDIs;
     Adjust the frequency of full resolution submissions to a 
two-year cycle for all CIDIs to accommodate engagement and capabilities 
testing as part of the resolution planning process, and establish 
periodic interim supplements containing specified resolution submission 
content items; and
     Codify certain aspects of guidance and feedback previously 
issued to IDIs subject to the 2012 rule.

II. Overview of Comments

    The FDIC received 12 comment letters to the proposal from banking 
organizations, industry and trade groups representing the banking and 
financial services industry, a law firm, and consumer groups.
    The comments received generally were responsive to questions posed 
by the FDIC in the NPR. The majority of commenters suggested changes to 
reduce the costs of submission preparation for filers, including by 
adjusting the proposed submission cycle, narrowing the proposed scope 
and content requirements, and enhancing alignment with relevant 
resolution planning requirements of the DFA rule. Several commenters 
raised concerns about the enhanced credibility standard, and asked for 
greater clarity on engagement and capability testing. Three commenters 
offered broad support for the proposed rule as written. The comments 
received are summarized below.

Scope of Rule

    Most commenters agreed with the overall scope of the rule. Two 
commenters suggested creating a new group of filers that would include 
only firms with $100 billion to $250 billion in total assets, and 
reducing requirements for that new group, as compared to the CIDIs with 
at least $250 billion in total assets. As for group B CIDIs, several 
commenters noted the content requirements of the informational filings 
varied in a limited manner from a full resolution plan and asserted 
that the FDIC should more significantly reduce the burden for group B 
CIDIs with further tailoring or elimination of requirements for group B 
CIDIs. Two other commenters recommended that group B CIDIs should be 
subject to the same requirements as group A CIDIs.
    Several commenters addressed the relationship between IDI 
resolution plans and DFA resolution plans. Two commenters supported 
changes to better harmonize these resolution planning efforts. One 
commenter suggested CIDIs with parent banking organizations that are 
biennial filers or triennial full filers of DFA resolution plans should 
be exempted from IDI resolution plan requirements. That commenter also 
argued for streamlining requirements if IDI resolution plans continue 
to be required for CIDIs in addition to the DFA resolution plans 
required of their parent banking organizations. Regarding consistency 
across these two programs, two commenters emphasized the need to use 
consistent definitions with regard to IDI resolution plans and DFA 
resolution plans, and cited the definition of ``material change'' as an 
example where there could be better alignment. Another commenter 
highlighted that the scope of the virtual data room capabilities 
requirement should be aligned with the equivalent requirement for DFA 
resolution plans. Additionally, two commenters emphasized the 
importance of consistency between credibility determinations on DFA 
resolution plans by the FDIC and FRB, and on IDI resolution plans by 
the FDIC, as well as any other feedback on common elements of these two 
submissions.

Submission Cycle and Transition Period

    Two commenters broadly supported the cycle as proposed, while four 
argued to reduce the frequency of full resolution submissions. 
Commenters arguing for a longer submission cycle generally supported a 
three-year cycle, which they noted would take into account the cycle 
for certain DFA resolution plans, allow for adequate review and 
feedback by FDIC staff, and provide time for CIDIs to incorporate that 
feedback. However, one commenter noted that a two-year cycle with no 
interim supplements could be appropriate for CIDIs whose parent 
companies are biennial filers of DFA resolution plans. In terms of the 
dates of submissions, one commenter suggested July, while two others 
proposed December.
    With respect to the first full resolution submissions or interim 
supplements following the effective date of the final rule, five 
commenters suggested a period of 12 months or longer, rather than the 
proposed 270-day period. In particular, with respect to group B CIDIs, 
commenters suggested a transition period of 18 months, since none of 
these CIDIs has submitted a resolution plan under the 2012 rule since 
implementation of the moratorium.
    Regarding the interim supplements, three commenters recommended 
narrowing the scope of information required. Commenters recommended 
reducing or eliminating requirements for narrative or description, and 
to limit the required content to information that has materially 
changed. Another commenter suggested that narrative commentary in the 
interim supplement should be limited to a summary of material changes 
in the information provided in the prior full resolution submission. 
One commenter suggested that interim supplements, like full resolution 
submissions, should use data as of the end of the prior year, rather 
than the prior quarter.
    Several commenters emphasized the importance of the FDIC providing 
meaningful feedback to CIDIs and adequate time for that feedback to be 
incorporated into subsequent submissions, with one commenter 
recommending feedback be provided at least 12 months before the next 
submission is due and two others noting the need for the FDIC to build 
internal capacity and capabilities to support this.

[[Page 56624]]

Rule Requirements

    Commenters generally supported the FDIC's focus on increasing 
optionality available to it in preparing for resolution. Four agreed 
that a bridge bank may be helpful in this respect, to provide more time 
to sell all or parts of the institution, reduce reliance on strategies 
involving a single buyer, and expand the universe of potential 
acquirers. Two commenters supported the identified strategy requirement 
as proposed, with one noting it would be among the most critical pieces 
of information in a resolution plan and plans without this element 
would not likely be credible or effective. Three other commenters 
favored elimination or modification of the scenario and identified 
strategy requirement. One of these commenters suggested that some CIDIs 
with more than $100 billion but less than $250 billion in total assets 
may have less complex structures that make an FDIC-arranged sale 
feasible. They noted that, by requiring just one identified strategy, 
the proposal restricts CIDIs from presenting a full range of options 
for resolution. Another commenter argued that, based on the lessons 
learned from recent failures, the FDIC should be more focused on 
maximizing the likelihood of a resolution weekend sale, including by 
emphasizing real-time capability for IDIs to produce necessary 
information for potential buyers. A third commenter expressed concern 
that the proposed requirement for the identified strategy to have 
``meaningful optionality'' is too vague.
    Two commenters addressed aspects of assumptions in the proposed 
failure scenario, with one arguing against the assumption that the 
CIDI's parent holding company enters bankruptcy, and the other 
supporting the assumption of continued Federal Home Loan Bank lending 
to a bridge bank.
    Regarding the proposed approach to valuation to facilitate the 
FDIC's assessment of least-costly resolution method, three commenters 
emphasized the importance of valuation to resolution planning and 
another expressed support for replacing the least-cost test requirement 
of the 2012 rule with the proposed valuation requirement. Three 
commenters suggested modifications to the approach; specifically, these 
commenters favored elimination of the requirement for quantitative 
valuation analysis. These commenters argued that such analysis would be 
overly burdensome, more expensive for CIDIs that do not maintain in-
house expertise, and of little value to the FDIC in an actual 
resolution scenario.

Engagement and Capabilities Testing

    Commenters were generally supportive of engagement and capabilities 
testing. One commenter suggested increasing the expected frequency of 
engagement, while another advocated for committing more resources 
toward engagement and capabilities testing while decreasing the 
emphasis on full resolution submission documentation. Four commenters 
suggested that the FDIC should provide advance notice of the timing for 
engagement and capabilities testing, and the process for the testing 
and feedback. Two of these commenters indicated the FDIC should provide 
CIDIs with a comprehensive list of capabilities it expects a CIDI to 
maintain, and suggested this should be done through a notice and 
comment period to enable input from the industry. One of these 
commenters also noted that CIDIs--especially, group B CIDIs--will need 
time to build, improve, and test capabilities prior to undergoing 
capabilities testing with the FDIC, and suggested capabilities testing 
should not occur during a CIDI's initial submission cycle under this 
Rule.

Credibility Standard

    Two commenters expressed support for the proposed enhancement of 
the credibility standard. Three other commenters recommended 
eliminating the credibility determination, granting CIDIs latitude on 
the standard's application, or foregoing any enforcement action based 
on a credibility determination. They argued that the standard, 
particularly the first prong, is subjective and susceptible to being 
applied inconsistently over time. Another commenter observed that any 
credibility standard is necessarily subjective.
    Several commenters emphasized the importance of a collaborative 
approach to resolution planning, with one emphasizing the role 
communications can play to support this, including related to the 
timing and scope of capabilities testing. In addition, several 
commenters expressed concerns about any enforcement actions related to 
engagement and capabilities testing, with one commenter stressing that 
full resolution submissions should only be deemed non-credible due to 
fundamental resolvability issues and not because of issues with CIDIs' 
resolution capabilities that fall short.

Expected Effects

    One commenter indicated that the proposal would substantially add 
to the time and resources required to prepare IDI resolution plans. 
Another two commenters argued that the analysis of the compliance 
burden understates the true cost of the burden. A fourth commenter 
suggested that the estimated time required to develop an IDI full 
resolution submission is not unreasonable and the cost of compliance 
would pale in comparison to the costs of potential bank failures and 
banking crises.

III. Final Rule

    The FDIC considered all comments received and has adopted certain 
changes to the proposed rule as discussed below. In addition, the FDIC 
made certain technical, non-substantive changes throughout, including 
corrections to paragraph numbering and grammar, improving word choice 
for readability, and eliminating redundancy.

A. Scope and Purpose

    The scope and purpose of the final rule are substantively unchanged 
from the proposal. This rule is intended to ensure that each group A 
CIDI develops a credible strategy to facilitate the FDIC's resolution 
of the institution across a range of possible scenarios and, with 
respect to each group A CIDI and each group B CIDI, that the FDIC has 
access to all of the material information and analysis it needs to 
efficiently resolve the CIDI in the event of its failure.
    Consistent with the 2012 rule and the proposal, the final rule 
applies to all IDIs with at least $50 billion in total assets based 
upon the average total assets reported over the previous four quarters. 
Like the proposal, the final rule will differentiate the requirements 
pertaining to group A CIDIs and group B CIDIs. Each group A CIDI is 
required to periodically submit a resolution plan to the FDIC, 
including an identified strategy for its resolution under the specified 
failure scenario. Each group B CIDI is required to periodically submit 
an informational filing to the FDIC that would consist of certain 
informational content, but would not be required to include an 
identified strategy or to develop capabilities necessary to produce 
valuations needed to support least-cost test analysis.
    Comments received by the FDIC included letters from two commenters 
who recommended that group B CIDIs should file resolution plans with no 
distinction between group A CIDIs and

[[Page 56625]]

group B CIDIs. Two other comment letters suggested that group A CIDIs 
should consist only of CIDIs with at least $250 billion in total assets 
and that there should be further tiering of requirements for CIDIs 
between $100-250 billion in total assets and those between $50-$100 
billion in total assets. One commenter recommended that group B CIDIs 
not be required to make any full resolution submissions.
    The FDIC has retained the distinction between group A CIDIs and 
group B CIDIs, and the requirement that group B CIDIs provide 
informational filings. The FDIC believes that the approach taken for 
group B CIDIs appropriately recognizes the additional complexity and 
greater resolution challenges applicable to the group A CIDIs. The 
threshold of $100 billion in total assets, which is also used in the 
Dodd-Frank Act \13\ and other rulemakings as a basis for assessing a 
banking organization's financial stability and safety and soundness 
risks,\14\ is an appropriate threshold to distinguish full resolution 
submission requirements for group A CIDIs and group B CIDIs, and is 
retained in the final rule.
---------------------------------------------------------------------------

    \13\ See 12 U.S.C. 5365(a)(2)(C). The threshold for enhanced 
prudential standards under that provision was established through 
passage of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act in 2018.
    \14\ See, e.g., 84 FR 59230 (Nov. 1, 2019) (codified at 12 CFR 
parts 3, 50, 217, 249, 324, 329).
---------------------------------------------------------------------------

    While all group A CIDIs have the same requirements for submission 
of full resolution plans, in response to comments discussed further 
below, the group A CIDIs are further divided into two filing 
categories: triennial and biennial filers. While most group A CIDIs 
will file on a triennial cycle under the final rule, those CIDIs that 
are part of the largest and most systemic and interconnected U.S. 
banking organizations--those affiliated with U.S. GSIBs--will file 
biennially.
    The FDIC considered comments proposing specific changes to the 
content of informational filings for group B CIDIs, which are addressed 
below.

B. Definitions

    The proposal included definitions of terms used in the proposed 
rule, which are included without change in the final rule, except as 
noted below.
    Several comments were received with respect to certain defined 
terms. Two commenters emphasized the importance of consistency in the 
definitions of equivalent terms between the proposed rule and the DFA 
rule, and ``core business line'' and ``material change'' were cited as 
specific examples. Additionally, two comment letters argued that the 
proposed definition of ``material change'' was overly inclusive and 
used in a manner that might result in triggering the notice 
requirements contained in the proposal upon relatively minor events, 
noting a narrower approach to events triggering such a notice in the 
DFA rule.
    Accordingly, the definitions for ``core business lines'' and 
``material change'' are revised in the final rule to be more consistent 
with similar concepts in the DFA rule. The definition of ``core 
business lines'' is revised to conform more closely to the DFA rule. 
The definition covers the CIDI's business lines whose failure would 
result in a material loss of the CIDI's revenue, profit, or franchise 
value.
    The definition of ``material change'' is revised to combine 
concepts from the definition in the proposed rule and from the 
definition in the DFA rule. As discussed in the preamble to the 
proposed rule, in administering the 2012 rule, the FDIC has observed 
that not all CIDIs have interpreted the material change concept 
similarly. Accordingly, the intent of revising the defined term is to 
use an approach similar to the DFA rule, while improving clarity as to 
how to apply the concept in the context of this rule. Given differences 
in the purpose and scope of the two rules, the final rule focuses on 
changes that are important for CIDIs. Thus, the definition of material 
change in the final rule focuses on events that relate to the 
requirements of the rule, such as changes to overall deposit structure, 
identification or de-identification of a franchise component, and 
acquisition or disposition of a material asset portfolio, among other 
things. The usage of the term ``material change'' was modified as well, 
to be more consistent with the approach taken under the DFA rule. As 
discussed below, the final rule uses the phrase ``extraordinary 
event,'' borrowed from the DFA rule, in the context of the notice 
requirement instead of the term ``material change.''
    One commenter noted that the proposed definition of ``material 
entity'' is over-inclusive, which might be inconsistent with the goal 
of focusing on the material aspects of the organization, and noted that 
this approach diverges from the approach taken in the DFA rule. The 
FDIC agrees with the comment that including all entities that are 
material to franchise components may result in relatively insignificant 
entities being captured within the definition. Accordingly, the 
reference to franchise components is omitted from the definition in the 
final rule. However, including all IDIs as material entities, 
regardless of size, is important for FDIC's resolution planning, as it 
is likely that all may enter resolution under the FDI Act, due to 
statutory cross-guarantees. No change is being made to the inclusion of 
all IDIs as material entities.
    In the definition of ``franchise component,'' the term ``asset 
pool'' was replaced by the term ``material asset portfolio'' to utilize 
a defined term from the rule. A similar change was made to the 
definition of ``multiple acquirer exit'' in using the defined term 
``material asset portfolios'' instead of ``asset portfolios.''
    Throughout the final rule, the term ``resolution submission'' was 
replaced by the term ``full resolution submission'' and the term 
``BDI'' was replaced by the term ``bridge depository institution'' for 
clarity.
    The definitions of ``group A CIDI'' and ``group B CIDI'' were 
revised to be more consistent with the approach used in the DFA rule 
for determining filing groups.
    The definition of United States was revised to be consistent with 
the definition under the FDI Act.
    New defined terms were added for clarity, including ``PCS service 
provider,'' ``DIF,'' ``biennial filer,'' and ``triennial filer.''

C. Full Resolution Submissions Required

Biennial Filers and Triennial Filers
    Under the proposal, each CIDI would have been required to provide a 
full resolution submission to the FDIC every two years. The FDIC would 
have retained the discretion to alter the submission dates upon written 
notice to the CIDI. An interim supplement would have been required in 
any year in which the CIDI is not required to file a full resolution 
submission.
    Four commenters recommended a three-year submission cycle 
consistent with the Statement. Commenters supporting the three-year 
cycle emphasized the importance of receiving timely feedback and having 
sufficient time to incorporate improvements in the full resolution 
submissions with each cycle. These commenters also cited an increased 
cost in more frequent filings. Commenters flagged the importance of the 
coordination of filing resolution submissions, submission review, and 
engagement and capabilities testing, as well as filing interim 
supplements over the course of the cycle. Two commenters supported the 
proposed biennial submission. One commenter recommended that if the 
FDIC were to

[[Page 56626]]

move to a triennial submission cycle for most CIDIs, the biennial cycle 
should be retained for the CIDI affiliates of U.S. GSIBs, which are 
biennial filers under the DFA rule. The commenter suggested that this 
approach would be more efficient for the U.S. GSIBs and for the FDIC, 
as interim supplements would not be necessary because either a DFA 
resolution plan or a resolution plan under this rule would be submitted 
in alternating years.
    The final rule adopts the recommended three-year submission cycle 
for most CIDIs. The FDIC agrees with commenters that timely and fulsome 
feedback for each CIDI is an important priority, and ensuring time for 
engagement and capabilities testing between full resolution submissions 
is of significant value. In addition, the FDIC expects that key 
components of the full resolution submission will remain relatively 
constant over a three-year cycle, including the identified strategy for 
group A CIDIs. Important information that is more likely to change over 
that period will be updated annually through the interim supplement. In 
addition, the FDIC will receive notices of extraordinary events that 
will provide information of significant changes at the CIDI, such as 
through merger and acquisition or divestiture, and the FDIC would be in 
a position to request additional information if needed.
    With respect to the CIDI affiliates of U.S. GSIBs, the FDIC agrees 
with the commenter that a full resolution submission cycle that is 
complimentary with the DFA resolution plan cycle will improve 
efficiency, and will ensure timeliness of content needed for 
contingency planning for an FDI Act resolution. The biennial filing is 
appropriate for these CIDIs, which are part of the largest and most 
systemic and interconnected U.S. banking organizations. Accordingly, 
the final rule establishes a two-year cycle for CIDIs that are 
affiliates of U.S. GSIBs. Consistent with the proposal, the FDIC 
retains the discretion to change filing dates for any CIDI.
    The FDIC received several comments with respect to the preferred 
submission date. One commenter suggested July 1, while two commenters 
recommended December dates. One of these commenters suggested that 
CIDIs with parent banking organizations that are triennial filers of 
DFA resolution plans should submit full resolution submissions under 
this rule in December of the same year in which the DFA resolution plan 
is filed. The final rule does not specify a calendar date for 
submissions, to retain flexibility over the life of the rule. While 
July 1, January 1, and December 1 dates have been used in the past, the 
most suitable dates may be different for different cohorts of CIDIs and 
may change over time. The FDIC considers the annual cadence for 
information required by this rule to be provided by most CIDIs, 
including those with parent banking organizations that are triennial 
filers of DFA resolution plans--whether via full resolution submissions 
or interim supplements--to be appropriate from a resolution planning 
workflow perspective for both the FDIC and CIDIs. The FDIC also expects 
to establish a regular cadence of review, testing, and engagement 
across two cohorts of group B CIDIs, and may establish different 
calendar dates for submissions by those group B CIDI cohorts.
    With respect to the first full resolution submissions or interim 
supplements following the effective date of the final rule, five 
commenters suggested a period of 12 months or longer, rather than the 
proposed 270-day period. In particular, with respect to group B CIDIs, 
commenters suggested a transition period of 18 months, since none of 
these CIDIs have submitted a resolution plan under the 2012 rule since 
implementation of the moratorium.
    The FDIC will notify CIDIs of the date when their first full 
resolution submissions or interim supplements are due under the final 
rule. Consistent with the proposal, for group A CIDIs, that date will 
be at least 270 days from the effective date of the rule. The FDIC 
believes that 270 days following the effective date is sufficient time 
for group A CIDIs to prepare a resolution plan or interim supplement 
that conforms to the final rule. This timing reflects the urgency of 
resolution planning for these largest CIDIs, and supports the 
establishment of a regular cadence of full resolution submissions and 
interim supplements across three cohorts of group A CIDIs for purposes 
of full resolution submission review, horizontal capabilities testing, 
and firm-specific engagement. The text of the final rule will be 
publicly available following action by the FDIC Board of Directors, and 
will be published in the Federal Register well before the effective 
date, giving CIDIs notice of the final rule's requirements.
    For group B CIDIs, the initial submission due dates will be at 
least one year from the effective date of the final rule. This is 
appropriate because the group B CIDIs are generally new to the 
resolution planning process--or have not filed for an extended period 
due to the moratorium--and because the resolution challenges associated 
with the group B CIDIs are somewhat reduced.

Full Resolution Submissions by New CIDIs

    Consistent with the proposal, the final rule indicates that an IDI 
that becomes a CIDI after the effective date of the final rule is 
required to provide its initial full resolution submission on or before 
the date specified in writing by the FDIC, which will be no earlier 
than 270 days after the IDI became a CIDI. As these firms are aware of 
such transition well in advance, 270 days after the change of status is 
an appropriate length of time to submit a new full resolution 
submission. As IDIs grow, whether through merger or business strategy 
or otherwise, it is important that the FDIC receive prompt and timely 
information for resolution planning. The 270-day period balances the 
urgency of resolution readiness against the time needed for a new CIDI 
to complete a thorough and responsive full resolution submission.
    The final rule adds language to address submissions subsequent to a 
CIDI transitioning between groups. A CIDI that transitions from group B 
to group A or from group A to group B, will file a full resolution 
submission or interim supplement, as applicable, pursuant to the 
requirements relevant to its new filing group on or before the date 
that its next full resolution submission or interim supplement is due, 
unless it receives written notice of a different date from the FDIC.
    The final rule contains language changes from the proposal for 
clarity and consistency by providing for full resolution submissions on 
or before the submission date, rather than on the submission date, for 
the biennial filers, the triennial filers, and the new filers. This is 
consistent with similar language in the DFA rule.
Notice of Extraordinary Event
    The proposal would have required that a CIDI provide the FDIC with 
a notice and explanation of a material change no later than 45 days 
after certain events included in the proposed definition of ``material 
change.'' The proposal also would have allowed for an exemption from 
this requirement if the date on which the CIDI would be required to 
submit the notice would be within 90 days before the date on which the 
CIDI is required to provide a full resolution submission.
    Commenters suggested that the definition of material change was too 
broad and would give rise to notices that were not likely to 
significantly

[[Page 56627]]

impact the full resolution submission. Commenters suggested 
consideration of the approach taken in the DFA rule, which requires 
notice of a more limited set of ``extraordinary events.'' The FDIC 
considered those comments and adopted the concept of an ``extraordinary 
event'' as the basis for the 45-day notice, rather than a ``material 
change.'' The term ``material change'' remains in the final rule, but 
is no longer part of the notice requirement. This is similar to the 
approach taken for DFA resolution plans, with appropriate adjustments 
for the differences in the two rules. The FDIC expects that this 
approach will provide a focus on the events that are significant enough 
to warrant a notice, such as a merger, acquisition or disposition of 
assets, or fundamental change to the CIDI's organizational structure, 
core business lines, size, or complexity. The final rule retains the 
requirement of the notice within 45 days of the event, and the 
exemption from the requirement if the event occurs within 90 days of 
the date by which the next full resolution submission is due. The 
impact of the extraordinary event on resolution would be discussed in 
the discussion of material changes in the next submission, whether a 
full resolution submission or the interim supplement, and the FDIC 
would be in a position to request additional information if needed. A 
CIDI is not exempt from the requirement if the event occurs within 90 
days of the date by which the next interim supplement is due because of 
the more limited content required in an interim supplement.
Approval by the CIDI Board of Directors
    The final rule adopts without change the requirement that a CIDI's 
board of directors approve the full resolution submission, and that 
this approval be noted in the board's minutes. For an insured branch, 
the final rule allows a submission to be approved by a delegee acting 
under the express authority of the board, and requires such delegation 
of authority to be noted in the board's minutes. No comments were 
received on this proposed provision. This requirement does not apply to 
an interim supplement.
Incorporation From Other Sources
    The proposal would have allowed the CIDI to incorporate certain 
information or analysis without seeking the authorization required 
under 12 CFR part 309 for disclosure of FDIC confidential information. 
The proposed rule included certain proposed requirements about the 
format and process for incorporation of information from other sources 
and would have required certification that the information or analysis 
remains accurate in all respects that are material to the CIDI's full 
resolution submission. The FDIC received no comments on this proposed 
provision and there were no substantive changes. However, the final 
rule has been modified from the proposal for consistency and clarity to 
state that a CIDI may incorporate information from other sources into 
its interim supplement and the ``confidential section'' of the full 
resolution submission and to allow information from a regulatory filing 
of a CIDI affiliate without seeking a separate waiver.

D. Content of the Full Resolution Submissions for CIDIs

    The proposal would have required each group A CIDI to submit a 
resolution plan that includes all content specified in Sec.  360.10(d) 
of the proposed rule. The proposal would have required each group B 
CIDI to provide an informational filing, which would not include all of 
the content of a resolution plan. As proposed, the informational filing 
would not include the executive summary, identified strategy and 
failure scenario, or valuation to support least-cost test analysis 
content elements that are applicable to group A CIDI resolution plans.
    The FDIC received comments related to the content elements that 
would apply to an informational filing. Two commenters suggested that 
the requirement to describe franchise components be reduced or removed 
for group B CIDIs, because, the commenters argued, the proposed 
franchise component content element included information similar to 
resolution planning that should not be required in an informational 
filing. While the FDIC continues to believe that the identification of 
franchise components is critical for resolution preparation, 
particularly in situations where a whole bank sale may be difficult to 
achieve, the FDIC also agrees that some proposed aspects of the 
franchise components content element may inadvertently require 
discussion of resolution strategy by group B CIDIs. Accordingly, in 
response to these comments, the final rule exempts group B CIDIs from 
reporting the portions of the franchise component content element 
relating to marketing process and capabilities, key assumptions 
underpinning each divestiture, and obstacles to execution. All other 
proposed subparts of the franchise component content element are 
required for group B CIDIs in the final rule.
    Commenters also recommended the reduction, removal, or amendment of 
several other content elements for informational filings. Some 
commenters generally suggested changes to content elements that they 
viewed as requiring information that they did not believe to be as 
relevant or applicable for group B CIDIs as for group A CIDIs or to be 
available from other sources aside from the group B CIDIs, while one 
commenter was generally supportive of the proposed content element 
requirements. After reviewing these comments, the proposed content 
element requirements, the availability of the information for the 
proposed content elements, and the FDIC's resolution practices and 
experience, the FDIC has determined that all other informational filing 
content elements should be maintained as proposed. The content elements 
will provide critical information at a level of detail necessary for 
resolution planning and execution that, in the FDIC's estimation and 
experience, is not available in sufficient detail from other sources to 
meet the FDIC's needs in the resolution context.
    Under the final rule, a full resolution submission, whether a 
resolution plan for a group A CIDI, or an informational filing for a 
group B CIDI, must include a discussion of any material changes from 
the prior full resolution submission or interim supplement or an 
affirmation that no material change has occurred, and a discussion of 
changes to the CIDI's previous full resolution submission resulting 
from any change in law or regulation, guidance, or feedback from the 
FDIC. This requirement was proposed as part of the executive summary of 
the resolution plans submitted by the group A CIDIs, and while the 
group B CIDIs do not need to include an executive summary as part of 
their informational filings, the final rule requires that the 
information filing include a similar discussion of changes since the 
prior submission. As discussed above, the definition of material change 
has been modified in the final rule in response to comments, providing 
additional context to this requirement.
    The FDIC considered all comments related to the specific 
requirements of the content elements described in Sec.  360.10(d) of 
the proposed rule and discusses these content elements below.
Identified Strategy
    The proposal would have required each group A CIDI to provide an 
identified strategy, which describes the resolution from the point of 
failure through the sale or disposition of the group A CIDI's franchise 
(including all

[[Page 56628]]

of its core business lines and all other business segments, branches, 
and assets that constitute the CIDI and its businesses as a whole) in a 
manner that meets the credibility standard. The proposal would have 
established the bridge bank approach as the default identified 
strategy, and indicated that a bridge bank strategy must provide for 
the establishment and stabilization of a bridge bank and an exit 
strategy from the bridge bank.
    Recognizing that the bridge bank approach may not be optimal for 
all group A CIDIs, the proposal would have permitted a different 
identified strategy if that different strategy best addressed the first 
prong of the credibility criteria, could reasonably be executed by the 
FDIC across a range of likely failure scenarios, and would be more 
appropriate for the size, complexity, and risk profile of the specific 
group A CIDI. However, the proposed rule would not have permitted the 
identified strategy to be based upon the sale of substantially all 
assets and liabilities over closing weekend. The proposal would have 
required that any identified strategy include meaningful optionality 
for execution across a range of failure scenarios.
    Two commenters recommended eliminating the requirement of a failure 
scenario-based identified strategy in any resolution plan. In addition, 
one comment letter suggested that this requirement should be based on 
factors other than size, such as whether more than 90 percent of the 
total consolidated assets are within the CIDI, the extent of cross-
border activity, or the IDI's role as a financial utility or agent 
bank. Two commenters supported the proposed scope of the requirement; 
one commenter suggested that it should apply to group B CIDIs as well.
    Two commenters supported the identified strategy requirement as 
proposed, with one noting it would be among the most critical pieces of 
information in a resolution plan and plans without this element would 
not likely be credible or effective. Three other commenters favored 
elimination or modification of the failure scenario and identified 
strategy requirement. Several commenters supported the proposed rule's 
emphasis on a bridge bank approach as the default identified strategy. 
Two commenters recommended including a whole bank sale as a permitted 
identified strategy for group A CIDIs, suggesting that it is a possible 
option even for large banks, and its use may minimize losses to the DIF 
and other creditors.
    The FDIC considered the comments and concludes that there are 
certainly factors other than size that impact challenges in resolution 
and availability and likelihood of a closing weekend sale as a 
strategic option, however, the FDIC considers that size alone may 
present significant challenges and make a closing weekend sale less 
likely. While the FDIC will consider any feasible bid for the sale of 
the IDI franchise over closing weekend or as promptly as possible post-
failure, it cannot rely on that option, and must have available other 
strategic options. As explained in the preamble to the proposal, the 
proposed requirements related to the identified strategy and failure 
scenario are intended to provide the FDIC with a strategic option that 
is adaptable under a wide range of potential scenarios, as the actual 
scenario is likely to be materially different from any hypothetical 
scenario construct. Further, the development of an identified strategy 
that takes into account a group A CIDI's organization, structure, 
business lines, and other characteristics provides significant insight 
into the obstacles that the FDIC might face in resolving the CIDI and 
possible mitigating actions that may be available to address those 
obstacles. Accordingly, the final rule retains the requirement that 
group A CIDIs develop an identified strategy based on a failure 
scenario.
    In addition, the final rule adopts the approach taken in the 
proposal with respect to the strategic options to be considered in each 
group A CIDI's identified strategy. The strategic option that the FDIC 
considers most useful for the group A CIDIs across the widest range of 
failure scenarios is the establishment of a bridge bank that can 
continue the operations of the CIDI. Generally, a bridge bank approach 
will support the preservation of franchise value and will also allow 
time for restructuring and marketing to facilitate the sale or 
disposition of the business lines and related assets, while providing 
insured depositors with prompt access to their accounts.
    Accordingly, the final rule establishes the bridge bank approach as 
the default identified strategy. A bridge bank strategy must provide 
for the establishment and stabilization of a bridge bank and an exit 
strategy from the bridge bank, such as a multiple acquirer exit 
involving the regional breakup of the group A CIDI or sale of business 
segments, an orderly wind down of certain business lines and asset 
sales, an exit via restructuring and subsequent initial public offering 
or other capital markets transaction, or another exit strategy 
appropriate to the size, structure, and complexity of the CIDI. If a 
multiple acquirer exit is included as part of the identified strategy, 
it may be appropriate for the resolution plan to address the time 
required for that exit option and any restructuring or other actions 
needed to address obstacles to separability of divestiture options. If 
the identified strategy assumes the sale of franchise components or a 
multiple acquirer exit, the resolution plan should take into account 
all issues surrounding the CIDI's ability to sell in market conditions 
present in the applicable economic condition at the time of sale.
    Consistent with the proposed rule, in addressing the establishment 
of the bridge bank, the final rule does not require that a resolution 
plan demonstrate that the identified strategy is the least-costly to 
the DIF of all available strategies; in particular, the resolution plan 
is not required to demonstrate that the identified strategy would be 
less costly to the DIF than liquidation. Similarly, the resolution plan 
is not required to include analysis discussing whether the conditions 
for chartering the bridge bank would be satisfied. Rather, each group A 
CIDI is required to support its estimation that the identified strategy 
in the resolution plan maximizes value and minimizes losses to the 
creditors of the group A CIDI. While commenters noted that this 
necessarily would be subjective and depend on a variety of factors, the 
CIDI's assessment of this item will be helpful to the FDIC in making 
its own assessment in the event of a failure. The valuation analysis 
discussed below supports the FDIC's ability to evaluate the strategy's 
impact on value and its potential costs to the DIF across a range of 
options.
    Recognizing that the bridge bank approach may not be optimal for 
all group A CIDIs, consistent with the proposal, the final rule permits 
a different identified strategy if it best addresses the first prong of 
the credibility standard (discussed in credibility criteria below), 
could reasonably be executed by the FDIC across a range of likely 
failure scenarios, and would be more appropriate for the size, 
complexity, and risk profile of the specific group A CIDI. Also 
consistent with the proposal, an alternative identified strategy under 
the final rule could include transferring some but not all business 
lines and assets to a bridge bank and liquidating others in a 
receivership. For some group A CIDIs, a payment of insured deposits 
\15\ and

[[Page 56629]]

liquidation of all business lines and assets in receivership may be the 
most appropriate identified strategy.
---------------------------------------------------------------------------

    \15\ This task could be accomplished through a Deposit Insurance 
National Bank established by the FDIC pursuant to 12 U.S.C. 1821(m).
---------------------------------------------------------------------------

    Consistent with the proposed rule, the final rule requires any 
identified strategy to include meaningful optionality for execution 
across a range of scenarios and provide the information and analysis to 
inform decisions and support optionality for the FDIC in undertaking a 
resolution of the CIDI following its material financial distress and 
failure. One commenter stated that meaningful optionality is a vague 
and difficult standard. As explained in the preamble to the proposal, 
meaningful optionality reflects an expectation that an identified 
strategy be flexible so that it can be adapted to a change in the 
failure scenario or an unexpected obstacle to its execution. The nature 
and extent of meaningful optionality will vary based upon the size and 
complexity of the CIDI. For instance, a relatively smaller and less 
complex CIDI with a focus on traditional banking may identify only a 
breakup between two business lines or the spinoff or sale of a 
separable business unit. For the largest or most complex CIDIs, 
meaningful optionality might include alternatives such as a breakup by 
business lines and a regional breakup, or by sale of one or more 
identified franchise components as options for a sale of the IDI 
franchise. The final rule retains the expectation of meaningful 
optionality as proposed.
Failure Scenario
    The proposal would have required the identified strategy to be 
based on a failure scenario that demonstrates that the CIDI is 
experiencing material financial distress. The proposed rule would have 
required the failure scenario to assume and demonstrate that the CIDI 
experienced a deterioration of its asset base, and that its high 
quality assets have been depleted or pledged due to increased liquidity 
requirements from counterparties and deposit outflows. The proposal 
noted that, while the immediate cause of failure may be based on 
liquidity shortfalls, the failure scenario also must consider the 
likelihood of the depletion of capital and losses in the assets of the 
CIDI, which may include embedded losses that may not have been 
recognized by the CIDI for financial reporting purposes. The FDIC has 
learned that a submission is most valuable when it is based on the 
assumption that the CIDI has experienced material financial distress 
such that its failure is a result of the depletion of capital and/or 
liquidity. While the resolution strategy may be based on an 
idiosyncratic event or action, including a series of compounding 
events, the firm should justify all assumptions, consistent with the 
conditions of the economic scenario and the nature of the CIDI. These 
proposed provisions remain substantively unchanged in the final rule.
    Under the proposal, the failure scenario would have been required 
to assume that the U.S. parent holding company is in bankruptcy and is 
consistent with the approach taken in DFA resolution plans. One 
commenter objected to the assumption that the parent is in bankruptcy, 
stating that this assumption is not appropriate for all firm structures 
and may overlook potential sources of value in resolution and limit the 
information available to the FDIC. While the FDIC appreciates that the 
CIDI's parent and parent affiliates may not be in bankruptcy in all 
cases, experience shows that a bank failure frequently occurs with 
bankruptcy of the parent and parent affiliates. For that reason, an 
understanding of the impact of such a failure scenario on the 
resolution of the CIDI is important for the FDIC to prepare for that 
possibility and the FDIC believes that this baseline assumption is 
useful and appropriate. The full resolution submissions will contain 
information to support an evaluation of outcomes in the event that a 
coordinated, group-wide approach is feasible. For instance, consistent 
with the proposal, the final rule requires information on financial and 
operational interconnections between the IDI and the parent and parent 
affiliates that will be helpful to the FDIC in considering options 
should this baseline assumption prove not to be the case in an actual 
resolution scenario. For these reasons, the FDIC has made no change 
with respect to this assumption in the final rule.
    The FDIC made a clarifying change to the failure scenario by 
deleting the references to discount window borrowing before or in 
resolution. While assumptions regarding discount window borrowing are 
included in the scenarios described in prior DFA resolution plan 
guidance, these considerations are less important to the FDI Act 
resolution scenario because of the availability of the DIF for 
temporary liquidity in resolution. The preamble to the proposed rule 
noted that the identified strategy may assume continuation of Federal 
Home Loan Bank (FHLB) advances as well as the availability of short-
term liquidity advances from the DIF to meet temporary liquidity needs 
in resolution, if the identified strategy provides for timely repayment 
of those funds, an assumption that was supported by one commenter. As 
the scenario specifically permits the use of DIF liquidity in 
resolution, provided that the identified strategy may not assume use of 
the DIF to avoid losses to creditors of the bridge bank, and may assume 
the availability of FHLB or other sources of liquidity on applicable 
terms, it is less significant whether the bridge bank borrows from the 
discount window. To the extent that the CIDI assumes that DIF funding 
is used during the resolution by a bridge bank, it must demonstrate the 
capacity for such borrowing on a fully secured basis and must 
demonstrate a source of timely repayment.
    In addition, the final rule retains the proposal without change to 
allow flexibility for the FDIC to devise specific failure scenario 
assumptions with respect to macroeconomic conditions or the 
precipitating cause of failure. One commenter stated that the FDIC 
should provide any changes to failure scenario assumptions at least 12 
months before a full resolution submission is due. The FDIC will 
endeavor to provide a group A CIDI notice of additional or alternative 
parameters for the failure scenario at least one year before the 
applicable full resolution submission is due. Other comments suggesting 
that changes to the scenario must be public and apply equally to all 
group A CIDIs were not adopted. The FDIC has learned in past plan 
reviews and resolution experience that the path to failure is different 
for different firms and may depend on the particular business structure 
of an individual CIDI or cohort of CIDIs. Accordingly, the FDIC 
believes that it is appropriate to retain options for flexibility and 
confidentiality in the development of scenarios.
Executive Summary
    The proposed rule would have required a group A CIDI to include an 
executive summary describing the key elements of its identified 
strategy. It also would have required a discussion of changes to the 
group A CIDI's previously submitted resolution plan resulting from any 
change in law or regulation, guidance or feedback from the FDIC, or any 
material change. Finally, the proposed rule would have required a 
discussion of any actions the group A CIDI had taken since submitting 
its most recent resolution plan to improve the resolution plan's 
information and analysis, or to improve its capabilities to develop and 
timely deliver that information and analysis. This provision of the 
final rule is adopted as proposed. As discussed above, the definition 
of material change

[[Page 56630]]

has been refined from the definition in the proposal.
Organizational Structure: Legal Entities; Core Business Lines; and 
Branches
    The proposal would have required a full resolution submission to 
describe the CIDI's domestic and foreign branch organization and to 
provide addresses and asset size. The proposed rule would have also 
required the CIDI to identify and describe the core business lines of 
the CIDI, the parent company, and parent company affiliates. The 
proposed rule would have introduced the requirement to identify all 
regulated subsidiaries, as this information will assist the FDIC in 
identifying entities with capital, liquidity, and other requirements, 
and in assessing these entities' regulatory requirements when it is 
resolving a CIDI using a bridge bank. The proposed rule would have 
modified the mapping requirements to require that core business lines 
be mapped to material entities, franchise components, and regulated 
subsidiaries, to improve the utility of mapping and support the 
analysis of franchise components. One commenter objected to the level 
of informational detail required for regulated subsidiaries, and 
recommended that the final rule limit the requirements to material 
entities, as defined, or limit the information required with respect to 
regulated entities to a list of these subsidiaries and their respective 
jurisdictions, regulators, and asset sizes. The definition of 
``regulated subsidiaries'' includes registered brokers and dealers, 
registered investment advisors, registered investment companies, 
insurance companies, futures commission merchants and other entities 
regulated by the Commodity Futures Trading Commission, and other, 
similar regulated entities. These entities, even if relatively small in 
asset size or income, present complexity in resolution, and it is 
important to the FDIC to understand their role in the banking 
organization and the capital and liquidity impacts of these entities if 
they are maintained by a bridge bank. Accordingly, the final rule 
adopts this requirement as proposed.
    The proposed rule would have required the full resolution 
submission to describe whether any core business line draws additional 
value from, or relies on, the operations of the parent company or a 
parent company affiliate, and identify whether any such operations are 
cross-border, to support and inform the FDIC's analysis of the impact 
of breakup of the CIDI from its parent company and parent company 
affiliates. This requirement is retained in the final rule.
Methodology for Material Entity Designation
    The proposed rule would have required each CIDI to describe its 
methodology for identifying material entities, to afford each CIDI the 
flexibility to develop a methodology that is appropriate to the nature, 
size, complexity, and scope of its operations. The final rule adopts 
this proposed requirement without change.
Separation From Parent; Potential Barriers or Material Obstacles to 
Orderly Resolution
    The proposed requirements with respect to actions needed to 
separate a CIDI from the organizational structure of its parent company 
and parent company affiliates, as well as how to separate the CIDI's 
subsidiaries from this structure, are adopted without substantive 
change. The final rule, consistent with the proposal, requires that a 
full resolution submission address the CIDI's ability to operate 
separately from the parent company's organization, and that the CIDI 
assume that its parent company and the parent company affiliates have 
filed for bankruptcy or are in resolution under another insolvency 
regime. It also requires addressing the impact on the bridge bank's 
value if the CIDI were separated from the parent company's 
organization. These requirements are intended to focus on whether the 
CIDI, and therefore a bridge bank, can be a viable stand-alone entity 
from the point of view of economic value and viability of business 
lines.
    Consistent with the proposed rule, the final rule requires 
identification of potential barriers or other material obstacles to an 
orderly resolution, the identification of how such barriers or 
obstacles could pose risks to a group A CIDI's identified strategy, and 
the identification of inter-connections and inter-dependencies that may 
hinder the timely and effective resolution of the CIDI. For 
clarification, the final rule qualifies the potential barriers or other 
material obstacles to an orderly resolution as those that may occur 
upon the CIDI's separation from the parent company's organization. Like 
the proposal, the final rule also provides for the CIDI to identify any 
remediation steps or mitigating responses necessary to eliminate or 
minimize these barriers or obstacles.
Overall Deposit Activities
    Consistent with the proposal, the final rule requires a full 
resolution submission to include important information about deposit 
activities. One comment letter suggested that instead of requiring this 
information, the rule should focus on ensuring that the CIDI has the 
capabilities to provide the necessary information timely. The FDIC 
agrees that the capabilities to provide this information on a current 
basis would be important in resolution. The CIDIs' provision of the 
information required would be one way to demonstrate these 
capabilities. This information would give the FDIC a baseline view of 
the deposit activities of each CIDI and assist the FDIC in contingency 
planning activities for a potential failure of the CIDI, recognizing 
that updates would be needed in an actual resolution event.
    The final rule adopts the proposed requirements with respect to 
deposit activities, which include information about insured and 
uninsured deposits. While the proposal would have required information 
on commercial deposits by business line and unique aspects of the 
deposit base or underlying systems, the final rule provides 
clarification of that particular aspect of the requirement. The final 
rule specifies that the requirement is to identify ``particular deposit 
concentrations,'' in addition to other aspects of the deposit base or 
underlying systems that may increase complexity in resolution. The 
final rule retains the proposed requirement to describe how types or 
groups of deposits are related to a core business line, business 
segment, or franchise component and how they are identified in the 
CIDI's systems or records. As discussed in the preamble to the proposed 
rule, the deposits related to a particular franchise component must be 
readily identified to facilitate the separation and sale of the 
franchise component along with the associated liabilities. Similarly, 
in a multiple acquirer exit, which may involve regional breakup of the 
CIDI or a breakup of its business lines, it will be important to 
understand how to identify the deposits that would relate to the 
various divestiture options in such a breakup.
    Consistent with the proposal, the final rule requires a discussion 
of foreign deposits and identification of deposits dually payable in 
the U.S. The final rule also adopts the proposed requirements with 
respect to information about deposit sweep arrangements with affiliates 
and unaffiliated parties and the contracts governing those 
arrangements. The final rule clarifies the proposal by stating that the 
FDIC needs information about the CIDI's reporting capabilities to 
generate accurate and timely contact information for omnibus, deposit 
sweep,

[[Page 56631]]

and pass-through accounts. The FDIC intends this clarification to be a 
non-substantive change.
    The final rule adopts the proposed requirements with respect to 
identification of key depositors, which are defined as depositors that 
hold or control the largest deposits (whether in one account or in 
multiple accounts) that collectively are material to one or more 
business segments. Each key depositor must be identified by name, 
business segment, and amount of deposit, and the CIDI must identify 
other services it provides to that depositor. One commenter stated that 
the required information regarding deposit activities should be 
narrowed, but the commenter did not propose an alternative approach. 
The FDIC asked for feedback on the approach to identification of key 
depositors but did not receive feedback. Rather than providing for a 
prescriptive approach, the final rule simply requires a description of 
the approach used by the CIDI in identifying its key depositors. While 
in some cases providing information on the top 10 or 20 percent of 
deposits may be the best approach, in others it may be the top 50 or 
400 depositors, or it may be that the nature of the relationship is a 
crucial identifying feature. Key depositors should include those 
depositors that the CIDI monitors most closely and may want to engage 
with in a stress event.
Critical Services
    The final rule adopts the proposed requirements with respect to 
critical services without substantive change. This includes the 
requirement that the CIDI be able to demonstrate capabilities necessary 
to ensure continuity of critical services in resolution. Under the 
final rule, full resolution submissions are required to identify 
critical services and critical services support and include an 
explanation of the criteria by which critical services are identified 
in order to clarify for the FDIC the CIDI's approach to this content 
element. The final rule requires the identification of critical 
services and critical services support provided by the parent company 
or a parent company affiliate, as well as the physical locations and 
jurisdictions of critical service providers and critical services 
support that are located outside of the United States. The full 
resolution submission must map critical services support to legal 
entities that provide those services directly or indirectly through 
third parties. In addition, a full resolution submission must map 
critical services to the material entities, core business lines, and 
franchise components supported by those critical services. It also must 
include information about the critical services and critical services 
support that may be at risk of interruption if the CIDI fails and the 
process the CIDI used to make that determination. The full resolution 
submission must also discuss potential obstacles to maintaining 
critical services that could occur in the event of the CIDI's failure 
and steps that could be taken to remediate or otherwise mitigate the 
risk of interruption, describe the CIDI's approach for continuing 
critical services in the event of the CIDI's failure, and provide 
information about the contracts governing the provision of these 
services. Consistent with the proposal, the final rule requires a CIDI 
to provide information about its process for collecting and monitoring 
the contracts governing critical services and critical services 
support. As noted in the preamble to the proposed rule, providing 
information about the systems that store these contracts and how this 
information is stored (e.g., centrally, by business line or material 
entity, by business function, etc.) would provide the FDIC with 
valuable information when seeking to understand a CIDI's operations and 
business relationships.
Key Personnel
    The final rule adopts without change the proposed requirements with 
respect to key personnel, including that a CIDI must identify key 
personnel and describe its methodology for identifying key personnel, 
and must furnish information regarding the identification of employee 
benefit programs provided to key personnel and any applicable 
collective bargaining agreements or similar arrangements. Key personnel 
are defined broadly in the rule, and should include personnel tasked 
with an essential role in support of a core business line, franchise 
component, or critical service, or having a function, responsibility, 
or knowledge that may be significant to the FDIC's resolution of the 
CIDI. Key personnel should include personnel that hold or maintain 
necessary licenses or permits for domestic or foreign operations at the 
CIDI or have been designated as key personnel to domestic or foreign 
authorities. Consistent with the proposal, the final rule requires a 
CIDI to provide a recommended approach for retaining key personnel 
during its resolution that, for example, may specify retention bonuses 
and other retention incentives. This approach should consider and 
address employees most at risk for leaving the CIDI promptly upon a 
failure event.
Franchise Components
    The proposal included certain requirements with respect to the 
identification of franchise components and related capabilities. Under 
the proposal, a franchise component was defined as a business segment, 
regional branch network, major asset or asset pool, or other key 
component of the IDI franchise that could be separated and sold or 
divested.
    In response to comments, the final rule makes certain adjustments 
to the requirements with respect to franchise components. The proposed 
rule included the requirement that a CIDI must be able to demonstrate 
the capabilities to ensure that franchise components are separable and 
marketable in resolution. The final rule eliminates the word separable 
from this definition. Instead of referring to separability as a 
required capability of a CIDI, the emphasis of the final rule is on the 
identification of franchise components that are, in their current 
circumstances, separable. The final rule retains the requirement that a 
CIDI must be able to demonstrate the capabilities necessary to market 
the franchise components.
    In addition, the final rule makes an express reference to the IDI 
franchise in this sentence to make clear that this capability also must 
support the marketing of the IDI franchise as a whole or in conjunction 
with the marketing of its franchise components. Although the final rule 
does not permit a closing weekend sale as the identified strategy for 
the reasons discussed above, a sale of the IDI franchise, whether over 
closing weekend or following a bridge bank period, is an important 
option in resolution. It is therefore essential that CIDIs maintain the 
capabilities necessary to support marketing of their IDI franchises as 
well as their franchise components.
    The proposal included the requirement that the full resolution 
submission identify franchise components that are currently separable 
and marketable in a timely manner. The proposed rule received one 
comment with respect to this requirement. The commenter stated that 
there should not be a specified timing requirement for the sale of 
franchise components and that the imposition of a time period, 
especially a short one, such as 60 or 90 days, would not be appropriate 
or realistic. In particular, the commenter stated that it would not 
work for multiple acquirer exit strategies, which require months to 
execute.
    The final rule retains the proposed definition of the term 
``franchise

[[Page 56632]]

component'' as discussed above and retains text of the proposed rule 
with respect to identification of franchise components that are 
currently separable and are marketable in a timely manner. The intent 
is to identify franchise components that can be marketed and sold in 
their current state, i.e., without significant obstacles or the need 
for restructuring. This will enhance optionality for the FDIC, creating 
the potential for marketing of the IDI franchise as a whole as quickly 
as possible following the failure of the CIDI. Thus, the phrase 
``timely manner'' is retained. Although the FDIC did not propose and is 
not now including a specific time requirement, ``timely'' marketing 
capabilities should be measured in days or weeks, not months.
    The FDIC notes that the adopted approach to separability and 
marketability of franchise components is distinguishable from the 
proposed approach taken with respect to the identification of 
divestiture options to support a multiple acquirer exit from a bridge 
bank. The multiple acquirer exit is a possible element of an identified 
strategy, a requirement that applies only to group A CIDIs. Such an 
exit option may require restructuring and divestiture options that 
present greater obstacles and that may require a longer period than for 
a sale of the franchise components. For example, an identified 
franchise component might be a broker-dealer or mortgage servicing 
subsidiary within the bank chain, or a material asset portfolio, that 
is readily separable from the IDI and can be marketed as an option at 
the time of failure. On the other hand, divestiture options may be the 
result of a regional breakup of the CIDI or a breakup of business lines 
that require significant restructuring in order to market the regional 
or business line segments separately.
    The proposed rule would have required franchise components 
identified in a full resolution submission to be sufficient to 
implement the identified strategy (for group A CIDIs) and to provide 
meaningful optionality across a range of scenarios if the preferred 
approach is not available. The requirement to provide meaningful 
optionality across a range of scenarios is deleted from this paragraph 
as superfluous. That expectation is subsumed in the first prong of the 
credibility standard applicable to group A CIDIs, which is discussed 
above.
    Consistent with the proposed rule, the final rule sets forth basic 
informational elements required for each franchise component, including 
identification of responsible senior management and provision of 
metrics depicting each franchise component's size and significance. 
Useful metrics may include total revenue, net income, percentage market 
share, and, if applicable and available, total assets and liabilities. 
The full resolution submission must also include a description of the 
key assumptions for each franchise component divestiture and all 
significant impediments and obstacles to execution of a franchise 
component divestiture, including legal, regulatory, cross-border, or 
operational challenges.
    The final rule retains these paragraphs as proposed. The final rule 
makes no change to the proposed requirement that a full resolution 
submission must include a description of the CIDI's capabilities and 
processes to initiate marketing of the franchise component and provide 
a description of necessary actions and a timeline for the divestiture 
supported by a description of the key underlying assumptions. The final 
rule also adopts the requirement in the proposal that the CIDI describe 
the process it would use to identify prospective bidders for its 
franchise components. The FDIC makes every effort to market failed 
banks--and their assets and business segments--as widely as possible. A 
requirement that CIDIs provide analysis on identification of 
prospective bidders of franchise components supports that effort. In 
addition to describing the process for identification of prospective 
bidders, identifying those prospective bidders, either specifically or 
by industry or category, would also be helpful.
    The final rule incorporates the proposed requirements with respect 
to a virtual data room (VDR), which, among other things, must include 
information sufficient to permit a bidder to provide an initial bid on 
the IDI franchise or the CIDI's franchise components. One commenter 
stated that the VDR requirements should be aligned with the DFA rule 
expectations regarding due diligence rooms. The comment also stated 
that the FDIC should not require ongoing maintenance of a VDR and not 
establish a timeframe for setting up the VDR because time requirements 
may vary across CIDIs. It also stated that the FDIC should note that 
the list of VDR elements is merely indicative.
    The VDR requirements in the final rule are consistent with the 
expectations in the U.S. GSIB guidance \16\ issued in connection with 
the DFA rule that would apply to any divestiture option identified in a 
DFA resolution plan, which could include any subsidiary or component of 
the firm's global organization. Reflecting the different focus of this 
rule, it provides more detail than the U.S. GSIB guidance about the 
informational elements that would be appropriate for a VDR to be 
utilized in the sale of the IDI franchise and the CIDI's franchise 
components. The final rule, like the proposal, does not require the 
ongoing maintenance of a VDR; rather it is focused on the capabilities 
to establish a VDR in a timely manner.
---------------------------------------------------------------------------

    \16\ Guidance for section 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).
---------------------------------------------------------------------------

    The final rule is unchanged from the proposal with respect to the 
length of time during which a VDR must be able to be populated, in that 
it does not provide a prescriptive time. However, the capabilities 
should support a very short time frame to stand up a VDR and not rely 
upon a stabilized bridge bank to extend the time available to do so. 
The final rule requires a description of the length of time and any 
challenges or obstacles to providing complete and accurate information 
necessary to support a competitive bid, with an expectation that this 
time frame will be brief and measured in days.
    The list of content elements to be included in the VDR is 
indicative and not comprehensive; the specific information and data 
that would be appropriate and sufficiently detailed to support prompt 
and competitive bids will vary among CIDIs. For instance, deposit data 
and information elements might include a complete, current deposit 
trial balance reconciled to the general ledger, a description of the 
largest depositor relationships, information regarding sweeps and 
brokered deposits, and other data useful to inform a bid. Loan and 
lending operations information might include a loan tape or loan trial 
balance reconciled to the general ledger, loan portfolio file 
samplings, underwriting policies, information regarding real estate 
owned, and key lending relationships. Where the CIDI has non-
traditional business lines, the information provided should be 
appropriate to the sale of those elements as franchise components or as 
part of the IDI franchise. The data and information as a whole should 
support a sale of the IDI franchise as a whole, while providing 
optionality for the sale of separable franchise components. The final 
rule was modified from the proposal to make clear that certain of the 
listed data elements may not apply in some cases, such as for the sale 
of a franchise component that is a material asset portfolio.

[[Page 56633]]

    Finally, to effect a timely sale of a failed IDI, the FDIC must 
have access to and control of data in a VDR. Historically, the FDIC has 
established a VDR controlled by the FDIC and migrated the information 
into that VDR. As in the proposal, the final rule requires the full 
resolution submission to include information with respect to access 
protocols and requirements for the FDIC to use the VDR to carry out the 
sale of the IDI franchise or the CIDI's franchise components. It also 
must include a description as to how the CIDI could support that 
process, either through providing sufficient access and controls to the 
CIDI's virtual data room to the FDIC as receiver for the failed IDI, or 
by establishing a process to timely and securely migrate all data to an 
FDIC-controlled VDR, in a suitable format and file structure.
    Because many of the CIDIs have a broker-dealer subsidiary or parent 
company affiliate, the final rule also includes, without change, the 
proposed provision specifically addressing VDR content related to a 
broker-dealer. It is not the intent of that provision, however, to 
exclude or limit information related to other non-banking activities 
such as insurance or asset management.
Material Asset Portfolios
    The proposed rule would have required CIDIs to include information 
about ``asset portfolios,'' including how the assets within the 
portfolio are valued and recorded in the CIDI's records. As proposed, a 
CIDI would have been required to identify and discuss impediments to 
the sale of each material asset portfolio and to provide a timeline for 
each material asset portfolio's disposition. A commenter noted that the 
concept of ``material asset portfolios'' appears to be included in the 
definition franchise components and therefore, a separate requirement 
regarding material asset portfolios is redundant and unnecessary. The 
final rule retains the proposed requirement and exclusively utilizes 
the defined term ``material asset portfolios.'' With respect to the 
definition of franchise components, the final rule utilizes the term 
``material asset portfolio'' instead of ``asset pool'' for clarity and 
consistency. While a material asset portfolio may be identified as a 
franchise component, this paragraph requires identification of material 
asset portfolios whether or not they meet the definition of a franchise 
component and are identified as such in the full resolution submission. 
However, where there is overlap with material asset portfolios that are 
franchise components, the information can be provided once and cross-
referenced, if appropriate.
Valuation To Facilitate FDIC's Assessment of Least-Costly Resolution 
Method
    As explained in the preamble to the proposal, the requirement that 
each group A CIDI must provide valuation analysis and develop the 
related capabilities would support the FDIC's analysis in conducting 
valuations in any actual failure scenario, even where there are no bid 
prices available to establish value. The proposed rule would have 
required group A CIDIs to demonstrate the capabilities necessary to 
produce valuations that support the FDIC's analysis to determine 
whether a resolution strategy would be the least costly to the DIF in 
the event of failure. To demonstrate valuation capabilities, the 
proposed rule would have required a group A CIDI to describe its 
valuation process in its resolution plan and include a valuation 
analysis that includes a range of quantitative estimates of value as an 
appendix to its resolution plan.
    The proposed valuation analysis required that a group A CIDI 
provide a narrative description of how it values its franchise 
components and the CIDI as a whole. It also required qualitative and 
quantitative valuation analysis assuming both an all-deposits bridge 
bank and the transfer of insured deposits only to the bridge bank. In 
all cases, the proposed rule required that the resolution plan describe 
the CIDI's approach to gathering information needed to support its 
analysis and its ability to produce updated and timely valuation 
information.
    The FDIC received several comments to the proposal with respect to 
the proposed requirements for valuation analysis. Several commenters 
emphasized the importance of valuation to resolution planning. Three 
commenters supported the replacement of least-cost analysis with a 
valuation capabilities requirement, but disagreed with the proposed 
approach to quantitative analysis. One commenter argued that 
assumptions regarding depositor and potential acquirer behavior would 
be ``inherently subjective and likely to add little-to-no value to the 
FDIC.'' This commenter also stated that the quantitative analysis is 
not well adapted to CIDIs that lack experience with mergers and 
acquisitions or large mergers and acquisitions teams, and would require 
retention of third parties.
    The FDIC considered commenters' concerns regarding the requirement 
for quantitative analyses. The final rule partially retains the 
requirement for quantitative analysis, with some modifications. There 
is significant value in a group A CIDI demonstrating that it has the 
capability to value its deposit franchise, as well as the individual 
franchise components. The proposed valuation content requirements are 
not underpinned by an expectation that the resulting ranges of value 
will accurately anticipate sale proceeds actually received from a 
disposition at some undetermined future point. Instead, the utility of 
CIDIs' valuation analysis is in understanding the methodologies CIDIs 
determine to be appropriate for estimating the value of their franchise 
components and the CIDI as a whole, and the degree to which CIDIs would 
be able to furnish the information and analysis necessary for the FDIC 
to conduct its statutorily-required analyses in an actual resolution 
scenario.
    The evaluation of valuation analyses under the second prong of the 
credibility standard reflects a recognition of the inherent necessity 
for application of judgment in the analyses (e.g., selection of 
appropriate valuation approaches, assignment of weights to the various 
approaches). As required by the standard, the CIDI's judgment should be 
supported by observable and verifiable capabilities and data, as well 
as reasonable projections. Thus, the FDIC will not evaluate the 
analysis on the basis of a specific threshold or metric or the specific 
choices made regarding valuation approaches and methodology, but rather 
on the comprehensiveness of the analysis, the supportability of the 
data and capabilities required to conduct the analysis, the 
reasonableness of the CIDI's assumptions and selected approaches, and 
the group A CIDI's ability to refresh the analyses in a timely manner. 
The FDIC does not require or expect valuation analysis to be completed 
by a third-party expert; rather the analysis should be based upon the 
group A CIDI's understanding of the nature of its business and its 
relationships with its depositors.
    In response to comments, the final rule eliminates the requirement 
that valuation estimates reflect the ``net present value of proceeds 
estimated to be received'' in a sale of the IDI franchise as a whole or 
under a sum-of-the-parts analysis. This change recognizes that, while 
the required valuation analysis will result in a range of reasonable 
values, the actual proceeds realized in a given transaction will depend 
on, among other things, the facts and circumstances surrounding the

[[Page 56634]]

actual failure and the time for marketing and executing the 
transaction.
    In addition, in response to comments, the final rule modifies the 
proposed requirements to reflect a shift toward qualitative analysis 
only for Sec.  360.10(d)(12)(ii)(B), eliminating the quantitative 
analysis relating to the impact on value in the event that losses are 
imposed on uninsured depositors in connection with the resolution 
strategy adopted.
    The presence of unsecured debt on the balance sheet of the failed 
IDI serves to protect deposits in resolution, and increase the 
likelihood that an all-deposits bridge bank will meet the requirements 
of the least-cost test. However, even with the benefits of long-term 
debt positioned at the CIDI at the time of its failure, it cannot be 
assured that an all-deposits bridge bank will meet the requirements of 
the least-cost test in every case. Thus, the final rule, like the 
proposal, also requires analysis of the impact on value where only 
insured deposits are passed to the bridge bank. This analysis will 
assist the FDIC in understanding the impact on value in an insured-only 
bridge bank, which will assist in weighing whether that outcome is less 
costly than other available resolution options. While the proposal 
required quantitative as well as qualitative analysis in this area, in 
response to comments, the final rule requires a group A CIDI to provide 
only qualitative analysis of the impact on franchise value that may 
result from not transferring uninsured deposits to the bridge 
depository institution. The quantitative analysis provided with respect 
to an all-deposits bridge bank, together with robust qualitative 
analysis with respect to an insured-only bridge bank, will support the 
FDIC's least-cost determination under both scenarios. This qualitative 
analysis must include a description of options to mitigate that impact, 
such as an advance dividend payment to depositors, reflecting different 
levels of loss. As clarified in the final rule, such a qualitative 
analysis should reflect reasonable assumptions of customer behavior 
based upon the group A CIDI's overall depositor profile and the 
provision of overall lending and other services to such depositors. For 
example, insight into the holistic client relationships, including the 
lending, fee-based, and deposit-based businesses would provide insight 
into the value impact.
Off-Balance Sheet Exposures
    The final rule incorporates the proposed requirement that a full 
resolution submission include a description of any material off-
balance-sheet exposures, including unfunded commitments, guarantees, 
and contractual obligations, and that it map those exposures to 
franchise components, core business lines, and material asset 
portfolios.
Qualified Financial Contracts
    The final rule includes the proposed requirements for information 
on qualified financial contracts (QFCs), which are intended to support 
and enhance information that may be provided under the FDIC's QFC 
recordkeeping rule, and would be useful in the event that the CIDI were 
not subject to the requirements of the QFC recordkeeping rule at the 
time of its failure.\17\ The focus of the information required is on 
the relationship of QFCs to the CIDI's core business lines and 
franchise components, and how these transactions are integrated with 
the CIDI's business activities and with other services provided to 
customers. Consistent with the proposal, the final rule also requires 
CIDIs to provide information about their booking models for risk, and 
how the CIDI uses QFCs to manage hedging or liquidity needs. This 
information will help the FDIC to make decisions with respect to 
transferring QFCs to a bridge bank, and to better understand the impact 
of any decision not to transfer certain QFCs. The final rule also 
includes certain revisions to the language of this paragraph, which are 
intended as clarifying changes.
---------------------------------------------------------------------------

    \17\ See generally 12 CFR part 371.
---------------------------------------------------------------------------

Unconsolidated Balance Sheet; Material Entity and Regulated Subsidiary 
Financial Statements
    The final rule adopts the proposed requirement that a CIDI must 
provide an unconsolidated balance sheet and consolidating schedules for 
all material entities and regulated subsidiaries that are subject to 
consolidation with the CIDI. The final rule also adopts the provision 
permitting CIDIs to aggregate on the consolidating schedule amounts 
attributed to entities that are not material entities or regulated 
subsidiaries. The final rule includes clarifying changes intended to 
more clearly state that all of the requirements apply to regulated 
subsidiaries as well as material entities. Consistent with the 
proposal, the final rule requires audited financial statements where 
they are available.
Payment, Clearing, and Settlement Services
    The final rule adopts, with clarifying changes, the proposed 
requirement that a full resolution submission provide information 
regarding each payment, clearing, and settlement (PCS) provider with 
which it has a direct relationship. The text was revised to make clear 
that payment, clearing, and settlement systems include services 
provided by financial market utilities and agent banks, and makes ``PCS 
service provider'' a new defined term. Consistent with the proposal, 
information is required for PCS service providers that are critical 
services or critical services support. Also consistent with the 
proposal, the final rule requires CIDIs to map PCS service providers to 
legal entities, core business lines, and franchise components, and to 
describe the services provided by these systems, including the value 
and volume of activities on a per-provider basis.
    The final rule also adopts the proposed requirement for a full 
resolution submission to describe PCS services provided by a CIDI and 
that are material in terms of revenue to or value of any franchise 
component or core business line of the CIDI.
Capital Structure; Funding Sources
    The final rule adopts, with clarifying changes, the proposed 
requirements with respect to capital structure and funding sources. Two 
comments were supportive of the proposed approach. The final rule 
requires that a full resolution submission describe the current 
processes used to identify the funding, liquidity, and capital needs of 
and resources available to each CIDI subsidiary or foreign branch that 
is a material entity, and to describe the CIDI's capabilities to 
project and report its near-term funding and liquidity needs. It 
requires that the full resolution submission identify the composition 
of liabilities of the CIDI, as a clarification of the proposed 
requirement to describe them, and specifies the requisite information 
to be provided with respect to those liabilities. The final rule also 
requires a CIDI to identify material funding relationships and material 
inter-affiliate exposures between the CIDI and its subsidiaries or 
foreign branches that are material entities, instead of the proposed 
requirement to describe them. These changes are intended to clarify 
that the full resolution submission is expected to include quantitative 
information for these areas, and are complementary to the expectation 
that the interim supplement will not include any additional narrative 
apart from the description of material changes as described in Sec.  
360.10(e)(2)(i) and (ii).

[[Page 56635]]

Parent and Parent Company Affiliate Funding, Transactions, Accounts, 
Exposures, and Concentrations
    The final rule adopts, with clarifying changes, the proposed 
requirements with respect to parent and parent company affiliate 
funding, transactions, accounts, exposures, and concentrations. The 
final rule requires that a CIDI's full resolution submission must 
identify material affiliate funding relationships and material inter-
affiliate exposures that the CIDI or its subsidiaries have with the 
parent company or any parent company affiliate, instead of the proposed 
requirement to describe them. Similar to above, this clarifying 
language is intended to make clear that the full resolution submission 
is expected to include quantitative information and is complementary to 
the expectation that the interim supplement will not include any 
additional narrative apart from the description of material changes as 
described in Sec.  360.10(e)(2)(i) and (ii). The full resolution 
submission must identify the nature and extent to which the parent 
company or any parent company affiliate serves as a source of funding 
to the CIDI and CIDI subsidiaries. The final rule requires that the 
submission include the terms of any contractual arrangements, including 
any capital maintenance agreements, the location of related assets, 
funds or deposits, and the mechanisms for such inter-affiliate 
transfers, revised to include funds transferred from parent company 
affiliates.
Economic Effects of Resolution
    The proposed rule would have required CIDIs to identify their 
activities that are material to a particular geographic area or region 
of the United States, a particular business sector or product line, or 
other financial institutions. It also would have required the full 
resolution submission to describe the potential disruptive impact of 
the termination of such activities on the geographic area, region, 
business sector, industry, or product line, or to the U.S. financial 
industry.
    The FDIC received several comments to the proposed approach with 
respect to the requirement that the full resolution submission describe 
disruptive impacts in resolution. Commenters objected to the proposed 
approach, arguing that it would require ``speculative'' assessment of 
impacts on third parties, that the information may be better available 
to supervisors with a wider vantage point on impacts, and that the 
proposal is too broad and vague and should be more clearly defined. The 
FDIC agrees that the assessment of the potential disruptive impacts on 
third parties may be difficult and possibly speculative, and would have 
limited value. Accordingly, the final rule eliminates that requirement 
and substitutes a narrower requirement: that the full resolution 
submission discuss whether the identified services or functions are 
readily substitutable by other providers and other mitigants to the 
potential impact of the termination of those activities in the event of 
failure of the CIDI.
    The CIDIs are the nation's largest banks, and the FDIC will seek to 
resolve a CIDI in a way that minimizes the disruptive impact of the 
resolution to the extent possible. It is therefore important that the 
FDIC is aware of the activities of the CIDI that are most likely to 
have significant disruptive effects if terminated in resolution, such 
as where a CIDI provides a unique function or is a dominant provider of 
a particular service. While the CIDI may not be able to fully measure 
or assess those impacts, a CIDI will be able to identify areas where it 
has a large market share of a particular business segment or geographic 
region, or where it provides significant services to other financial 
institutions, such as agent or correspondent banking services. A 
description of the impact of cessation of these services or functions, 
and information regarding whether there are other providers with the 
capacity to readily substitute for the activities of the CIDI or other 
mitigants to the impact of termination of these services are important 
to understanding the potential impacts and mitigating actions that may 
be useful in the FDIC's resolution planning.
Non-Deposit Claims
    The final rule adopts without change the proposed requirement that 
a CIDI's full resolution submission identify and describe its 
capabilities to identify the non-depositor unsecured creditors of the 
CIDI and its subsidiaries that are material entities. Consistent with 
the proposal, the final rule also requires a description of how the 
CIDI would identify all non-depositor unsecured liabilities, including 
contingent liabilities like guarantees and letters of credit, as well 
as the location of the CIDI's related records and its recordkeeping 
practices. While related to the requirements in Sec.  360.10(d)(17) 
addressing capital structure and funding sources, the requirements in 
this paragraph are intended to provide information specifically helpful 
to the claims process, and would be in addition to the description of 
liabilities provided in Sec.  360.10(d)(17).
Cross-Border Elements
    The final rule adopts with certain changes the proposed 
requirements with respect to cross-border elements in a full resolution 
submission. The FDIC received one comment on this proposed element, 
which supported the inclusion of the element as proposed. Consistent 
with the proposal, the final rule requires a full resolution submission 
to describe components of cross-border activities of the parent company 
or parent company affiliates that contribute to value, revenues, or 
operations of the CIDI. Where the CIDI has a significant interest 
(e.g., a controlling interest or a significant economic interest) in a 
foreign joint venture that contributes to revenue or operations of the 
CIDI, that information should be included. Entities with no meaningful 
function or contribution to the CIDI's operations, such as single 
purpose real estate holding companies, may be excluded.
    Consistent with the proposal, the final rule also requires that a 
full resolution submission identify regulatory or other impediments to 
divestiture, transfer, or continuation of foreign branches, 
subsidiaries, or offices while the CIDI is in resolution, including 
retention or termination of personnel and adding in the final rule, 
transfer or continuation of licenses or authorizations. Further, the 
final rule adds an express requirement that the full resolution 
submission must identify all authorities with regulatory or supervisory 
authority over cross-border operations. This information will assist 
the FDIC in coordinating with the requisite authorities in resolution.
Management Information Systems; Software Licenses; Intellectual 
Property
    The final rule adopts without substantive change the proposed 
requirement that each CIDI's full resolution submission identify and 
describe each key management information system and application, and 
identify any core business line that uses it, and the key personnel 
needed to support and operate it. In the final rule, the term key 
personnel is used here instead of ``personnel by title and legal entity 
employer.'' Each full resolution submission also is required to 
identify each system's and application's use and function, which core 
business lines use it, and its physical location, if any, as well as 
any related third-party contracts or service-level agreements, any 
related software or systems licenses, and any other related 
intellectual property. Consistent with the proposal, the final rule 
also requires a full resolution

[[Page 56636]]

submission to specifically identify key systems or applications that 
the CIDI or its subsidiary does not own or license directly from the 
provider and to discuss how to maintain access to the system or 
application when the CIDI is in resolution. Like the proposal, the 
final rule requires a description of the capabilities of the CIDI's 
processes and systems to collect, maintain, and produce the information 
and other data underlying the full resolution submission; 
identification of all relevant systems and applications; and a 
description of how the information is managed and maintained. For 
example, the full resolution submission must describe whether the 
information is centralized, or organized by region or business line; 
whether it is automated or manual; and whether the applicable system or 
application is integrated with other of the CIDI's systems or 
applications. The final rule also provides for the CIDI to describe any 
deficiencies, gaps, or weaknesses in these capabilities and the actions 
the CIDI intends to take to address promptly any such deficiencies, 
gaps, or weaknesses, and the time frame for implementing these actions.
Digital Services and Electronic Platforms
    The proposal included a new content element for inclusion in each 
CIDI's full resolution submission regarding digital services provided 
by a CIDI to its customers and the electronic platforms that support 
these systems. The FDIC received one comment, asserting that the 
requirement regarding digital services and electronic platforms is 
vague and potentially duplicative of other requirements, such as 
critical services, payment, clearing, and settlement, and management 
information systems. The final rule retains the requirement as 
proposed. While some of the requirements may overlap with other 
requirements in the rule, such as whether the services and platforms 
are provided by a CIDI subsidiary, a parent company affiliate, or a 
third-party and information on the related intellectual property 
rights, this paragraph is intended to capture information specific to 
digital services and electronic platforms. If the information is 
provided elsewhere, a cross-reference will suffice. The final rule uses 
the word ``customers'' instead of ``depositors'' in the first sentence 
of the paragraph, to clarify that retail and business customers may 
include depositors or other customers or clients of the CIDI.
    As noted in the preamble to the proposal, digital services provided 
to customers and their electronic platforms is a new and evolving area 
of banking. The language in the final rule is intended to be flexible 
enough to adapt to the changing environment, while focusing on the 
significance of these services to CIDI operations or customer 
relationships and their relationship to franchise value and depositor 
behavior. The information required will be helpful to the FDIC in 
understanding how such services are significant to customer loyalty and 
franchise value where they are unique, may rely on proprietary 
intellectual property with low substitutability, may have an impact on 
stickiness of retail or commercial deposits, or are important to a 
customer base that relies upon a certain platform or service.
Communications Playbook
    The final rule adopts the proposed requirement that a full 
resolution submission must include a communications playbook describing 
the CIDI's current communications capabilities and how those 
capabilities could be used from the point of the CIDI's failure through 
its resolution. One commenter supported this requirement as proposed, 
while one commenter suggested elimination of this requirement as 
unnecessary. The final rule retains the requirement for a 
communications playbook and adds an express requirement that the 
playbook include the identification of key personnel responsible for 
the CIDI's crisis communications across key stakeholder categories and 
communications channels and the organizational structure for relevant 
communications activities. It also clarifies that the stakeholders 
should include any foreign regulatory authorities as well as domestic 
regulatory authorities. In a resolution, it is important for the FDIC 
to be able to quickly identify the right points of contact to assure 
timely, clear, and coordinated communications to all stakeholders.
Corporate Governance
    The final rule adopts without change the proposed requirements for 
the governance of the CIDI's resolution planning processes and 
preparation and approval of full resolution submissions.
CIDI's Assessment of the Full Resolution Submission
    The final rule adopts without change the proposal that a full 
resolution submission must include a description of any contingency 
planning or similar exercise that the CIDI has conducted since its most 
recently filed full resolution submission that assesses the viability 
of the identified strategy (if required) or improves any capabilities 
described in the full resolution submission. As noted in the preamble 
to the proposal, the requirement is limited to requiring CIDIs to 
describe contingency planning or exercises they have done or plan to 
do; it does not require CIDIs to conduct these types of activities.
Any Other Material Factor
    The final rule requires a CIDI to identify and discuss any other 
material factor that may impede its resolution. This is unchanged from 
the proposal.

E. Interim Supplement

    Under the proposal, each CIDI would be required to file interim 
supplements that address all or parts of certain content elements 
included in the CIDI's full resolution submission. The FDIC received 
comments to the proposed interim supplement requirements and made 
changes to the final rule in response to those comments.
    Several commenters argued for narrowing the content required in the 
interim supplement to focus on data and information that has materially 
changed since the most recent submission or has a material impact on 
the full resolution submission. One commenter suggested that any 
narrative in the interim supplement be limited to an explanation of 
material changes. Commenters expressed concern that the interim 
supplement, as proposed, would be burdensome for CIDIs.
    One commenter suggested that the interim supplement should be based 
on prior year-end data, rather than data as of the end of the most 
recent fiscal quarter.
    Two comment letters recommended that all or most group A CIDIs 
should move to a three-year cycle for full resolution submissions and 
interim supplements should be filed either 18 months after that 
submission, or in each year that a full resolution submission is not 
made. One of these comment letters recommended that CIDI affiliates of 
U.S. GSIBs, which are biennial filers under the DFA rule, make full 
resolution submissions every two years, alternating with DFA resolution 
plan submissions, and interim supplements would therefore be 
unnecessary and should not be required.
    The FDIC considered these comments and has concluded that the 
content requirements for the interim supplement are appropriate and 
that the information required will aid the FDIC with planning for and 
carrying out resolutions. As a result, the final rule

[[Page 56637]]

retains the proposal's content requirements for the interim supplement. 
With the final rule's shift to a three-year cycle for most CIDIs, the 
expected utility of the interim supplement is further increased. The 
FDIC believes the interim submission requirement strikes the right 
balance between providing the FDIC with valuable updated information to 
assist with resolution planning while limiting burden on the CIDIs in 
providing the updated information. The FDIC has focused the interim 
supplement content requirements on information that is most essential 
to its resolution planning, that can be readily produced, and that is 
relatively likely to change year over year. Under the final rule, the 
FDIC retains the proposed discretion to add or eliminate elements from 
the interim supplement to ensure that it remains useful, includes the 
most important information, and can evolve based on lessons learned.
    In response to comments, the final rule incorporates a requirement 
to describe all material changes resulting from an extraordinary event, 
and to describe each material changes applicable to interim supplement 
content since the CIDI's most recent full resolution submission or 
interim supplement (or to affirm that no such material change has 
occurred). The FDIC does not expect any additional narrative will need 
to be included in the interim supplement.
    Also in response to comments, the final rule provides that data in 
the interim supplement should be as of the most recent fiscal year-end 
for which the CIDI has financial statements or, if financial 
information from more recent financial statements would more accurately 
reflect the CIDI's operations as of the date of the interim supplement, 
financial information as of that more recent date. This is reflected in 
Sec.  360.10(g)(1), which has been revised to incorporate a reference 
to the interim supplement in additional to full resolution submissions. 
With this change, the proposal's Sec.  360.10(e)(2) has been eliminated 
as it is no longer necessary.
    Regarding the frequency of interim supplement filings, the final 
rule makes certain changes for clarity and consistency, and introduces 
an exception. The final rule retains the annual cadence of interim 
supplements, and requires an interim supplement on or before the 
anniversary of the prior full resolution submission or interim 
supplement, as the case may be, unless the FDIC provides written notice 
of a different date. Consistent with the proposal, no interim 
supplement is required in the calendar year in which a CIDI files a 
full resolution submission. In response to comments, the final rule 
provides that biennial filers, which are IDI affiliates of U.S. GSIBs, 
are not required to submit an interim supplement in the year in which 
they file a DFA resolution plan. This exception applies only to the 
biennial filers, given their higher frequency of submissions under this 
rule, and expected annual submission of resolution plans under this 
rule and by their parent companies under the DFA rule. In addition, 
particularly for CIDIs identified as material entities and divesture 
options in the DFA resolution plan, there is sufficient overlap in 
content to meet the needs of the interim supplement.
    The final rule makes clear that all CIDIs will receive a written 
notice specifying the date on which their initial full resolution 
submission or interim supplement is due. CIDIs that are not filing a 
full resolution submissions as their first submission following the 
effective date of the final rule are required to provide interim 
supplements in the years prior to the date their first full resolution 
submission is due.

F. Credibility; Review of Full Resolution Submissions; Engagement; 
Capabilities Testing

Credibility Criteria
    The proposal included a credibility standard consisting of two 
prongs for assessing the credibility of a full resolution submission. 
The first prong applies only to resolution plans submitted by group A 
CIDIs. Under this prong, a resolution plan could be found not credible 
if the identified strategy did not provide timely access to insured 
deposits, maximize value from the sale or disposition of assets, 
minimize any losses realized by creditors of the CIDI in resolution, 
and address potential risks of adverse effects on U.S. economic 
conditions or financial stability. The second prong applies to full 
resolution submissions by all CIDIs. Under the second prong, a full 
resolution submission could be found not credible if the information 
and analysis in the full resolution submission are not supported with 
observable and verifiable capabilities and data and reasonable 
projections, or the CIDI fails to comply in all material respects with 
the requirements of the rule. Because the interim supplement is simply 
an update of a subset of information required in a full resolution 
submission, it will not be separately assessed against the credibility 
standard.
    The FDIC considered all comments regarding the credibility 
standard, and the final rule retains the credibility standard as 
proposed. One commenter recommended that all full resolution 
submissions be subject to both credibility assessment prongs as part of 
a general recommendation to eliminate the distinction between group A 
CIDIs and group B CIDIs. As discussed above, the FDIC believes that the 
distinction between group A CIDIs and group B CIDIs is appropriate, and 
therefore the prong one standard would not be applicable to the 
informational filings.
    Another commenter suggested that the requirement that the 
identified strategy be effective in minimizing losses to creditors was 
in contradiction with the recent rulemaking proposal by the FDIC and 
other agencies to require certain large insured depository institutions 
to have outstanding a specified amount of eligible long-term debt.\18\ 
The FDIC believes that the goals of the proposed rulemaking and this 
final rule are strongly aligned. The long-term debt rule, if adopted, 
will help reduce losses to creditors and will support an orderly and 
efficient resolution of an IDI.
---------------------------------------------------------------------------

    \18\ See Long-Term Debt Requirements for Large Bank Holding 
Companies, Certain Intermediate Holding Companies of Foreign Banking 
Organizations, and Large Insured Depository Institutions, 88 FR 
64524 (Sept. 19, 2023).
---------------------------------------------------------------------------

    The FDIC received three comments recommending that the credibility 
determination be eliminated, or that there should not be any 
enforcement action based on the credibility standard. These commenters 
argued that the standard's first prong would require speculation on 
conditions at the time of failure and would therefore be subjective and 
potentially inconsistently applied over time. The FDIC received one 
comment advocating for changes to the second prong of the credibility 
standard that would remove the qualifiers ``verifiable'' and 
``observable'' for capabilities requirements.
    It is an important goal of the final rule to establish clear 
expectations with respect to the form and substance of resolution 
submissions, and a clear standard against which they are assessed for 
compliance with the rule. The FDIC has experience in evaluating 
resolution plans and generally expects to conduct horizontal reviews 
across full resolution submissions of CIDIs that have similar 
characteristics to gain a broader perspective as well as to assure 
consistent assessment of the full resolution submissions.

[[Page 56638]]

    As described in the preamble to the proposal, the new standard 
expressly incorporates concepts from the 2012 rule, including the 
reference to observable and verifiable capabilities and data and 
reasonable projections. These elements of the credibility standard, 
which are incorporated into the second prong, have proved useful in 
past plan reviews and feedback.
    With respect to prong one of the standard, the FDIC considered 
comments suggesting that this standard may be subjective or imprecise. 
The FDIC appreciates the concern that the standard necessarily requires 
the exercise of judgment in understanding whether value is maximized or 
losses to creditors are minimized, for example, in a particular 
strategy under the specified scenario. The FDIC agrees that there is a 
necessary element of judgment in determining whether an identified 
strategy meets the goals of the rule as expressed in the first prong of 
the credibility standard. The application of judgment in the 
development of the identified strategy is appropriate given the 
diversity among the group A CIDIs. A well-reasoned and well-supported 
identified strategy prepared by a group A CIDI will provide the FDIC 
useful information in assessing its options when confronted with an 
actual failure scenario.
    One comment pointed to potential challenges in the element of the 
first prong that requires that the resolution plan address the 
potential risk of adverse effects on U.S. economic conditions or 
financial stability. Some CIDIs have critical operations that are 
important to financial stability identified in their affiliates' DFA 
resolution plans, may be highly interconnected with other financial 
institutions, may have dominant market share in certain geographic 
regions or market segments, or their resolution could be disruptive to 
the U.S. economy or financial stability in other ways. The requirement 
that the resolution plan address the potential risk of adverse effects 
on U.S. economic conditions or financial stability is intended to 
require that the identified strategy take into account the potential 
for risks to U.S. economic conditions or financial stability arising 
from the execution of the strategy. Those risks should be described in 
the resolution plan, and the identified strategy should include 
specified actions that would mitigate those risks. It is a critical 
resolution planning objective that the CIDI can be resolved without the 
need for extraordinary support from the DIF and without reliance on the 
systemic risk exception to the statutory least-cost requirement under 
the FDI Act.
    As discussed in the proposal, the FDIC has considered the 
particular challenges with respect to the requirement that the 
identified strategy address the potential for risks to U.S. economic 
conditions or financial stability for the CIDIs that are part of the 
largest and most systemic and interconnected U.S. banking 
organizations, specifically the group A CIDIs that are subsidiaries of 
U.S. GSIBs. This category of firms comprises the U.S. banking 
organizations that pose the greatest risk to U.S. financial stability. 
The FDIC is aware of progress made by the U.S. GSIBs in the development 
of DFA resolution plans, including their adoption of an SPOE strategy 
for the resolution of the firm pursuant to which any subsidiary U.S. 
IDI that is a material entity remains open and operating. Each of these 
firms has also made progress in increasing the range of scenarios in 
which that strategy may be actionable and effective through structural 
and operational changes. Moreover, certain enhanced prudential 
standards that support resolvability apply only to the U.S. GSIBs.
    Despite this progress, the availability or success of an SPOE 
strategy cannot be ensured in all circumstances, and the possibility of 
a resolution of a CIDI that is a subsidiary of a U.S. GSIB cannot be 
eliminated. The FDIC believes that it is appropriate to require group A 
CIDIs within these banking organizations to develop comprehensive 
resolution plans that include an identified strategy that meets the 
requirements of the first prong of the credibility standard to support 
the FDIC's resolution readiness in the event that such a CIDI should 
fail. While these CIDIs may have a particular challenge in addressing 
the risks their identified strategy may present to the U.S. economy and 
financial stability, where the DFA resolution plan of the CIDI's parent 
company contains relevant analysis and information with respect to the 
risk of potential adverse effects on U.S. financial stability arising 
from the failure of a subsidiary group A CIDI, the inclusion of that 
information by cross-reference is permitted under (c)(6). In addition, 
where the strategy for the rapid and orderly resolution of a U.S. GSIB 
in its DFA resolution plan does not include the resolution of the CIDI 
under the FDI Act, that strategy may reasonably be identified as a 
mitigant to the systemic risk, if any, posed by the failure of the CIDI 
under the FDI Act.
Full Resolution Submission Review and Credibility Determination
    The proposal described a process for full resolution submission 
review and credibility assessment. Like the proposal, the final rule 
makes no change to the proposed rule with respect to coordination with 
supervisors related to the review process. The FDIC will review a full 
resolution submission in consultation with the appropriate Federal 
banking agency for the CIDI and for its parent company. If after 
consultation with any such appropriate Federal banking agency (or 
agencies), the FDIC determines that a CIDI's full resolution submission 
is not credible, the FDIC will notify the CIDI in writing of such 
determination. This written notice will include a description of the 
material weaknesses in the full resolution submission that resulted in 
the determination.
    With respect to the full resolution submission review and the 
credibility determination process, two commenters emphasized the 
importance of the FDIC providing timely, clear, and consistent feedback 
to CIDIs, with one noting that feedback should be provided at least 12 
months before the next submission is due. This comment also suggested 
that the FDIC should institute an intermediate level of feedback 
between informal feedback and a formal weakness determination to 
precede a non-credibility finding.
    The FDIC agrees that timely and clear feedback is an important part 
of the review process. The extension of the submission cycle to three 
years for most CIDIs will provide additional assurance of sufficient 
time to incorporate feedback into the next full resolution submission. 
The FDIC anticipates that full resolution submissions will improve 
through an interactive and iterative process, and the FDIC recognizes 
that there should be multiple communications between the FDIC and the 
CIDIs to improve the full resolution submissions. While the final rule, 
like the proposal, does not establish a fixed timing requirement for 
the delivery of feedback to CIDIs, the FDIC will review full resolution 
submissions promptly and endeavor to give feedback identifying material 
weaknesses or significant findings within one year of the full 
resolution submission date. Any additional observations or other 
feedback, for instance following engagement, that would impact the next 
full resolution submission would be given at least 270 days before that 
submission is due.
    The FDIC received one comment recommending that any feedback on

[[Page 56639]]

resolution plans should be treated as confidential supervisory 
information, except to facilitate coordination between home and host 
country resolution planning, where applicable. The FDIC received 
another comment recommending that the FDIC should commit to publishing 
all future feedback letters, including any that describe weaknesses 
resulting in a non-credible determination, with confidential 
supervisory information redacted. In the past, the FDIC has not made 
public the feedback letters on resolution submissions under the 2012 
rule, as these letters may have relied on or disclosed confidential 
supervisory information. The FDIC has also considered that redacted 
letters may be incomplete and misunderstood and has treated the letters 
in a confidential manner, similar to supervisory letters. Any decision 
with respect to disclosure of feedback letters in the future will 
consider the confidential nature of any information, as well as the 
public interest.
    The FDIC considered the comment recommending an intermediate level 
of feedback between informal feedback and a finding of a material 
weakness. The FDIC also considered the approach taken in reviews and 
feedback for DFA resolution plans, which includes an intermediate level 
of feedback. The FDIC believes that there is utility in providing 
feedback that requires correction with an appropriate level of urgency, 
but that does not trigger the immediate corrective actions spelled out 
in paragraph (f)(3). Consequently, the final rule establishes the 
concepts of material weaknesses and significant findings.
    A material weakness is an aspect of a CIDI's full resolution 
submission that the FDIC determines individually or in conjunction with 
other aspects fails to meet the credibility criteria described in Sec.  
360.10(f)(1). The FDIC must identify one or more material weaknesses in 
determining a CIDI's full resolution submission is not credible. The 
final rule requires that within 90 days of receiving a notice by the 
FDIC pursuant to Sec.  360.10(f)(2) or such shorter or longer period as 
the FDIC may determine, the CIDI must resubmit a revised full 
resolution submission, or such other information or material as 
specified by the FDIC, that addresses any material weaknesses 
identified by the FDIC and discusses in detail the revisions made to 
address such material weaknesses. This is consistent with the proposal, 
with a clarification that in some cases, a full resolution submission 
may not be required and the FDIC may identify other information or 
material responsive to the material weakness.
    Under the final rule, a significant finding is a weakness or gap 
that raises questions about the credibility of a CIDI's full resolution 
submission but does not rise to the level of a material weakness. If a 
significant finding is not satisfactorily explained or addressed before 
or in the CIDI's next full resolution submission, it may be found to be 
a material weakness in the CIDI's next full resolution submission. To 
clarify how the CIDI intends to address the significant findings by the 
next full resolution submission, the FDIC may require a time-bound 
project plan from the CIDI that outlines the actions the CIDI will be 
taking in the interim period to assure that the significant finding is 
addressed in a timely manner. In some cases, project plans may also be 
used as a tool to clarify how the CIDI intends to address material 
weaknesses. The final rule makes clear that the FDIC may identify an 
aspect of a CIDI's full resolution submission as a material weakness 
even if such aspect was not identified as a significant finding in an 
earlier full resolution submission. The FDIC must notify the CIDI in 
writing of any significant findings that are identified in the full 
resolution submission.
    The difference between a material weakness and a significant 
finding is one of degree of severity. A material weakness is more 
likely to be a weakness in the full resolution submission that would 
significantly impact the FDIC's ability to undertake an efficient and 
effective resolution of the CIDI or would increase the risk of a 
disorderly and value-destructive resolution if not promptly corrected. 
A significant finding would more likely be feedback that goes to the 
completeness, sufficiency, and thoroughness of information provided or 
the adequacy of a capability demonstrated, that could affect the 
resolution of the CIDI and should be addressed, but is not of the same 
level of impact and urgency as a material weakness.
    Other observations that are not material weaknesses or significant 
findings may be included in the feedback letter or may be provided in 
other communications throughout the full resolution submission review, 
capabilities testing, and engagement cycle. Those observations are also 
intended to provide useful feedback to the CIDIs about areas of focus 
for further development of their full resolution submissions.
    The FDIC received two comments that suggested the FDIC should 
provide general guidance to CIDIs, with one noting that such guidance 
could cover common issues and best practices following each review 
cycle. Other commenters suggested additional guidance or specificity 
with respect to identification of expected capabilities. The final rule 
is intended to be comprehensive and supersedes the 2012 rule and all 
prior guidance. In the event the FDIC determines, based on review of 
full resolution submissions and engagement with the CIDIs, that 
additional general guidance may be helpful in addition to firm-specific 
feedback, the FDIC may consider providing such guidance at that time.
    Another comment suggested that the FDIC provide a list of 
identified strategies that are presumptively credible. That approach 
would be inconsistent with the goal of the rule to obtain the insight 
and analysis of each group A CIDI as to the approach to resolution that 
best fits with their organization and business structure. The FDIC 
expects to give appropriate feedback, if needed, on a CIDI's identified 
strategy, consistent with the interactive and iterative process 
described above to improve full resolution submissions and the FDIC's 
resolution readiness.
Engagement and Capabilities Testing
    The final rule retains the proposed approach to engagement and 
capabilities testing, without substantive change, but with some 
modifications to the organization of the content intended to reflect 
that engagement and capabilities testing are complementary parts of the 
review and evaluation process. The changes also clarify the process and 
identify the communications relative to both engagement and 
capabilities testing.
    The FDIC received several comments with respect to engagement and 
capabilities testing. These comments generally focused on the process, 
the timing of notices, the scope of engagement and capabilities 
testing, and the approach to enforcement, including to ensure the 
FDIC's approach to resolution planning is sufficiently collaborative. 
One of these comments also noted that CIDIs--especially, group B 
CIDIs--will need time to build, improve, and test capabilities prior to 
undergoing capabilities testing with the FDIC, and suggested 
capabilities testing should not occur during a CIDI's initial 
submission cycle under the final rule.
    The final rule retains the proposed requirements with respect to 
engagement between the FDIC and a CIDI, including that each CIDI must 
provide the FDIC such information and access to personnel of the CIDI 
that have

[[Page 56640]]

sufficient expertise and responsibility to address the informational 
and data requirements of the engagement. The final rule makes clear 
that the FDIC will provide timely notification of the scope of any 
engagement. Because the appropriate advance notice of an engagement 
will depend on the parameters of the engagement, the final rule does 
not specify a time period for such a notification. In the past, the 
FDIC has provided four to eight weeks' advance notice of any engagement 
and has taken into account scheduling considerations for the CIDIs, 
such as other scheduled examinations and supervisory requirements, and 
expects to continue that practice. The final rule also makes clear that 
the FDIC will communicate with the CIDI after engagement. The form and 
content of that communication are not specified in the rule; in 
general, the FDIC expects to communicate observations from the 
engagement. In some cases, engagement will inform the review of the 
full resolution submission itself and engagement findings may support 
or address findings from the review process and be incorporated in the 
findings of weaknesses or non-credibility described above.
    Engagement may take place at any time to provide additional 
insights to the FDIC and to inform areas of interest for future full 
resolution submissions. It may also be the case that engagement takes 
place after the FDIC has provided the CIDI with written notice of its 
determination with respect to the credibility assessment described 
above.
    In some cases, for instance, where an IDI recently has become a 
CIDI or changed from a group A CIDI to a group B CIDI, engagement may 
take place before the initial full resolution submission, to provide 
information on particular resolution matters or areas of future 
submission content. The FDIC expects that engagement will be useful to 
the CIDIs by providing a better understanding of the areas of 
particular interest to the FDIC with respect to its resolution 
responsibilities, and will help the FDIC to better understand the 
information in the full resolution submissions and the resolution 
challenges for a specific CIDI as well as mitigants to those 
challenges.
    The final rule also adopts without change the proposed requirement 
that each CIDI may be required to demonstrate through capabilities 
testing that it can in fact perform the capabilities described in a 
full resolution submission, necessary for an identified strategy or 
required under the rule, and that these capabilities are adaptable to a 
range of scenarios. The FDIC expects capabilities testing to be an 
important part of its full resolution submission review process and 
will begin capabilities testing in the first review cycle. While in 
some cases time may be necessary to develop capabilities, early 
assessment is an important first step in that process.
    As with engagement, the final rule makes clear that the FDIC will 
provide timely notification of the scope of any capabilities testing. 
As with engagement, the final rule does not specify a time period for 
such a notification; in some cases, short notice of the capabilities 
test may an intended feature of the exercise. However, the FDIC will 
give notice that is appropriate to the nature of the capabilities 
testing, and, as with engagement, will take into account scheduling 
considerations for the CIDIs as noted above. As with engagement, after 
completion of the capabilities test the FDIC may communicate 
observations, or the information from the capabilities test may 
contribute to a letter with findings.
    Generally, the FDIC anticipates that capabilities testing will be 
conducted concurrently with the full resolution submission review 
process and will be conducted across a cohort of CIDIs.
    Two commenters indicated the FDIC should provide CIDIs with a 
comprehensive list of capabilities it expects a CIDI to maintain and a 
description of minimum standards expected for each capability. While 
the proposed rule was not prescriptive with respect to capabilities, it 
contained the express requirement that a CIDI's capabilities are 
sufficient to support key elements, namely, capabilities necessary to 
ensure continuity of critical services in resolution, the marketability 
of franchise components, and, with respect to group A CIDIs, the 
production of valuations needed in assessing the least-cost test. In 
addition, an identified strategy in a resolution plan for a group A 
CIDI must be supported with observable and verifiable capabilities, 
among the other requirements of the second prong of the credibility 
standard.
    The preamble to the proposal also provided additional context with 
respect to capability expectations for some or all CIDIs that can 
reasonably be inferred from the content requirements of the full 
resolution submission as described in the proposal. For example, a 
requirement to map information clearly implies expectation of a mapping 
capability; and requirements to identify key depositors, critical 
services support, or key personnel require the capabilities to support 
that identification. Examples of the capabilities that a CIDI could be 
required to demonstrate could include identification of key employees 
and critical services, as well as capabilities to meet requirements 
with respect to mapping, such as mapping critical services to material 
entities. The FDIC might also test capabilities that are necessary to 
key elements of the full resolution submission content, such as 
continuity of operations, or marketing of a franchise component or the 
IDI franchise. An example of such a capabilities test might be the 
establishment of a virtual data room for one or more franchise 
components or for the IDI franchise as a whole. The nature of this 
testing would be tailored to the requirements applicable to each CIDI. 
For example, while a group A CIDI may be asked to demonstrate its 
ability to execute capabilities necessary to its identified strategy, 
or demonstrate necessary capabilities for valuation, the focus for 
group B CIDIs would be more likely on informational requirements, such 
as the ability to produce informational items and referenced supporting 
documents within a specified timeframe.
    The final rule retains the provisions of the proposal with respect 
to capabilities with one change, addressed in the discussion of 
franchise components above.
    While the FDIC generally expects that engagement or capabilities 
testing with a particular CIDI would occur no more than once during the 
three-year or two-year submission cycle, as applicable, the FDIC also 
believes that it is important to preserve the flexibility to undertake 
engagement and capabilities testing with a CIDI as frequently as needed 
and whenever prudent, based on the circumstances of the particular 
CIDI. In some instances, no engagement or capabilities testing may be 
necessary during a submission cycle, while in other cases, such as 
after changes at the CIDI or as the result of varying economic 
conditions, more frequent engagement and capabilities testing may be 
warranted. Because informational filings by group B CIDIs do not 
include the development of an identified strategy and other elements of 
a resolution plan, the FDIC expects the engagement and capabilities 
testing with group B CIDIs will be a key component of its resolution 
planning for such firms and expects to conduct engagement and 
capabilities testing with most group B CIDIs in each cycle. In addition 
to engagement and capabilities testing, the FDIC could also have other 
interactions with CIDIs, such as questions during the full resolution 
submission review process or

[[Page 56641]]

conversations regarding changes to resolvability or updates to 
information.
    Finally, the final rule eliminates the specific reference to 
enforcement of the engagement and capabilities testing requirements 
that was included in this section as proposed. The FDIC received 
several comments expressing concern about implications of the specific 
reference to enforcement with respect to engagement and capabilities 
testing as proposed, and suggesting that further process is needed to 
challenge the specific enforcement powers relating to capabilities 
testing. The inclusion of enforcement language in this paragraph may 
have given the impression that engagement and capabilities testing 
might lead to specific enforcement actions that are separate from 
enforcement of compliance with the rule overall and from the 
application of the credibility standard to full resolution submissions. 
The FDIC agrees with commenters that the resolution planning process 
benefits from ongoing communication between the FDIC and CIDIs, and an 
interactive and iterative process to improve full resolution 
submissions and the FDIC's resolution readiness. The engagement and 
capabilities testing requirements are important components of the 
overall requirements of the rule to meet the goal of ensuring 
resolution readiness based on credible full resolution submissions, 
information, and analysis. Consequently, the FDIC has eliminated the 
specific reference to enforcement when addressing engagement and 
capabilities testing and will instead rely on the overall enforcement 
provision in Sec.  360.10(j) for all requirements of the rule.

G. No Limiting Effect on FDIC

    The final rule retains the proposed provision that no full 
resolution submission provided pursuant to this section will be binding 
on the FDIC as supervisor, deposit insurer, or receiver for a CIDI, or 
otherwise require the FDIC to act in conformance with such full 
resolution submission. The final rule has been revised to make this 
provision applicable to interim supplements as well as full resolution 
submissions.
Financial Information
    The final rule retains the proposed provision that requires a 
CIDI's full resolution submission use, to the greatest extent possible, 
financial information as of the most recent fiscal year-end for which 
the CIDI has financial statements or, if financial information from 
more recent financial statements would more accurately reflect the 
CIDI's operations as of the date of the submission, financial 
information as of that more recent date. As addressed in the discussion 
of interim supplements above, the final rule has been revised to make 
this provision applicable to interim supplements as well as full 
resolution submissions.
Indexing of Information and Analysis to Full Resolution Submission and 
Interim Supplement Content Requirements
    The final rule adopts the proposed requirement that a CIDI's full 
resolution submission and interim supplement include an index of each 
content requirement required to be included in that full resolution 
submission or interim supplement to every instance of its location in 
the full resolution submission or interim supplement.
Combined Full Resolution Submission or Interim Supplements by 
Affiliated CIDIs
    The final rule adopts without change the proposed provision to 
allow CIDIs that are affiliates to submit a single, combined full 
resolution submission or interim supplement, so long as all affiliated 
CIDIs submitting the combined submission or supplement are within the 
same CIDI group, whether group A or group B. The combined full 
resolution submission or interim supplement must satisfy the content 
requirements for each CIDI's separate full resolution submission or 
interim supplement, as applicable, and the CIDIs must ensure that the 
portions of a combined full resolution submission or interim supplement 
for each CIDI can be readily identified.

H. Form of Full Resolution Submissions; Confidential Treatment of Full 
Resolution Submissions and Interim Supplements

    The final rule requires that each CIDI divide its full resolution 
submission into a public section and a confidential section and 
describes the required content of a public section. This section also 
provides the confidentiality provisions of the proposed rule. One 
commenter recommended that the FDIC generally increase the amount of 
information disclosed in the public portion of resolution submissions. 
The FDIC agrees that the public portions should be robust and should 
usefully address all of the required elements. The FDIC believes that 
the proposal included the appropriate required elements for the public 
portion and the paragraph was adopted as proposed with no material 
change.

I. Extensions and Exemptions

    The final rule adopts without change the proposed provision that 
the FDIC, on its own initiative or upon written request, may extend, on 
a case-by-case basis, any of the rule time frames or deadlines and 
exempt a CIDI from one or more of the requirements of the rule. One 
commenter recommended including a process for a CIDI to request content 
exemptions where certain content elements were not important to that 
CIDI's resolution. One commenter requested that the FDIC expressly note 
that inapplicable content should be excluded. The final rule 
incorporates the requirements that the FDIC believes are appropriate to 
group A CIDIs and group B CIDIs. To the extent that certain elements 
are less significant to a CIDI because of its structure, organization, 
business strategy, or other factors, the CIDI can and should adjust its 
approach to those content elements. For instance, a CIDI with no cross-
border activities would not provide any information other than the 
confirmation that there are no such activities with respect to that 
requirement. Accordingly, the FDIC did not incorporate a prescribed 
exemption process, but retained the flexibility to provide exemptions 
to one or more content elements of the rule, consistent with the 
proposal.

J. Enforcement

    Consistent with the proposed rule, the final rule expressly 
provides that violating any provision of this section constitutes a 
violation of a regulation and may subject the CIDI to enforcement 
actions under 12 U.S.C. 1818, including Sec.  360.10(t) thereunder.

IV. Expected Effects

    This final rule amends and restates the 2012 rule, as discussed in 
more detail above. It establishes two tiers of submission requirements 
to reflect the different sizes and complexity of CIDIs. Group A CIDIs 
are required to submit resolution plans that comply with all of the 
content requirements of the final rule, including the development of an 
identified strategy for the resolution of the CIDI, and to participate 
in engagement and capabilities testing. Group B CIDIs are required to 
submit an informational filing containing information on resolution 
planning and readiness, and to participate in engagement and 
capabilities testing. The following describes the expected costs and 
benefits of this final rule as it applies to the groups of CIDIs, and 
other economic impacts.
    As of the quarter ending March 31, 2024, the FDIC insured 4,577 
depository

[[Page 56642]]

institutions. Of these, 33 are group A CIDIs that reported total 
average assets of $100 billion or more over their four most recent 
Consolidated Reports of Condition and Income, and 12 are group B CIDIs 
that reported total assets of at least $50 billion, but less than $100 
billion, over their four most recent Consolidated Reports of Condition 
and Income. In the aggregate, these 45 CIDIs held a combined $17.951 
trillion in total assets, accounting for about 74% of total U.S. 
banking industry assets.\19\
---------------------------------------------------------------------------

    \19\ FDIC Consolidated Reports of Condition and Income data as 
of March 31, 2024.
---------------------------------------------------------------------------

A. Review of Comments

    The FDIC received several comments related to its analysis of the 
expected effects of the NPR. One commenter indicated that the NPR would 
substantially add to the time and resources required to prepare IDI 
resolution plans. Another two commenters argued that the analysis of 
the compliance burden of the NPR significantly understates the cost of 
the burden, with one noting that the analysis understates the true cost 
since it only includes internal costs to the IDI and fails to include 
the costs of outside lawyers, accountants, and risk management 
specialists that may be involved with resolution planning. A fourth 
commenter suggested that the estimated time required to develop an 
IDI's full resolution submission is not unreasonable and the estimated 
cost of compliance would be substantially less than the costs of 
potential bank failures and banking crises.
    The FDIC has carefully reviewed the burden associated with the 
compliance requirements for each element in light of changes to the 
final rule and in consideration of the comments received. 
Recordkeeping, reporting, and disclosure requirements, like all 
compliance costs, may vary across institutions and the FDIC's 
compliance estimates associated with the Paperwork Reduction Act (PRA) 
are meant to be overall averages. The FDIC does not have the detailed 
data that would permit it to precisely estimate the quantitative effect 
of the final rule for every CIDI. The estimated labor hours needed to 
comply with certain aspects of the rule are based on the FDIC's 
extensive experience with resolution plan submissions and estimating 
associated burden. Absent any additional data, the FDIC believes the 
estimates of burden hours are reasonable, considering the 
recordkeeping, reporting, and disclosure requirements of the final 
rule.
    The FDIC received one comment relating to its estimate of the costs 
of switching from a three-year to a two-year submission cycle, which 
stated that the FDIC underestimates the costs associated with a two-
year submission cycle when weighing the proposal's burdens and 
benefits. Upon further consideration, the FDIC is finalizing a three-
year submission cycle for most group A CIDIs and the group B CIDIs, as 
discussed previously.
    Certain changes made to the final rule, as compared to the 
proposal, would result in a change to the economic effect. Those are 
described below.

B. Changes From the Proposed Rule to the Final Rule

Group A CIDIs
    Group A CIDIs in the final rule are defined as IDIs with $100 
billion or more in total assets based upon the average of the 
institution's four most recent Consolidated Reports of Condition and 
Income. As of the quarter ending March 31, 2024, 33 IDIs reported total 
average assets of $100 billion or more over their four most recent 
Consolidated Reports of Condition and Income. Therefore, for the 
purposes of this analysis, the FDIC estimates that 33 FDIC-insured 
depository institutions would be classified as group A CIDIs under the 
final rule. In aggregate, these 33 group A CIDIs held a combined $17.10 
trillion in total assets, accounting for about 71 percent of total U.S. 
banking industry assets.\20\
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    \20\ FDIC Consolidated Reports of Condition and Income data as 
of March 31, 2024.
---------------------------------------------------------------------------

Key Changes to the Final Rule Affecting Group A CIDIs
    The final rule would make certain changes from the proposal which 
would materially affect the requirements of the rule with respect to 
group A CIDIs.
    First, most group A CIDIs would be required to file resolution 
plans on a triennial, rather than a biennial basis as proposed, with 
interim supplements expected each year where a resolution plan is not 
filed. This change means that these group A CIDIs will file fewer 
resolution plans over time and a greater number of interim supplements. 
Specifically, over a six-year period, each group A CIDI would have been 
expected to file three resolution plans and three interim supplements 
under the proposed rule and would be expected to file two resolution 
plans and four interim supplements under the final rule. This change 
would reduce the estimated economic effect of the final rule on the 24 
group A CIDIs that are triennial filers.
    The final rule would retain the biennial filing cycle for the nine 
group A CIDIs that are affiliated with U.S. GSIBs, but would make a 
change that would impact the expected frequency of submission of 
interim supplements for these biennial filers. Under the final rule, 
the nine biennial filers would not be required to submit interim 
supplements in the calendar year in which they file resolution plans 
under the rule or in the calendar year in which their affiliates submit 
a DFA resolution plan. DFA resolution plans submitted by these banking 
organizations are also on a biennial cycle. Because resolution plans 
under the final rule and DFA resolution plans are expected to be 
submitted in alternating years, these nine CIDIs would not be expected 
to submit interim supplements under the final rule. This would reduce 
the estimated economic effect of the final rule for these biennial 
filers as compared to the proposal.
    In light of the changes in filing cycle frequency in the final 
rule, the FDIC expects to place a greater emphasis on engagement and 
capabilities testing for the group A CIDIs that are triennial filers. 
The FDIC estimates that this would result in a modest increase in 
compliance costs for the 24 group A CIDI triennial filers. Because the 
final rule does not change the submission cycle from the proposed rule 
for the nine biennial filers, there would be no change in the FDIC's 
expectation of engagement with those CIDIs, and therefore the FDIC's 
estimate compliance costs associated with resolution plan filings for 
these CIDIs would remain unchanged.
Group B CIDIs
    Group B CIDIs are defined as IDIs with $50 billion or more in total 
assets but less than $100 billion in total assets, based upon the 
average of the institution's four most recent Consolidated Reports of 
Condition and Income. As of the quarter ending March 31, 2024, 12 IDIs 
reported total average assets of at least $50 billion, but less than 
$100 billion, over their four most recent Consolidated Reports of 
Condition and Income. Therefore, the FDIC estimates that 12 IDIs would 
be classified as group B CIDIs under the final rule. In aggregate, 
these 12 group B CIDIs held a combined $849 billion in total assets, 
accounting for about 3.51 percent of total U.S. banking industry 
assets.\21\
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    \21\ FDIC Consolidated Reports of Condition and Income data as 
of March 31, 2024.

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[[Page 56643]]

Key Changes to the Final Rule Affecting Group B CIDIs
    Under the final rule, all group B CIDIs would be required to submit 
informational filings on a triennial, rather than on a biennial basis 
as proposed, with interim supplements expected each year where an 
informational filing is not submitted. This change means that group B 
CIDIs will file fewer informational filings over time and a greater 
number of interim supplements. Specifically, over a six-year period, 
each group B CIDI would have been expected to file three informational 
filings and three interim supplements under the proposed rule and would 
be expected to file two informational filings and four interim 
supplements under the final rule. This change would reduce the 
estimated economic effect of the final rule on the 12 group B CIDIs.
Other Changes to the Proposal
    In addition to the specific changes discussed above, the final rule 
contains several changes to individual content elements to be included 
in full resolution submissions. These modifications to the proposal are 
discussed in detail above. They include changes that result in modest 
decreases in the required content, such as changes to the valuations 
element, the use of year-end data for interim supplements, the adoption 
of a change to the definition of material entity, and the reduction of 
certain content elements relative to franchise components for 
informational filings. The modifications also include changes that 
result in modest increases in the required content, such as the 
requirement for a description of material changes in interim 
supplements and informational filings, the identification of key 
communications personnel as part of the communications playbook, the 
requirement for a description of the methodology for the identification 
of key depositors, and the identification of regulators and other 
authorities with respect to cross-border activities. Taking into 
account these and other elements that both increase and decrease 
content requirements, the FDIC has determined that there is no net 
change in estimated compliance costs with respect to the development of 
resolution plans, informational filings, or interim supplements, other 
than those related to the changes to submission frequency discussed 
above.

C. Marginal Effect of Changes Compared to the 2012 Rule

    The final rule would have four primary effects on CIDIs compared to 
the 2012 rule: (1) change in filing frequency for group A CIDIs 
affiliated with U.S. GSIBs; (2) the establishment of an interim 
supplement requirement; (3) changes in full resolution content 
requirements for group A CIDIs; and (4) changes in full resolution 
submission requirements for group B CIDIs. The FDIC analyzed expected 
filings by CIDIs over a six-year period beginning in 2025, the year in 
which the first submissions are expected to be made under the final 
rule, and assumes that the total assets reported by existing individual 
CIDIs for the quarter ending March 31, 2024 would remain constant 
throughout the period of analysis, notwithstanding assumptions made by 
the FDIC on the number of new group A CIDIs and group B CIDIs in each 
filing cycle (discussed below). For the purposes of this analysis, the 
FDIC generally assumes that compliance costs are directly proportional 
to the total consolidated assets of the CIDI. While asset size is not a 
direct measure of complexity, the FDIC believes that asset size is 
positively correlated with the amount of compliance time necessary for 
a CIDI to complete full resolution submissions and interim supplements 
under this final rule. The following discussion addresses each of these 
primary effects to illustrate their marginal contribution to the 
aggregate effect.
Marginal Effect of Changes to the Biennial Filing Cycle for Group A 
CIDIs Affiliated With U.S. GSIBs
    As discussed above, the final rule would adjust the filing cycle 
for all group A CIDIs that are affiliated with U.S. GSIBs from the 
current triennial cycle to a biennial cycle. Of the 33 group A CIDIs 
identified above, nine are affiliated with U.S. GSIBs. To isolate the 
effect of the potential change from a triennial cycle to a biennial 
cycle on these CIDIs, the FDIC compared estimated reporting compliance 
costs of the current triennial cycle under the 2012 rule,\22\ to the 
costs of those same compliance requirements on a biennial basis for 
these nine CIDIs. Over the six-year period of analysis, the FDIC 
estimates that the labor hours expended by group A CIDIs that are 
affiliated with U.S. GSIBs would increase by an average of 107,000 
hours annually in order to comply with a biennial cycle. Using a wage 
estimate of $118.14 an hour,\23\ the FDIC estimates that the change 
from a triennial cycle to a biennial cycle would result in average 
additional costs of approximately $12.6 million annually for the nine 
group A CIDIs affiliated with U.S. GSIBs.
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    \22\ See https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202111-3064-003.
    \23\ The FDIC's estimated allocations of labor associated with 
the reporting compliance burden for full resolution submissions in 
the final rule (for group A CIDIs and group B CIDIs) reflects an 
assumption that the majority will be attributable to financial 
analysts (including accountants and risk management specialists), 
with executives and managers, and legal occupations accounting for 
the remaining balance. The estimated weighted average hourly 
compensation cost of these employees are found by using the 75th 
percentile hourly wages reported by the Bureau of Labor Statistics 
(BLS) National Industry-Specific Occupational Employment and Wage 
Estimates for the relevant occupations in the Depository Credit 
Intermediation sector, as of May 2022. These wages are adjusted to 
account for inflation and non-monetary compensation rates for health 
and other benefits, as of March 2024, to provide a comprehensive 
estimate of overall compensation.
---------------------------------------------------------------------------

Marginal Effect of the Introduction of the Interim Supplement 
Requirement
    The final rule introduces a requirement for group A CIDIs and group 
B CIDIs to submit an interim supplement in the years that they do not 
file a full resolution submission. As discussed above, the final rule 
exempts group A CIDIs that are biennial filers from this requirement in 
years where they file a DFA resolution plan. Because the FDIC assumes 
that submission dates for the DFA resolution plans and the full 
resolution submissions under the final rule will be in alternate years 
for the biennial filers, it is not expected that these nine CIDIs will 
file interim supplements.
    The FDIC estimates that the interim supplement will pose 24 labor 
hours per billion dollars in assets on group A CIDIs that are not 
affiliated with U.S. GSIBs and group B CIDIs. Using this estimate over 
the six-year period of analysis, the requirement for interim 
supplements would result in an estimated average annual increase of 
approximately 102,000 hours and 17,000 hours for group A CIDI triennial 
filers and group B CIDIs, respectively. Using a wage estimate of 
$118.14 an hour,\24\ the FDIC estimates that the increase in reporting 
burden hours for group A CIDI triennial filers and group B CIDIs 
submitting interim supplements will result in average additional annual 
costs of approximately $12.1 million annually and $2 million, 
respectively. Thus, the FDIC estimates the total average impact of this 
specific requirement to be approximately 119,000 hours annually, and 
about $14.1 million annually.
---------------------------------------------------------------------------

    \24\ See footnote 23.

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[[Page 56644]]

Marginal Effect of Proposed Changes in Full Resolution Submission 
Content for All Group A CIDIs
    The FDIC's estimates of labor hours needed by group A CIDIs to 
comply with the reporting requirements of the final rule for first-time 
full resolution submissions remain unchanged at 16,000 hours. However, 
the FDIC has adjusted its estimate for subsequent full resolution 
submissions by group A CIDIs that are not affiliated with U.S. GSIBs to 
73 hours per billion dollars in assets. For group A CIDIs that are 
affiliated with U.S. GSIBs, the FDIC estimates that they would incur 72 
hours of burden per billion dollars in assets for subsequent full 
resolution submissions. To maintain consistency with the FDIC's 
estimates under the 2012 rule, the estimate of labor hours for both 
engagement and capabilities testing was included in the prior estimates 
of labor hours per billion in total assets for resolution plan content 
requirements of group A CIDIs. Thus, the difference in the burden 
estimate for group A CIDIs that are triennial filers is because in 
light of the change in submission cycle under the final rule for these 
CIDIs, the FDIC expects more engagement with these filers. Group A 
CIDIs that are affiliated with U.S. GSIBs, conversely, will file 
biennially under the final rule and will have somewhat less engagement 
between full resolution submissions.
    Over the six-year period of analysis, beginning in 2025, the FDIC 
assumes there will be three first-time group A CIDIs that will file 
full resolution submissions in each triennial filing cycle. This 
estimate is based on the FDIC's review of Consolidated Reports of 
Condition and Income data over the three-year period from 2021 through 
2023.\25\ The FDIC analyzed the effect of changes in these other 
requirements for group A CIDIs by assuming the same filing frequency 
exists under the 2012 rule and the final rule, and then compared 
estimated compliance costs. As previously discussed, the final rule 
changes the filing frequency for group A CIDIs affiliated with U.S. 
GSIBs as well as the full resolution submission content and other 
requirements for group A CIDIs. The preceding subsection of this 
analysis presented the estimated effects of the final rule's amendments 
to the filing frequency for group A CIDIs affiliated with U.S. GSIBs; 
from triennial to biennial. To isolate the effects of the final rule's 
changes to the full resolution submission content and other 
requirements for group A CIDIs, the FDIC assumes that group A CIDIs 
affiliated with U.S. GSIBs file biennially, rather than triennially, 
and then calculate estimated compliance costs for group A CIDIs 
associated with the content requirements of the 2012 rule. The analysis 
then compares the estimated compliance costs for group A CIDIs 
associated with the content requirements of the 2012 rule with the 
estimated compliance costs associated with the content requirements 
established by the final rule.
---------------------------------------------------------------------------

    \25\ CIDIs that become group A CIDIs in subsequent filing cycles 
(i.e., the triennial filing cycle beginning in 2028) will have 
already filed full resolution submissions as group B CIDIs, and thus 
are not considered first-time filers for the purposes of estimating 
burden.
---------------------------------------------------------------------------

    For group A CIDIs filing full resolution submissions in the next 
and subsequent filing cycles, the FDIC estimates that, over the six-
year period of analysis, the changes in the final rule relating to the 
full resolution submission content requirements will result in an 
average increase in labor hours to comply with associated reporting 
requirements of approximately 128,000 hours annually. Using a wage 
estimate of $118.14 an hour,\26\ the FDIC estimates that the increase 
in reporting burden hours for group A CIDIs due to changes to full 
resolution submission content requirements for group A CIDIs will 
result in average additional costs of approximately $15.1 million 
annually to all group A CIDIs. Approximately 63 percent of this 
increase in estimated annual compliance costs can be attributed to the 
nine group A CIDIs affiliated with U.S. GSIBs.
---------------------------------------------------------------------------

    \26\ See footnote 23.
---------------------------------------------------------------------------

Marginal Effect of Proposed Changes in Full Resolution Submission 
Content for All Group B CIDIs
    The FDIC estimates that the labor hours needed by group B CIDIs to 
comply with the reporting requirements of the final rule, for both 
first-time full resolution submissions and subsequent submissions, 
would be 7,200 hours and 67 hours per billion dollars in assets, 
respectively. To maintain consistency with the FDIC's estimates under 
the 2012 rule, the estimate of labor hours for both engagement and 
capabilities testing was included in the estimate of 67 hours per 
billion in total assets for group B CIDIs.
    The analysis of the estimated compliance costs of the final rule on 
group B CIDIs is predicated on the assumption that all requirements 
under the final rule are new for the 12 group B CIDIs, resulting in 
relatively high initial compliance efforts. Most CIDIs that would be 
categorized as group B CIDIs under the final rule have not provided 
resolution submissions of any kind to the FDIC. For those CIDIs that 
have filed previously, the significant passage of time since that 
filing, taken together with the significant changes to the applicable 
requirements for group B CIDIs under the final rule, suggest that it is 
appropriate to consider them to be first-time filers for the purposes 
of assessing compliance costs in the first triennial cycle over the 
six-year period of analysis.\27\ Accordingly, the 12 group B CIDIs will 
be considered first-time filers for their initial full resolution 
submission under the final rule. In addition, over the six-year period 
of analysis, beginning in 2025, the FDIC assumes there will be five 
first-time group B CIDIs that will file full resolution submissions in 
each triennial cycle, based on the FDIC's review of Reports of 
Condition and Income data over the three-year period from 2021 through 
2023.
---------------------------------------------------------------------------

    \27\ Of the 12 group B CIDIs identified, only three have 
submitted resolution plans under the 2012 rule (in either 2015 or 
2018).
---------------------------------------------------------------------------

    The FDIC estimates that, over the six-year period of analysis, the 
final rule would result in an average increase in reporting burden 
hours of approximately 35,000 hours annually. Using a wage rate of 
$118.14 an hour,\28\ the FDIC estimates that the increase in reporting 
burden hours for group B CIDIs submitting informational filings will 
result in average additional costs of approximately $4.1 million 
annually.
---------------------------------------------------------------------------

    \28\ See footnote 23.
---------------------------------------------------------------------------

Total Estimated Effect on Reporting Compliance Costs to CIDIs
    Taken together, the total estimated marginal effect of the change 
to a biennial cycle for group A CIDIs affiliated with U.S. GSIBs, 
submission content changes for all group A CIDIs and group B CIDIs, and 
requirements for interim supplements, over the six-year analysis 
period, would result in an average increase in reporting burden hours 
of approximately 389,000 annually. Using an estimated wage rate of 
$118.14 \29\ per hour, this would amount to total additional estimated 
reporting costs for all CIDIs of approximately $46 million annually. By 
comparison, total average annual estimated reporting compliance costs 
of $46 million are approximately 0.010 percent of total noninterest 
expenses across all CIDIs.\30\
---------------------------------------------------------------------------

    \29\ See footnote 23.
    \30\ FDIC Consolidated Reports of Condition and Income data as 
of June 30, 2023 through March 31, 2024.

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[[Page 56645]]

D. Effects on Insured Deposits and the Deposit Insurance Fund

    As previously discussed, the final rule would increase the amount 
of information CIDIs produce and furnish to the FDIC for the purposes 
of resolution planning. In the years since the adoption of the 2012 
rule, the FDIC has learned which aspects of the resolution planning 
process are most valuable and gained a greater understanding of the 
resources that CIDIs expend in meeting the requirements and 
expectations to comply with the 2012 rule. The FDIC does not have the 
information necessary to quantify the benefits to the DIF associated 
with the increase in the amount of resolution planning information for 
CIDIs. However, the FDIC believes that requiring CIDIs to regularly 
submit more information on their resolution readiness capabilities 
would be expected to reduce the costs to the DIF in the event of a 
failure of such an institution because this information would help the 
FDIC be more prepared to resolve these CIDIs.

E. Additional Economic Considerations and Effects

    Because some of the methodologies used to estimate reporting 
costs--for subsequent full resolution submissions and interim 
supplements--are based on the number of labor hours per billions of 
dollars in total assets, it is possible for a CIDI's estimated 
compliance cost to change solely due to fluctuations in asset size. The 
FDIC acknowledges that economic trends resulting in, or contributing 
to, changes in banking industry assets generally would have an impact 
on the estimates described above, but believes that these potential 
changes in compliance costs are likely to be modest relative to the 
size of the IDIs affected by the final rule.
    CIDIs would likely incur some regulatory costs, in addition to the 
reporting costs presented above, to transition their internal systems 
and processes in order to comply with the final rule. The FDIC does not 
have access to information that would enable it to estimate such costs. 
However, the FDIC believes that such costs are likely to be small 
relative to the size of the IDIs affected by the final rule.
    Finally, the FDIC does not believe that any additional costs 
incurred as a result of the final rule would have significant adverse 
impact on the provision of banking services such as originating and 
servicing loans, processing payments, or various financial market 
activities that the CIDIs may be involved in. This analysis illustrates 
that estimated reporting costs in future years only comprise 
approximately 0.010 percent of current noninterest expenses \31\ for 
all CIDIs.
---------------------------------------------------------------------------

    \31\ FDIC Consolidated Reports of Condition and Income data as 
of June 30, 2023 through March 31, 2024.
---------------------------------------------------------------------------

F. Overall Effects

    In summary, the FDIC believes that the final rule would result in 
public benefits by improving the FDIC's ability to effect timely and 
cost-effective resolutions of large, complex insured institutions. The 
FDIC estimates the final rule would result in average annual compliance 
cost increases of approximately $46 million over the six-year analysis 
period--which spans two filing cycles (three for group A CIDIs 
affiliated with U.S. GSIBs) under the final rule.

V. Alternatives Considered

    The FDIC considered several alternatives while developing the final 
rule. The FDIC first considered leaving the 2012 rule unchanged. The 
FDIC rejected this alternative because it believes the final rule 
improves the value of submissions and provides additional clarity to 
CIDIs regarding requirements by incorporating elements of prior 
guidance and taking into account the lessons learned from resolution 
planning under the 2012 rule. The final rule also provides a complete 
and clear set of requirements with respect to resolution planning 
submissions and the review and feedback process and bolsters and 
clarifies the FDIC's approach to engagement and capabilities testing in 
a manner useful to both the FDIC and CIDIs.
    Following review of comments on the proposed rule, the FDIC 
considered several alternatives in finalizing the rule. First, the FDIC 
considered finalizing the rule as proposed. Comments received 
identified certain areas where the rule could be strengthened and 
improved, particularly with respect to the process and timing of 
submissions and review of the full resolution submissions as discussed 
below.
    The FDIC considered several options with respect to the timing of 
submissions. First, it considered retaining without change the proposed 
biennial cycle for all CIDIs. It also considered adopting a triennial 
cycle for all CIDIs. Finally, it considered the approach adopted in 
this final rule by imposing a triennial cycle for most CIDIs, and 
biennial filings for the group A CIDIs affiliated with U.S. GSIBs. The 
FDIC believes that, for most CIDIs, a triennial cycle, with interim 
supplements in the off-years, would be an appropriate balance between 
the burden on CIDIs associated with more frequent filings and the 
public benefit in having timely and complete submissions. The final 
rule establishes a biennial cycle for group A CIDIs that are affiliated 
with U.S. GSIBs. The FDIC believes the biennial filing would be 
appropriate for these CIDIs, which are part of the largest and most 
systemic and interconnected U.S. banking organizations.
    The approach to the timing of submissions adopted in the final rule 
also has the benefit of allowing the FDIC to have additional time 
between submissions for engagement with the CIDIs that are triennial 
filers. The biennial filing schedule for all group A CIDIs resulted in 
an expectation that engagement with those CIDIs would be limited as a 
result of the increased time for preparation and review of full 
resolution submissions. The FDIC expects that the additional time for 
engagement will improve the FDIC's understanding of firm-specific 
resolution matters, and will provide additional opportunity for 
feedback and observations that may assist the CIDIs in improving their 
full resolution submission in successive filings.
    The FDIC considered several alternatives with respect to the timing 
of interim supplements. First, it considered retaining the proposed 
approach that would require an interim supplement in any year in which 
a full resolution submission is not required. Second, it considered not 
requiring an interim supplement for any CIDI that is an affiliate of a 
DFA resolution plan filer in a calendar year in which a DFA resolution 
plan is submitted. Finally, it considered the approach adopted in the 
final rule, which requires all CIDIs, except the biennial filers, to 
provide an interim supplement in any calendar year in which a full 
resolution submission is not submitted. For the biennial filers, the 
final rule does not require an interim supplement in a calendar year in 
which a DFA resolution plan from the affiliated banking organization is 
submitted. This

[[Page 56646]]

alternative is an appropriate balance of costs and benefits, taking 
into account biennial filers' higher frequency of submissions under 
this rule, and the expected annual submission of resolution plans 
alternating between submissions under this rule and the DFA rule.
    The FDIC considered other modifications to the proposal in response 
to comments, including changes to the identified strategy and other 
content elements. In each case, the FDIC weighed the proposed change 
against the alternative of adopting the proposal. The FDIC believes 
that the changes made, in the aggregate, do not have a significant 
impact on the cost of preparing the full resolution submissions and 
interim supplements, and have meaningful benefits in terms of improving 
the usefulness of the content of the submissions.

VI. Regulatory Analysis and Procedures

A. Paperwork Reduction Act

    In accordance with the requirements of the PRA,\32\ the FDIC may 
not conduct or sponsor, and the respondent is not required to respond 
to, an information collection unless it displays a currently valid 
Office of Management and Budget (OMB) control number.
---------------------------------------------------------------------------

    \32\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

Comments Received
    The FDIC received comments that appear to relate to the PRA. As 
stated above, the majority of commenters suggested changes to reduce 
the costs of submission preparation for filers, including by adjusting 
the proposed submission cycle, narrowing the proposed scope and content 
requirements, and enhancing alignment with relevant resolution planning 
requirements of the DFA rule. Additionally, one commenter raised 
questions about the FDIC's burden estimate. The comments received and 
their respective responses are summarized in the above analysis.
    The final rule modifies the current filing cycle cadence for group 
A CIDIs that are affiliated with U.S. GSIBs from triennial to biennial, 
which will result in these CIDIs sometimes filing multiple full 
resolution submissions across a given three-year PRA renewal cycle. On 
content, the final rule does not differ substantially from the proposed 
rule. The final rule retains the proposed rule's requirement for group 
A CIDIs and group B CIDIs to submit interim supplements to the FDIC in 
calendar years where they are not expected to file full resolution 
submissions, except in the case of the biennial filers who are also not 
expected to file in calendar years when they file DFA resolution plans. 
On engagement and capabilities testing, the final rule is broadly 
similar to the proposed rule. The change in submission cycle resulted 
in an increased expectation for engagement with group A CIDI triennial 
filers, as discussed above. Therefore, the estimate for subsequent full 
resolution submissions for group A CIDIs which are filing triennially 
has been increased from 72 hours per billion dollars in assets to 73 
hours per billion dollars in assets, which would affect the estimates 
in Information Collection #2, described in table 1 below. For 
subsequent plan submissions for group A CIDIs which are filing 
biennially, the estimate remains at 72 hours per billion dollars in 
assets.
    The revisions for this Information Collection Renewal (``ICR'') in 
the final rule represent a decrease of 182,238 hours from the PRA 
estimates in the proposed rule (771,975 hours).\33\ This decrease is 
primarily due to the reversion to a triennial cycle for all CIDIs 
except for group A CIDIs that are affiliated with U.S. GSIBs, and the 
decision to exempt group A CIDIs that are affiliated with U.S. GSIBs 
from the interim supplement requirement in calendar years when they 
file DFA resolution plans. The FDIC will revise this information 
collection as follows:
---------------------------------------------------------------------------

    \33\ The revisions for this ICR in the final rule represent an 
increase of 300,074 estimated annual burden hours from the PRA 
estimates in the 2021 collection (289,663 hours), and an increase of 
16,946 estimated annual burden hours from the PRA estimates in the 
2018 collection (572,791 hours).
    \34\ For the PRA renewal cycle corresponding with the expected 
effective date of the final rule--from 2025 through 2027--there will 
be a total of nine biennial filers, with total assets (as of the 
quarter ending March 31, 2024) of approximately $11,152 billion. The 
FDIC estimates that these nine CIDIs would incur 72 hours per 
billion dollars in assets of reporting burden under this IC, and 
that these nine ICs would file once during this three-year period. 
Therefore, the total burden is 802,944 hours ($11,152 billion in 
assets * 72 hours per billion in assets = 802,944 hours) across this 
period, or 267,648 hours annually. At three respondents a year (9 
biennial filers/3 years), this comes out to 89,216 hours per 
response.
    \35\ For the PRA renewal cycle corresponding with the expected 
effective date of the final rule--from 2025 through 2027--there will 
be a total of 24 triennial filers, with total assets (as of the 
quarter ending March 31, 2024) of approximately $5,951 billion. The 
FDIC estimates that these 24 CIDIs would incur 73 hours per billion 
dollars in assets of reporting burden under this IC, and that these 
24 ICs would file once during this three-year period. Therefore, the 
total burden is 434,423 hours ($5,951 billion in assets * 73 hours 
per billion in assets = 434,423 hours) across this period, or 
approximately 144,807.67 hours annually. At 8 respondents a year (24 
triennial filers/3 years), this comes out to 18,100.96 hours per 
response, or 18,100 hours and 58 minutes per response.
---------------------------------------------------------------------------

    Title: Resolution Plans and Periodic Engagement and Capabilities 
Testing Required.
    OMB Number: 3064-0185.
    Affected Public: Large and Highly Complex Depository Institutions.

                                   Table 1--Summary of Estimated Annual Burden
                                               [OMB No. 3064-0185]
----------------------------------------------------------------------------------------------------------------
                                 Type of burden                      Number of       Time per
  Information collection (IC)     (frequency of      Number of     responses per     response      Annual burden
    (obligation to respond)         response)       respondents     respondent        (HH:MM)         (hours)
----------------------------------------------------------------------------------------------------------------
1. Resolution Plan update by    Reporting                      3               1   \34\ 89216:00         267,648
 previous filer (biennial        (Annual, 2 year
 filer, group A), 12 FR          filing cycle).
 360.10(c)(1); 12 FR 360.10(d)
 (Mandatory).
2. Resolution Plan update by    Reporting                      8               1   \35\ 18100:58         144,808
 previous filer (triennial       (Annual, 3 year
 filer, group A), 12 FR          filing cycle).
 360.10(c)(2); 12 FR 360.10(d)
 (Mandatory).
3. Resolution Plan by new       Reporting                      1               1        16000:00          16,000
 filer (group A), 12 FR          (Annual, 3-year
 360.10(c)(3); 12 FR 360.10(d)   filing cycle).
 (Mandatory).

[[Page 56647]]

 
4. Informational Filing update  Reporting                      1               1      \36\ 00:00               0
 by previous filer (group B),    (Annual, 3-year
 12 FR 360.10(c)(2); 12 FR       filing cycle).
 360.10(d) (Mandatory).
5. Informational Filing by New  Reporting                      6               1         7200:00          43,200
 Filers (group B), 12 FR         (Annual, 3-year
 360.10(c)(3); 12 FR 360.10(d)   filing cycle).
 (Mandatory).
6. Interim Supplement, 12 FR    Reporting                     30               1         3920:00         117,600
 360.10(e) (Mandatory).          (Annual, 3-year
                                 filing cycle).
7. Waiver Requests, 12 FR       Reporting (On                  1               1           01:00               1
 360.10(i) (Required to obtain   Occasion).
 or retain a benefit).
8. Notice of extraordinary      Reporting (On                  4               1          120:00             480
 event, 12 FR 360.10(c)(4)       Occasion).
 (Mandatory).
    Total Annual Burden         ................  ..............  ..............  ..............         589,737
     (Hours).
----------------------------------------------------------------------------------------------------------------
Source: FDIC.
Note: The estimated annual IC time burden is the product, rounded to the nearest hour, of the estimated annual
  number of responses and the estimated time per response for a given IC. The estimated annual number of
  responses is the product, rounded to the nearest whole number, of the estimated annual number of respondents
  and the estimated annual number of responses per respondent. This methodology ensures the estimated annual
  burdens in the table are consistent with the values recorded in OMB's consolidated information system.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency, 
in connection with a final rule, to prepare and make available for 
public comment a final regulatory flexibility analysis that describes 
the impact of the final rule on small entities.\37\ However, a final 
regulatory flexibility analysis is not required if the agency certifies 
that the final rule will not have a significant economic impact on a 
substantial number of small entities. The Small Business Administration 
(SBA) has defined ``small entities'' to include banking organizations 
with total assets of less than or equal to $850 million.\38\ Generally, 
the FDIC considers a significant economic impact to be a quantified 
effect in excess of 5 percent of total annual salaries and benefits or 
2.5 percent of total noninterest expenses. The FDIC believes that 
effects in excess of one or more of these thresholds typically 
represent significant economic impacts for FDIC-supervised 
institutions. For the reasons described below and under section 605(b) 
of the RFA, the FDIC certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
As of the quarter ending March 31, 2024, the FDIC insured 4,577 
depository institutions, of which the FDIC identifies 3,272 as a 
``small entity'' for purposes of the RFA.\39\
---------------------------------------------------------------------------

    \36\ The estimated time per response for a group B CIDI that has 
filed previously under the final rule is 67 hours per billion 
dollars in total assets. However, for the PRA renewal cycle 
corresponding with the expected effective date of the final rule--
from 2025 through 2027--the FDIC estimates that 0 group B CIDIs will 
be subject to this requirement. For the purposes of estimating 
annual reporting compliance burden, all group B CIDIs in this period 
are considered ``new filers'' and thus will file under IC #5. The 
FDIC expects that the 17 group B CIDIs under IC #5 (rounded to six 
annually) would all file under IC #4 in the next three-year PRA 
renewal cycle, notwithstanding the number of group B CIDIs that may 
fail, merge with other CIDIs, or experience asset growth such that 
they no longer would be considered a group B CIDI at the time of 
their next filing. In recognition that, in future filing cycles, 
some group B CIDIs will incur burden under this IC, the FDIC uses a 
placeholder estimate of 0 respondents to retain this information 
collection.
    \37\ 5 U.S.C. 601 et seq.
    \38\ The SBA defines a small banking organization as having $850 
million or less in assets, where an organization's ``assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See 13 CFR 121.201 
(as amended by 87 FR 69118, effective December 19, 2022). In its 
determination, the ``SBA counts the receipts, employees, or other 
measure of size of the concern whose size is at issue and all of its 
domestic and foreign affiliates.'' See 13 CFR 121.103. Following 
these regulations, the FDIC uses an insured depository institution's 
affiliated and acquired assets, averaged over the preceding four 
quarters, to determine whether the insured depository institution is 
``small'' for the purposes of RFA.
    \39\ FDIC Consolidated Reports of Condition and Income data as 
of December 31, 2023 and March 31, 2024.
---------------------------------------------------------------------------

    The final rule amends resolution submission requirements for IDIs 
with over $50 billion in total average assets. Therefore, the final 
rule would apply only to institutions with $50 billion or more in total 
average assets. As of the quarter ending March 31, 2024 there are no 
small, FDIC-insured institutions with $50 billion or more in total 
average assets.\40\ In light of the foregoing, the FDIC certifies that 
the final rule will not have a significant economic impact on a 
substantial number of small entities supervised.
---------------------------------------------------------------------------

    \40\ FDIC Consolidated Reports of Condition and Income data as 
of December 31, 2023 and March 31, 2024.
---------------------------------------------------------------------------

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \41\ requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The FDIC has sought to present the 
final rule in a simple and straightforward manner. The FDIC invited 
comments regarding the use of plain language in the proposed rule but 
did not receive any comments on this topic.
---------------------------------------------------------------------------

    \41\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999), 12 U.S.C. 4809.
---------------------------------------------------------------------------

D. Riegle Community Development and Regulatory Improvements Act of 1994

    Under section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\42\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
IDIs, each FBA must consider, consistent with principles of safety and 
soundness and the public interest, any administrative burdens that such 
regulations would place on depository institutions, including small 
depository institutions, and customers of depository

[[Page 56648]]

institutions, as well as the benefits of such regulations. In addition, 
section 302(b) of the RCDRIA requires new regulations and amendments to 
regulations that impose additional reporting, disclosures, or other new 
requirements on IDIs generally to take effect on the first day of a 
calendar quarter that begins on or after the date on which the 
regulations are published in final form.\43\
---------------------------------------------------------------------------

    \42\ 12 U.S.C. 4802(a).
    \43\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

E. Congressional Review Act

    For purposes of the Congressional Review Act (5 U.S.C. 801 et 
seq.), the OMB makes a determination as to whether a final rule 
constitutes a ``major rule.'' If a rule is deemed a ``major rule'' by 
the OMB, the Congressional Review Act generally provides that the rule 
may not take effect until at least 60 days following its publication. 
The Congressional Review Act defines a ``major rule'' as any rule that 
the Administrator of the Office of Information and Regulatory Affairs 
of the OMB finds has resulted in or is likely to result in--(1) an 
annual effect on the economy of $100 million or more; (2) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographic regions; or 
(3) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\44\ The OMB has determined that the final rule is not a 
major rule for purposes of the Congressional Review Act and the FDIC 
will submit the final rule and other appropriate reports to Congress 
and the Government Accountability Office for review.
---------------------------------------------------------------------------

    \44\ See 5 U.S.C. 804(2).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 360

    Bank deposit insurance, Banks, banking, Holding companies, National 
banks, Reporting and recordkeeping requirements, Savings associations.

Authority and Issuance

    For the reasons stated in the preamble, the Federal Deposit 
Insurance Corporation amends 12 CFR part 360 as follows:

PART 360--RESOLUTIONS AND RECEIVERSHIPS RULES

0
1. The authority citation for part 360 is revised to read as follows:

    Authority:  12 U.S.C. 1811 et seq., 1817(a)(2)(B), 1817(b), 
1818(a)(2), 1818(t), 1819(a) Seventh, Eighth, Ninth, and Tenth, 
1820(b)(3) and (4), 1820(g), 1821(d)(1), (4), (10)(C), and (11), 
1821(e)(1) and (8)(D)(i), 1821(f)(1), 1823(c)(4), and 1823(e)(2).

0
2. Revise Sec.  360.10 to read as follows:


Sec.  360.10  Resolution plans required for insured depository 
institutions with $100 billion or more in total assets; informational 
filings required for insured depository institutions with at least $50 
billion but less than $100 billion in total assets.

    (a) Scope and purpose. This section applies to insured depository 
institutions with $50 billion or more in total assets. It requires a 
covered insured depository institution with $100 billion or more in 
total assets (a group A CIDI, as defined in paragraph (b) of this 
section) to submit a resolution plan that should enable the FDIC, as 
receiver, to resolve the institution under 12 U.S.C. 1821 and 1823 in a 
manner that provides depositors timely access to their insured 
deposits, maximizes the net present value return from the sale or 
disposition of assets and minimizes the amount of any loss realized by 
the creditors in the resolution, and addresses risks of adverse effects 
on U.S. economic conditions or economic stability. Other covered 
insured depository institutions (group B CIDIs, as defined in paragraph 
(b) of this section) are required under this section to submit to the 
FDIC an informational filing containing information relevant to the 
group B CIDI's resolution that will support the development of 
strategic options for resolution of the CIDI by the FDIC. This section 
also establishes the requirements regarding the submission of 
resolution plans and informational filings and their contents, as well 
as procedures for their review by the FDIC. This rule is intended to 
ensure that each group A CIDI develops a credible strategy to 
facilitate the FDIC's resolution of the institution across a range of 
possible scenarios and, with respect to each group A CIDI and each 
group B CIDI, the FDIC has access to all of the material information 
and analysis it needs to resolve efficiently the covered insured 
depository institution in the event of its failure.
    (b) Definitions.
    Affiliate has the same meaning as in 12 U.S.C. 1813(w)(6).
    Appropriate Federal banking agency has the same meaning as in 12 
U.S.C. 1813(q).
    Biennial filer is defined in paragraph (c)(1) of this section.
    Bridge depository institution has the same meaning as in 12 U.S.C. 
1813(i)(2).
    Capabilities testing is defined in paragraph (f)(7) of this 
section.
    CIDI or covered insured depository institution means a group A CIDI 
or a group B CIDI.
    Company has the same meaning as in 12 CFR 362.2(d).
    Control has the same meaning as in 12 U.S.C. 1813(w)(5).
    Core business lines means those business lines of the CIDI, 
including associated operations, services, functions, and support, 
that, in the view of the CIDI, upon failure would result in a material 
loss of revenue, profit, or franchise value of the CIDI.
    Critical services means services and operations, including shared 
and outsourced services, that are necessary to continue the day-to-day 
operations of the CIDI, and, in the case of a group A CIDI, to support 
the execution of the identified strategy, and includes all services and 
operations that are necessary to continue any critical operation 
conducted by the CIDI that has been included in the most recent DFA 
resolution plan of the CIDI's parent company.
    Critical services support means resources, including shared and 
outsourced resources, that are necessary to support the provision of 
critical services, including systems, technology infrastructure, data, 
key personnel, intellectual property, and facilities.
    DFA resolution plan means a resolution plan filed by a CIDI's 
parent company under 12 U.S.C. 5365(d).
    DIF means the deposit insurance fund established by 11 U.S.C. 
1821(a)(4).
    Engagement is defined in paragraph (f)(6) of this section.
    Failure scenario means a scenario as described in paragraph (d)(2) 
of this section.
    Foreign-based company means any company that is not incorporated or 
organized under the laws of the United States.
    Franchise component means a business segment, regional branch 
network, major asset, material asset portfolio, or other key component 
of a CIDI's franchise that can be separated and sold or divested.
    Full resolution submission means a resolution plan for a group A 
CIDI, and an informational filing for a group B CIDI.
    Group A CIDI means an insured depository institution with $100 
billion or more in total assets, as determined based upon the average 
of the institution's four most recent Consolidated Reports of Condition 
and Income. An insured depository institution that is a group A CIDI 
remains a group A CIDI until it has less than $100 billion in total 
assets for each of the institution's four most recent

[[Page 56649]]

Consolidated Reports of Condition and Income. In the event of a merger, 
acquisition of assets, combination, or similar transaction by an 
insured depository institution that causes it to exceed $100 billion in 
total assets, the FDIC may alternatively consider, in its discretion, 
to the extent and in the manner the FDIC considers to be appropriate, 
one or more of the four most recent Consolidated Reports of Condition 
and Income of the insured depository institutions that will become a 
group A CIDI effective as of the date of the consummation of such 
merger, acquisition, combination, or other transaction.
    Group B CIDI means an insured depository institution with at least 
$50 billion but less than $100 billion in total assets, as determined 
based upon the average of the institution's four most recent 
Consolidated Reports of Condition and Income. An insured depository 
institution that is a group B CIDI remains a group B CIDI until it is a 
group A CIDI or has less than $50 billion in total assets, in either 
case, for each of the institution's four most recent Consolidated 
Reports of Condition and Income. In the event of a merger, acquisition 
of assets, combination, or similar transaction by an insured depository 
institution that causes it to have at least $50 billion but less than 
$100 billion in total assets, the FDIC may alternatively consider, in 
its discretion, to the extent and in the manner the FDIC considers to 
be appropriate, one or more of the four most recent Consolidated 
Reports of Condition and Income of the insured depository institutions 
that will become a group B CIDI effective as of the date of the 
consummation of such merger, acquisition, combination, or other 
transaction.
    Identified strategy means the strategy chosen by a group A CIDI for 
its resolution plan as required pursuant to paragraph (d)(1) of this 
section, covering the time period from the point of failure to 
disposition of substantially all of the assets and operations of the 
group A CIDI through wind-down, liquidation, divestiture, or other 
return to the private sector.
    IDI franchise means all core business lines and all other business 
segments, branches, and assets that constitute the CIDI and its 
businesses as a whole.
    Informational filing means the full resolution submission submitted 
by a group B CIDI pursuant to this section.
    Insured depository institution has the same meaning as in 12 U.S.C. 
1813(c)(2).
    Key depositors is defined in paragraph (d)(7)(v) of this section.
    Key personnel means personnel tasked with an essential role in 
support of a core business line, franchise component, or critical 
service, or having a function, responsibility, or knowledge that may be 
significant to the FDIC's resolution of the CIDI. Key personnel may be 
employed by the CIDI, a CIDI subsidiary, the parent company, a parent 
company affiliate, or a third party.
    Least-cost test means the process for determining the resolution 
strategy that is least costly to the DIF, as required under 12 U.S.C. 
1823(c).
    Material asset portfolio means a pool or portfolio of assets, such 
as loans, securities, or other assets that may be sold in resolution by 
the bridge depository institution or the receivership and is 
significant in terms of income or value to the CIDI.
    Material change means a change in organization, operations, or 
strategic direction of the CIDI that results from an extraordinary 
event or other circumstance that could reasonably be foreseen to have a 
material effect on the resolvability of the CIDI. Such changes include, 
but are not limited to:
    (i) The identification of a new core business line;
    (ii) The identification of a new material entity or the de-
identification of a material entity;
    (iii) Legal or functional organizational structure;
    (iv) Overall deposit structure;
    (v) Critical services or critical services support;
    (vi) The identification or de-identification of a franchise 
component;
    (vii) The acquisition or disposition of a material asset portfolio; 
or
    (viii) Cross-border elements.
    Material entity means a company, a domestic branch, or a foreign 
branch as defined in 12 U.S.C. 1813(o) that is significant to the 
activities of a critical service or core business line, and includes 
all IDIs that are subsidiaries or affiliates of the CIDI.
    Multiple-acquirer exit means an exit from a bridge depository 
institution through the sale of all or nearly all of the CIDI's IDI 
franchise to multiple acquirers, such as a regional breakup of the 
CIDI's IDI franchise or a sale of business segments to multiple 
acquirers, and may also include the wind-down or other disposition of 
franchise components, or material asset portfolios incidental to the 
divestitures of going concern elements, as applicable.
    Parent company means the company that controls, directly or 
indirectly, an insured depository institution. In a multi-tiered 
holding company structure, parent company means the top-tier of the 
multi-tiered holding company only.
    Parent company affiliate means any affiliate of the parent company 
other than the CIDI and the CIDI's subsidiaries.
    Payment, clearing, and settlement service provider (PCS service 
provider) is defined in paragraph (d)(16) of this section.
    Qualified financial contract has the same meaning as in 12 U.S.C. 
1821(e)(8).
    Regulated subsidiary is defined in paragraph (d)(4)(v) of this 
section.
    Resolution plan means the full resolution submission submitted by a 
group A CIDI pursuant to this section.
    Subsidiary has the same meaning as in 12 U.S.C. 1813(w)(4).
    Total assets has the meaning given in the instructions for the 
filing of Reports of Condition and Income.
    Triennial filer is defined in paragraph (c)(2) of this section.
    United States has the same meaning as the term State as defined in 
12 U.S.C. 1813(a)(3).
    Virtual data room means an online repository where information 
pertinent to a sale or disposition of a CIDI or its franchise 
components is maintained in a secure and confidential manner to 
facilitate, whether by the CIDI or the FDIC, such sale or disposition 
to one or more third party acquirers.
    (c) Full resolution submissions required--(1) Biennial filers--(i) 
Definition. Biennial filer means a CIDI affiliate of a biennial filer, 
as defined in Sec.  381.4(a)(1) of this chapter.
    (ii) Submission date. Each biennial filer must provide a full 
resolution submission to the FDIC on or before the date that is two 
years after the date of its most recent full resolution submission (or 
first business day thereafter), unless it has received written notice 
of a different date from the FDIC. All biennial filers will receive a 
written notice specifying the date on which their initial full 
resolution submission or interim supplement is due, which will be at 
least 270 days after October 1, 2024.
    (2) Triennial filers--(i) Definition. Triennial filer means all 
CIDIs that are not biennial filers.
    (ii) Submission date. Each triennial filer must provide a full 
resolution submission to the FDIC on or before the date that is three 
years after the date of its most recent full resolution submission (or 
first business day thereafter), unless it has received written notice 
of a different date from the FDIC. All triennial filers will receive a 
written notice specifying the date on which their initial full 
resolution

[[Page 56650]]

submission or interim supplement is due, which will be at least 270 
days after October 1, 2024.
    (3) Full resolution submission by new CIDIs. An insured depository 
institution that becomes a CIDI after October 1, 2024, must submit its 
initial full resolution submission on or before the date specified in 
writing by the FDIC. Such date will occur no earlier than 270 days 
after the date on which the insured depository institution became a 
CIDI. A CIDI that transitions between groups will file a full 
resolution submission or interim supplement, as applicable, pursuant to 
the requirements applicable to its new filing group on or before the 
date that its next full resolution submission or interim supplement is 
due, unless it receives written notice of a different date from the 
FDIC.
    (4) Notice of extraordinary event. (i) Requirements. Each CIDI must 
provide the FDIC with a notice no later than 45 days after any material 
merger, acquisition or disposition of assets, or similar transaction or 
fundamental change to the CIDI's organizational structure, core 
business lines, size, or complexity. Such notice must describe the 
extraordinary event and explain how the event impacts the resolvability 
of the CIDI. The CIDI must address any material changes resulting from 
the extraordinary event with respect to which it has provided notice 
pursuant to this paragraph (c)(4)(i) in the subsequent full resolution 
submission or interim supplement submitted by the CIDI.
    (ii) Exception. A CIDI is not required to submit a notice under 
paragraph (c)(4)(i) of this section if the date by which the CIDI would 
be required to submit the notice under paragraph (c)(4)(i) of this 
section would be within 90 days before the date on which the CIDI is 
required to make a full resolution submission under this section.
    (5) Approval by the CIDI board of directors. The CIDI's board of 
directors or, in the case of an insured branch only, a delegee acting 
under the express authority of the CIDI's board of directors, must 
approve the full resolution submission. That approval or delegation of 
express authority must be noted in the minutes of the board of 
directors.
    (6) Incorporation from other sources--(i) Sources. A CIDI may 
incorporate information or analysis into the confidential section of 
its full resolution submission or its interim supplement from one or 
more of the following without seeking the authorization for disclosure 
of FDIC confidential information required under 12 CFR part 309:
    (A) The most recent full resolution submission submitted by the 
CIDI or an affiliate of the CIDI.
    (B) The most recent DFA resolution plan of a company that is a CIDI 
affiliate.
    (C) Any other regulatory filing by the CIDI or a CIDI affiliate 
with the FDIC.
    (ii) Requirements for incorporation from other sources. A CIDI may 
incorporate information from other sources only if:
    (A) The full resolution submission seeking to incorporate 
information or analysis from other sources clearly indicates the source 
and as-of date of the information or analysis the CIDI is 
incorporating, and the information or analysis required by this section 
is readily distinguishable from any extraneous parent company (or 
parent company affiliate) information or analysis, with a description 
of any material differences.
    (B) The CIDI certifies that the information or analysis the CIDI is 
incorporating from other sources remains accurate in all respects that 
are material to the CIDI's full resolution submission.
    (d) Content of the full resolution submissions for CIDIs. Each 
group A CIDI must submit a resolution plan that includes all content 
specified in this paragraph (d). Each group B CIDI must submit an 
informational filing that includes the content specified in paragraphs 
(d)(4) through (9), (d)(10)(i) through (iii) and (vii) through (viii), 
(d)(11), and (d)(13) through (27) of this section, inclusive; a 
description of each material change since the submission of its prior 
informational filing or, where relevant, interim supplement (or 
affirmation that no such material change has occurred); and a 
discussion of the changes to the CIDI's previously submitted 
informational filing resulting from any change in law or regulation, 
guidance, or feedback from the FDIC, or material change.
    (1) Identified strategy. (i) Each resolution plan must include an 
identified strategy for the resolution of the CIDI in the event of its 
failure that meets the credibility criteria in paragraph (f)(1) of this 
section.
    (ii) A CIDI must utilize as its identified strategy the formation 
and stabilization of a bridge depository institution that continues 
operation through the completion of the resolution and exit from the 
bridge depository institution unless the CIDI determines and 
demonstrates in its resolution plan why another strategy:
    (A) Would be more appropriate for the size, complexity, and risk 
profile of the CIDI;
    (B) Reasonably could be executed by the FDIC across a range of 
likely failure scenarios; and
    (C) Best addresses the credibility criteria described in paragraph 
(f)(1) of this section.
    (iii) The identified strategy must include meaningful optionality 
for execution across a range of scenarios. The exit from the bridge 
depository institution may be through a multiple acquirer exit, or any 
other exit strategy following the stabilization of the operations of 
the bridge depository institution. The identified strategy may not be 
based upon a sale or other disposition to one or more acquirers over 
resolution weekend.
    (2) Failure scenario. For the identified strategy, the CIDI must 
use a failure scenario that demonstrates that the CIDI is experiencing 
material financial distress, such that the quality of the CIDI's asset 
base has deteriorated and high-quality liquid assets have been depleted 
or pledged in the stress period before failure due to high, unexpected 
outflows of deposits and increased liquidity requirements from 
counterparties that would impact the CIDI's ability to pay its 
obligations in the normal course of business before the FDIC's 
appointment as receiver. Though the immediate failure event may be 
liquidity-related and associated with a lack of market confidence in 
the financial condition of the CIDI before the final recognition of 
losses, the identified strategy must also consider the depletion of 
capital before and at the time of the appointment of the FDIC as 
receiver. The CIDI may not assume any regulatory waivers in connection 
with the actions proposed to be taken before or in resolution. To the 
extent that the CIDI assumes that DIF funding is used during the 
resolution by a bridge depository institution, it must demonstrate the 
capacity for such borrowing on a fully secured basis and the source of 
repayment. The identified strategy must take into account that failure 
of the CIDI will occur under severely adverse economic conditions 
developed by the Board of Governors of the Federal Reserve System 
pursuant to 12 U.S.C. 5365(i)(1)(B), and must assume that the U.S. 
parent company (if any) is in resolution under 11 U.S.C. 101 et seq. or 
another applicable insolvency regime. The FDIC may provide a CIDI 
additional or alternative parameters for the failure scenario detailed 
in this paragraph (d)(2). The FDIC will endeavor to provide a CIDI 
notice of such additional or alternative

[[Page 56651]]

parameters for the failure scenario at least one year before the 
applicable resolution plan is due. Any such additional or alternative 
parameters:
    (i) May be applicable to all CIDIs or only specific individual 
CIDIs; and
    (ii) May include additional conditions, such as different 
macroeconomic stress scenario information or assumptions with respect 
to the cause of failure. If the FDIC provides such additional or 
alternative parameters, the CIDI must use the additional or alternative 
parameters rather than the conditions specified in paragraph (d)(2) of 
this section, to the extent inconsistent with the conditions specified 
in paragraph (d)(2) of this section.
    (3) Executive summary. A resolution plan must include an executive 
summary providing:
    (i) A description of the key elements of the identified strategy;
    (ii) An overview of the CIDI's core business lines and franchise 
components;
    (iii) A description of each material change since the prior 
resolution plan addressing the changed element (or affirmation that no 
such material change has occurred);
    (iv) A discussion of the changes to the CIDI's previously submitted 
resolution plan resulting from any change in law or regulation, 
guidance, or feedback from the FDIC, or material change; and
    (v) A discussion of any actions taken by the CIDI since the 
submission of its prior resolution plan to further develop the quality 
or comprehensiveness of the information and analysis included in the 
resolution plan, including the identified strategy, or to improve its 
capabilities to develop and timely deliver that information and 
analysis.
    (4) Organizational structure: legal entities; core business lines; 
and branches. A full resolution submission must:
    (i) Identify and describe the CIDI's, the parent company's, and the 
parent company affiliates' legal and functional structures, including 
all material entities.
    (ii) Identify and describe each of the CIDI's core business lines, 
including whether any core business line draws additional value from, 
or relies on the operations of, the parent company or a parent company 
affiliate, and identify any such operations that are cross-border. 
Provide information about the assets and annual revenue for each core 
business line, clearly identifying revenue to the CIDI.
    (iii) Map franchise components to core business lines, and 
franchise components and core business lines to material entities and 
regulated subsidiaries.
    (iv) Describe the CIDI's branch organization, both domestic and 
foreign, including the address and total domestic and foreign deposits 
of each branch.
    (v) Identify each CIDI subsidiary that is one of the following 
legal entities (each a ``regulated subsidiary''), and provide the 
address and asset size of each regulated subsidiary:
    (A) A broker or dealer that is registered under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.);
    (B) A registered investment adviser, properly registered by or on 
behalf of either the Securities and Exchange Commission or any State, 
with respect to the investment advisory activities of such investment 
adviser and activities incidental to such investment advisory 
activities;
    (C) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.);
    (D) An insurance company, with respect to insurance activities of 
the insurance company and activities incidental to such insurance 
activities, that is subject to supervision by a State insurance 
regulator;
    (E) A legal entity that is subject to regulation by, or 
registration with, the Commodity Futures Trading Commission, with 
respect to activities conducted as a futures commission merchant, 
commodity trading adviser, commodity pool, commodity pool operator, 
swap execution facility, swap data repository, swap dealer, major swap 
participant, and activities that are incidental to such commodities and 
swaps activities;
    (F) A corporation organized under 12 U.S.C. 611 et seq. or a 
corporation having an agreement or undertaking with the Federal Reserve 
Board under 12 U.S.C. 601 et seq.; or
    (G) Any legal entity that is organized under the law of any 
jurisdiction other than the United States and that is authorized or 
supervised by a regulatory authority of such jurisdiction in a manner 
generally comparable to the U.S. legal entities and authorities 
described in paragraphs (d)(4)(v)(A) through (E) of this section, and 
includes any subsidiary that takes deposits or conducts the business of 
banking under the laws of such jurisdiction.
    (vi) Identify all of the CIDI's subsidiaries, offices, and agencies 
with cross-border operations associated with the operations of any core 
business line or franchise component. For each such subsidiary, office, 
or agency, provide metrics that appropriately depict its size and 
significance, and the location of each such subsidiary, office, and 
agency.
    (5) Methodology for material entity designation. A full resolution 
submission must describe the CIDI's methodology for identifying 
material entities. The methodology must be appropriate to the nature, 
size, complexity, and scope of the CIDI's operations.
    (6) Separation from parent; potential barriers or material 
obstacles to orderly resolution. The full resolution submission must 
address the CIDI's ability to operate separately from the parent 
company's organization, and any impact on maintaining economic 
viability and preservation of franchise value in a bridge depository 
institution, with the assumption that the parent company and parent 
company affiliates are in resolution under 11 U.S.C. 101 et seq. or 
another applicable insolvency regime. The full resolution submission 
must describe the actions necessary to separate the CIDI and its 
subsidiaries from the organizational structure of its parent company in 
a cost-effective and timely fashion. The full resolution submission 
must identify potential barriers or other material obstacles to an 
orderly resolution of the CIDI that may occur upon the CIDI's 
separation from the parent company's organization, as well as risks to 
the identified strategy (if required), and inter-connections and inter-
dependencies that may hinder the timely and effective resolution of the 
CIDI, and include the remediation steps or mitigating responses 
necessary to eliminate or minimize such barriers or obstacles.
    (7) Overall deposit activities. A full resolution submission must:
    (i) Describe the CIDI's overall deposit activities, including, 
insured and uninsured deposits, and particular deposit concentrations 
or other aspects of the deposit base or underlying systems that may 
create operational complexity for the FDIC. Describe how any types or 
groups of deposits are related to a core business line, business 
segment, or franchise component, and if so, how those types or groups 
of deposits are identified on the records or systems of the CIDI.
    (ii) Identify the total amount of foreign deposits by jurisdiction 
and what percentage of foreign deposits is dually payable in the United 
States. Describe any relationship between foreign deposits and core 
business lines and any deposit sweep arrangements with foreign 
branches, subsidiaries, and affiliates.

[[Page 56652]]

    (iii) Identify and describe deposit sweep arrangements, if any, 
that the CIDI has with the parent company, parent company affiliates, 
or third parties, and identify contracts governing such deposit sweep 
arrangements. Describe the CIDI's reporting capabilities on sweep 
deposits, including whether such reporting is automated and any data 
lag that affects the accuracy of such reports. If the CIDI receives 
significant amounts of deposits through such deposit sweep arrangements 
with the parent company or parent company affiliates, include a 
detailed discussion of such relationships and the business objectives 
of such deposit sweep arrangements.
    (iv) Identify all omnibus, deposit sweep, and pass-through 
accounts, and identify the accountholder, the location of relevant 
contracts, and the system on which the accounts are maintained. Provide 
a detailed discussion of the capabilities and timeliness of deposit 
reporting systems and capabilities to generate accurate and timely 
contact information with respect to any omnibus, deposit sweep, or 
pass-through accounts.
    (v) Provide a report regarding the CIDI's depositors that hold or 
control the largest deposits (whether in one account or multiple 
accounts) that collectively are material to one or more business 
segments (``key depositors''). The report must identify key depositors 
by name and business segment and the amount of deposit of each key 
depositor, and for each key depositor must identify other services 
provided by the CIDI to that depositor, such as lending, wealth 
management, brokerage services, or custody services. The full 
resolution submission must describe the CIDI's approach to identifying 
these key depositors and must describe how long it would take the CIDI 
to generate such a report and the timeliness of the information 
provided.
    (8) Critical services. A CIDI must be able to demonstrate 
capabilities necessary to ensure continuity of critical services in 
resolution. In order to support these capabilities, a full resolution 
submission must:
    (i) Identify and describe the CIDI's critical services and critical 
services support, including whether they are provided, in whole or in 
part, by or through:
    (A) The CIDI or a CIDI subsidiary or branch (and further indicate 
whether those critical services or critical services support are 
ultimately provided by a third party), or
    (B) The parent company or a parent company affiliate (and further 
indicate whether those critical services or critical services support 
are ultimately provided by a third party).
    (ii) Describe the CIDI's process for identifying critical services 
and critical services support. Describe the CIDI's process for 
collecting and monitoring the terms of contracts governing critical 
services and critical services support, and whether services provided 
pursuant to such contracts and associated costs can be segmented by the 
material entity, core business line, or franchise component that 
receives the critical service or critical service support.
    (iii) Map critical services support to the legal entities that own, 
contract for, or employ them, and map critical services to the material 
entities, core business lines, and franchise components that they 
support.
    (iv) Identify the physical locations and jurisdictions of critical 
service providers and critical services support that are located 
outside of the United States.
    (v) Identify the critical services and critical services support 
that may be at risk of interruption in the event of the CIDI's failure 
and describe the process used to make this determination. Describe the 
CIDI's approach for continuing critical services in the event of the 
CIDI's failure. Identify contracts for critical services that contain 
provisions that, upon the insolvency of the CIDI or the FDIC being 
appointed receiver of the CIDI, purport to permit the service provider 
to stop providing services, to alter pricing, or to alter other terms 
of service. Discuss potential obstacles to maintaining critical 
services that could occur in the event of the CIDI's failure and steps 
that could be taken to remediate or otherwise mitigate the risk of 
interruption, to include those critical services and critical services 
support provided by the parent company or a parent company affiliate 
and addressing:
    (A) Whether the CIDI and the parent company or parent company 
affiliate have entered into a written agreement and whether the written 
agreement has a cost plus or arms' length pricing rate, and the 
processes used by the CIDI to identify and project liquidity needs 
associated with those costs; and
    (B) The impact on continuity of critical services or critical 
services support provided by the parent company or a parent company 
affiliate if the parent company or parent company affiliate is in 
resolution under 11 U.S.C. 101 et seq. or other applicable insolvency 
regime.
    (9) Key personnel. A full resolution submission must:
    (i) Identify all key personnel by title, function, location, core 
business line, and employing legal entity.
    (ii) Describe the CIDI's methodology for identifying key personnel.
    (iii) Provide a recommended approach for retaining key personnel 
during the CIDI's resolution.
    (iv) Identify all employee benefit programs provided to key 
personnel, including health insurance, defined contribution and defined 
benefit retirement programs, and any other employee wellness programs, 
as well as any collective bargaining agreements or other similar 
arrangements. Identify the legal entity sponsor of each employee 
benefit program, and provide a description of and points of contact (by 
title) for such programs.
    (10) Franchise components. A CIDI must be able to demonstrate the 
capabilities necessary to ensure that franchise components and the IDI 
franchise are marketable in resolution. A full resolution submission 
must:
    (i) Identify franchise components that are currently separable, and 
are marketable in a timely manner in resolution. For a resolution plan 
of a group A CIDI, the franchise components identified must be 
sufficient to implement the identified strategy.
    (ii) Provide metrics that depict the size and significance of each 
franchise component.
    (iii) Identify by position the senior management officials of the 
CIDI who are primarily responsible for overseeing the business 
activities underlying the franchise component.
    (iv) Describe the CIDI's current capabilities and process to 
initiate marketing of franchise components to potential third party 
acquirers, and describe the process by which the CIDI would identify 
prospective bidders for such franchise components.
    (v) Describe the key assumptions (such as market conditions, 
available time to market assets, and anticipated client behaviors) 
underpinning each franchise component divestiture.
    (vi) Describe any significant impediments and obstacles to 
execution, including significant legal, regulatory, cross-border or 
operational challenges to the divestiture of each franchise component. 
This description must also address impediments and obstacles to 
maintaining internal operations (for example, shared services, 
information technology requirements, and human resources) and to 
maintaining access to financial market utilities. Identify the material 
actions that would be needed to facilitate the sale or disposition of 
each franchise component and, based on the

[[Page 56653]]

CIDI's current capabilities, describe the projected time frame to 
prepare for and execute the disposition of each franchise component.
    (vii) If a CIDI subsidiary or a parent company affiliate is a 
broker-dealer that provides services to the CIDI or customers of the 
CIDI, describe such services and the integration of the broker-dealer 
with the CIDI's business and operations. Provide an analysis discussing 
the challenges that could arise upon the discontinuation of services if 
the CIDI were separated from the broker-dealer, and actions to mitigate 
such challenges.
    (viii) Describe the CIDI's current capabilities and processes to 
establish a virtual data room promptly in the run-up to or upon failure 
of the CIDI that could be used to carry out sale of the IDI franchise 
as well as any or all of the CIDI's franchise components, including a 
description of the organizational structure of information within the 
virtual data room. Information in the virtual data room must support 
the ability of the FDIC to market and execute a timely sale or 
disposition of the IDI franchise or the CIDI's franchise components, be 
appropriate for a buyer to conduct due diligence for a timely sale or 
disposition of the IDI franchise or the CIDI's franchise components, 
and be sufficient to permit a bidder to provide a competitive bid on 
the IDI franchise or the CIDI's franchise components. A full resolution 
submission must also describe expected access protocols and 
requirements for the FDIC to use the virtual data room in order to 
carry out the sale of the IDI franchise or the CIDI's franchise 
components, including the FDIC's ability to facilitate bidder due 
diligence, and describe how information populated within the virtual 
data room could be transferred to a virtual data room hosted by the 
FDIC. The full resolution submission should identify the time required 
to capture all elements of information in the virtual data room, 
indicating number of days it would take to populate each category of 
information described below, and the process for each, including any 
potential obstacles or impediments in producing accurate, timely, and 
complete information in a useful format. The content of the virtual 
data room must include the following elements, or those that are 
applicable in the case of a sale of a franchise component:
    (A) Financial information, including annual and interim financial 
statements, including carve-out financial statements for franchise 
components, general ledger, and relevant financial information;
    (B) Deposit data and information;
    (C) Loan and lending operations information;
    (D) Securities information, including relevant information 
describing the CIDI's securities and investment portfolio;
    (E) Corporate organization information, including current 
organizational chart;
    (F) Employee information, including organization charts, 
compensation, and benefits;
    (G) Material contracts and critical services information, including 
key critical services agreements, leases, and bond indentures; and
    (H) Other information necessary to facilitate a rapid and effective 
due diligence process for the sale of the IDI franchise or the CIDI's 
franchise components.
    (11) Material asset portfolios. A full resolution submission must 
identify each material asset portfolio by size, and by category and 
classes of assets within such material asset portfolio, and include a 
breakdown of those assets within a material asset portfolio that are 
held by a foreign branch or regulated subsidiary. For each material 
asset portfolio, describe how the assets within the portfolio are 
valued and how they are maintained on the books and records of the 
CIDI. Identify and discuss impediments to the sale of each material 
asset portfolio identified and provide a timeline for such sale.
    (12) Valuation to facilitate FDIC's assessment of least-costly 
resolution method. A CIDI must be able to demonstrate the capabilities 
necessary to produce valuations needed in assessing the least-cost 
test. A resolution plan must:
    (i) Provide a detailed description of the approaches the CIDI would 
employ for determining the values of the franchise components and the 
IDI franchise as a whole, including the underlying assumptions and 
rationale. Describe the CIDI's approach to the development of the 
information needed to support valuation analysis, including a 
description of the CIDI's current ability to produce updated 
projections, timely if necessary, to support the FDIC's analysis to 
determine whether a resolution strategy would be the least costly to 
the Deposit Insurance Fund in the event of failure.
    (ii) Provide the following valuation analysis based upon the 
failure scenario assumed in the development of the identified strategy, 
with such adjustments to the scenario as may be necessary to 
demonstrate the analysis required under paragraph (d)(12)(ii)(B) of 
this section:
    (A) Valuation estimates of the IDI franchise, and where a multiple 
acquirer exit strategy is incorporated in the identified strategy, a 
sum-of-the-parts analysis. In determining these valuation estimates, 
the CIDI must consider appropriate valuation approaches, such as the 
income-based approach, asset-based approach, and market-based approach. 
In deriving a range of estimates of value, the CIDI must assess and 
provide a reasoned quantitative or qualitative analysis in support of 
whether the conclusion of value should reflect the results of one 
valuation approach and method, or a combination of the results of more 
than one valuation approach and method; as appropriate, the resolution 
plan must discuss the relevance and weight given to the different 
valuation approaches and methods used.
    (B) A qualitative analysis of the impact on franchise value that 
may result from not transferring any uninsured deposits to the bridge 
depository institution, including a narrative describing any options to 
mitigate franchise value destruction where there is not a transfer of 
all deposits to a bridge depository institution such as, an advance 
dividend payment to depositors that takes into account the expected 
loss to depositors, and the impact of such an advance dividend on 
depositor behavior and preservation of franchise value at different 
levels of loss. Such qualitative analysis should reflect reasonable 
assumptions of customer behavior based upon the CIDI's range of 
services provided to, and interconnections with, depositors.
    (iii) Provide all content responsive to paragraph (d)(12)(ii) of 
this section as an appendix to the resolution plan, including any 
analysis of liquidity and deposit runoff assumptions and factors 
underlying such runoff estimates.
    (13) Off-balance-sheet exposures. A full resolution submission must 
describe any material off-balance-sheet exposures (including the amount 
and nature of unfunded commitments, guarantees, and contractual 
obligations) of the CIDI and map those exposures to core business 
lines, franchise components, and material asset portfolios.
    (14) Qualified financial contracts. A full resolution submission 
must:
    (i) Describe the types of qualified financial contract transactions 
the CIDI is involved with in respect of its customers and business 
activities, the core business lines and franchise components with which 
such transactions are associated, and how the CIDI offsets position 
risk from such

[[Page 56654]]

transactions. Identify customers of the CIDI that are counterparties to 
qualified financial contracts transactions with the CIDI that are 
significant in terms of gross notional amounts or volumes of 
transactions.
    (ii) Describe the booking models for risk from derivative 
transactions, including whether customer-facing risk or other dealer-
facing risk resides in the CIDI while the position risk hedging is 
performed by a parent company affiliate. Describe the CIDI's use of any 
``global risk book,'' ``remote bookings,'' or ``back-to-backs'' booking 
model, identify the challenges these booking models present to the 
transfer or unwind of such related derivatives, and analyze approaches 
for addressing those challenges.
    (iii) Describe how the CIDI uses qualified financial contracts to 
manage its hedging or liquidity needs, including specifying the hedged 
items (including underlying risk, cash flow, assets or liability being 
hedged) and the applicable core business line, as well as the approach 
used to mitigate such risks.
    (iv) For each of paragraphs (d)(14)(i) through (iii) of this 
section, identify hedges that receive hedge accounting treatment, core 
business line-specific hedges, and reporting capabilities and practices 
for hedge accounting information and other end-user hedges.
    (15) Unconsolidated balance sheet; material entity and regulated 
subsidiary financial statements. A full resolution submission must 
provide an unconsolidated balance sheet for the CIDI and a 
consolidating schedule for all material entities and regulated 
subsidiaries that are subject to consolidation with the CIDI. Amounts 
attributed to legal entities that are not material entities or 
regulated subsidiaries may be aggregated on the consolidating schedule. 
Provide financial statements for each material entity and regulated 
subsidiary. When available, audited financial statements should be 
provided.
    (16) Payment, clearing, and settlement. A full resolution 
submission must identify each provider of payment, clearing, and 
settlement services, and agent banks, and other financial market 
utilities (each, a ``PCS service provider''), of which the CIDI 
directly is a member or has a direct relationship that is a critical 
service or a critical service support. For each such PCS service 
provider:
    (i) Map those PCS service providers to the CIDI's legal entities, 
core business lines, and franchise components;
    (ii) Describe the PCS services provided by such PCS service 
providers, including the value and volume of activities on a per-
provider basis; and
    (iii) Describe the CIDI's role as a PCS service provider that is 
material in terms of revenue to, or value of, any franchise component 
or core business line.
    (17) Capital structure; funding sources. A full resolution 
submission must:
    (i) Provide descriptions of the current processes used by the CIDI 
to identify the funding, liquidity, and capital needs of and resources 
available to each material entity that is a CIDI subsidiary or foreign 
branch. Describe the current capabilities of the CIDI to project and 
report its funding and liquidity needs (e.g., next day, cumulative next 
five days, cumulative next 30 days).
    (ii) Identify the composition of the liabilities of the CIDI 
including the types and amounts of short-term and long-term liabilities 
by type and term to maturity, secured and unsecured liabilities, and 
subordinated liabilities. Such information must include whether such 
liabilities are held by affiliates, whether they are publicly issued, 
their maturity, any call rights provided, and, where applicable, the 
identity of their indenture trustees.
    (iii) Identify the material funding relationships and material 
inter-affiliate exposures between the CIDI and any CIDI subsidiary or 
foreign branch that is a material entity, including material inter-
affiliate financial exposures, claims or liens, lending or borrowing 
lines and relationships, guaranties, deposits, and derivatives 
transactions.
    (18) Parent and parent company affiliate funding, transactions, 
accounts, exposures, and concentrations. A full resolution submission 
must:
    (i) Identify material affiliate funding relationships, and material 
inter-affiliate exposures, including terms, purpose, and duration, that 
the CIDI or any CIDI subsidiary has with the parent company or any 
parent company affiliate. Such information must include material 
affiliate financial exposures, claims or liens, lending or borrowing 
lines and relationships, guaranties, deposits, and derivatives 
transactions.
    (ii) Identify the nature and extent to which the parent company or 
any parent company affiliate serves as a source of funding to the CIDI 
and CIDI subsidiaries, the terms of any contractual arrangements, 
including any capital maintenance agreements, the location of related 
assets, funds, or deposits, and the mechanisms by which funds are 
transferred from the parent company or any parent company affiliate to 
the CIDI and CIDI subsidiaries.
    (19) Economic effects of resolution. A full resolution submission 
must identify any activities of the CIDI that provide a service or 
function that is material:
    (i) To a geographic area or region of the United States;
    (ii) To a business sector or product line in that geographic area 
or region, or nationally; or
    (iii) To other financial institutions. The full resolution 
submission must include a discussion of mitigants to the potential 
impact of termination of those activities in the event of failure of 
the CIDI, including whether the activity is readily substitutable.
    (20) Non-deposit claims. A full resolution submission must identify 
and describe the CIDI's systems and processes used to identify the 
unsecured creditors of the CIDI that are not depositors, as well as the 
unsecured creditors of each CIDI subsidiary that is a material entity. 
Such description must identify the location of the CIDI's records and 
recordkeeping practices regarding unsecured debt issued by the CIDI and 
any inter-creditor agreements for unsecured debt. The description must 
include a description of the CIDI's capabilities to identify each such 
unsecured creditor by name, address, nature of the liability, and 
amount owed by the CIDI and each CIDI subsidiary or, in the case of 
indentured securities, the identity of the indenture trustee.
    (21) Cross-border elements. A full resolution submission must 
describe all components of the parent company's and parent company 
affiliates' operations that are based or located outside the United 
States, including regulated subsidiaries, and foreign branches and 
offices that contribute to the value, revenues, or operations of the 
CIDI. A full resolution submission must also identify all authorities 
with regulatory or supervisory authority over these operations, and 
identify regulatory or other impediments to divestiture, transfer, or 
continuation of any of the CIDI's foreign branches, subsidiaries, and 
offices in resolution, including with respect to retention or 
termination of personnel and transfer or continuation of licenses or 
authorizations.
    (22) Management information systems; software licenses; 
intellectual property. A full resolution submission must:
    (i) Provide a detailed inventory and description of the key 
management information systems and applications, including systems and 
applications for risk management, accounting, and financial and 
regulatory reporting, as well as those used to provide the information 
required to be provided in the full resolution submission, used by

[[Page 56655]]

or for the benefit of the CIDI and CIDI subsidiaries. For each system 
or application the description must identify the legal owner or 
licensor, the key personnel needed to support and operate the system or 
application, the system or application's use and function, any core 
business line that uses the system or application, its physical 
location (if any), any related third party contracts or service-level 
agreements, any related software or systems licenses, and any other 
related intellectual property.
    (ii) For any key management information system or application for 
which the CIDI or CIDI subsidiary is not the owner or licensor, 
describe both any obstacles to maintaining access to such system or 
application when the CIDI is in resolution, and approaches for 
maintaining access to such system or application when the CIDI is in 
resolution, including the projected costs of maintaining access when 
the CIDI is in resolution.
    (iii) Describe the capabilities of the CIDI's processes and systems 
to collect, maintain, and produce the information and other data 
underlying the full resolution submission. Identify all relevant 
management information systems and applications, and describe how the 
information is managed and maintained. Describe any deficiencies, gaps, 
or weaknesses in such capabilities and the actions the CIDI intends to 
take to address promptly any such deficiencies, gaps, or weaknesses, 
and the time frame for implementing such actions.
    (23) Digital services and electronic platforms. A full resolution 
submission must:
    (i) Describe all digital services and electronic platforms offered 
to customers to support banking transactions for retail or business 
customers.
    (ii) Identify whether such services and platforms are provided by 
the CIDI, a CIDI subsidiary, a parent company affiliate, or a third 
party, and which of them owns the related intellectual property or is 
the licensee.
    (iii) Discuss how these services or platforms are significant to 
the operations or customer relationships of the CIDI, and their impact 
on franchise value and depositor behavior.
    (24) Communications playbook. A full resolution submission must 
include a communications playbook that describes the CIDI's current 
communication capabilities, including capabilities to communicate with 
personnel, customers, and counterparties, and how those capabilities 
could be used from the point of the CIDI's failure through the CIDI's 
resolution. The description must:
    (i) Identify categories of key stakeholders addressed in the CIDI's 
communications plans including, counterparties, domestic and foreign 
regulatory authorities, customers, and personnel.
    (ii) Identify communication channels for each key stakeholder 
category and describe the logistics and limitations of the use of each 
communication channel.
    (iii) Describe the procedures to generate contact lists for each 
key stakeholder category and estimate the time required to generate 
each list.
    (iv) Describe procedures for coordinating communications across key 
stakeholder categories and communications channels, including cross-
border communications, if any.
    (v) Identify key personnel that are responsible for the CIDI's 
crisis communications across key stakeholder categories and 
communications channels and the functional and legal entity 
organization of relevant communications activities.
    (25) Corporate governance. A full resolution submission must 
include a detailed description of: how resolution planning is 
integrated into the corporate governance structure and processes of the 
CIDI; the CIDI's policies, procedures, and internal controls governing 
preparation and approval of the full resolution submission; and the 
identity and position of the senior management official of the CIDI who 
is primarily responsible and accountable for the development, 
maintenance, and filing of the full resolution submission, and for the 
CIDI's compliance with this section.
    (26) CIDI's assessment of the full resolution submission. A full 
resolution submission must describe the nature, extent, and results of 
any contingency planning or similar exercise conducted by the CIDI 
since the date of the most recently filed full resolution submission to 
assess the viability of the identified strategy (if required) or 
improve any capabilities described in the full resolution submission.
    (27) Any other material factor. A full resolution submission must 
identify and discuss any other material factor that may impede the 
resolution of the CIDI.
    (e) Interim supplement. Each CIDI must submit interim supplements 
containing current and accurate information regarding the specified 
full resolution submission content items in accordance with this 
paragraph (e).
    (1) Submission date. (i) Each interim supplement must be submitted 
to the FDIC on or before the anniversary date (or first business day 
thereafter) of its most recent full resolution submission, or its most 
recent interim supplement, unless the CIDI has received written notice 
of a different date from the FDIC.
    (ii) Notwithstanding paragraph (e)(1)(i) of this section, with 
respect to all CIDIs, no interim supplement is required in the calendar 
year in which a full resolution submission is made and, with respect to 
a biennial filer, no interim supplement is required in the calendar 
year in which it submits a DFA resolution plan.
    (2) Content items for interim supplement. Each CIDI must submit 
interim supplements that address each of the following content items:
    (i) A description of all material changes resulting from an 
extraordinary event;
    (ii) A description of each material change applicable to interim 
supplement content items since the submission of its prior full 
resolution submission (or affirmation that no such material change has 
occurred);
    (iii) The content required under paragraph (d)(4) of this section;
    (iv) From paragraph (d)(7) of this section, the content required 
under paragraph (d)(7)(i), the first sentence of paragraph (d)(7)(ii), 
the first sentence of paragraph (d)(7)(iii), the first sentence of 
paragraph (d)(7)(iv), and the first two sentences of paragraph 
(d)(7)(v) of this section;
    (v) From paragraph (d)(8) of this section, the content required 
under paragraphs (d)(8)(i) and (iv) of this section;
    (vi) From paragraph (d)(9) of this section, the content required 
under paragraph (d)(9)(i) of this section;
    (vii) From paragraph (d)(10) of this section, the content required 
under paragraphs (d)(10)(i) through (iii) of this section;
    (viii) From paragraph (d)(11) of this section, the content required 
under the first sentence of paragraph (d)(11) of this section;
    (ix) The content required under paragraph (d)(13) of this section, 
excluding the requirement to ``map those exposures to core business 
lines, franchise components and material asset portfolios'';
    (x) The content required under paragraph (d)(15) of this section;
    (xi) From paragraph (d)(16) of this section, the content required 
under the first sentence of paragraph (d)(16) of this section;
    (xii) From paragraph (d)(17) of this section, the content required 
under the first sentence of paragraph (d)(17)(ii) of this section;
    (xiii) The content required under paragraph (d)(21) of this 
section;

[[Page 56656]]

    (xiv) From paragraph (d)(22) of this section, the content required 
under paragraph (d)(22)(i) of this section; and
    (xv) Any other content element expressly identified for the next 
interim supplement by the FDIC.
    (f) Credibility; review of full resolution submissions; engagement; 
capabilities testing--(1) Credibility criteria. Each full resolution 
submission must be credible. The FDIC may, at its sole discretion, 
determine that the full resolution submission is not credible if:
    (i) The identified strategy would not provide timely access to 
insured deposits, maximize value from the sale or disposition of 
assets, minimize any losses realized by creditors of the CIDI in 
resolution, and address potential risk of adverse effects on U.S. 
economic conditions or financial stability; or
    (ii) The information and analysis in the full resolution submission 
is not supported with observable and verifiable capabilities and data 
and reasonable projections or the CIDI fails to comply in any material 
respect with the requirements of paragraph (d) or (e) of this section.
    (2) Resolution submission review and credibility determination. The 
FDIC will review the full resolution submission in consultation with 
the appropriate Federal banking agency for the CIDI and its parent 
company. If, after consultation with the appropriate Federal banking 
agency for the CIDI, the FDIC determines that the full resolution 
submission of a CIDI is not credible pursuant to paragraph (f)(1) of 
this section, the FDIC must notify the CIDI in writing of such 
determination. Any notice provided under this paragraph (f)(2) must 
include a description of the material weaknesses in the full resolution 
submission identified by the FDIC that resulted in the determination 
that the full resolution submission is not credible. A material 
weakness is an aspect of a CIDI's full resolution submission that 
individually or in conjunction with other aspects fails to meet the 
credibility criteria described in paragraph (f)(1).
    (3) Resubmission of a full resolution submission. Within 90 days of 
receiving a notice issued by the FDIC pursuant to paragraph (f)(2) of 
this section that the full resolution submission is not credible based 
on identified material weaknesses, or such shorter or longer period as 
the FDIC may determine, a CIDI must submit a revised full resolution 
submission, or such other information or material specified by the 
FDIC, to the FDIC that addresses any material weaknesses identified by 
the FDIC and discusses in detail the revisions made to address such 
material weaknesses.
    (4) Failure regarding resubmission. If the CIDI fails to submit the 
revised full resolution submission within the required time-period 
under paragraph (f)(3) of this section or the FDIC determines that the 
revised full resolution submission fails to address adequately the 
material weaknesses identified in the notice issued by the FDIC, the 
FDIC may take enforcement action against the CIDI in accordance with 
paragraph (j) of this section.
    (5) Significant findings. The FDIC may also identify significant 
findings and other observations after review of a full resolution 
submission. A significant finding is a weakness or gap that raises 
questions about the credibility of a CIDI's full resolution submission 
but does not rise to the level of a material weakness. If a significant 
finding is not satisfactorily explained or addressed before or in the 
CIDI's next full resolution submission, it may be found to be a 
material weakness in the CIDI's next full resolution submission. The 
FDIC may require a project plan with identified milestones to assure 
that the significant finding is timely addressed. The FDIC may identify 
an aspect of a CIDI's full resolution submission as a material weakness 
even if such aspect was not identified as a significant finding in an 
earlier full resolution submission. The FDIC must notify the CIDI in 
writing of any significant findings that are identified in the full 
resolution submission.
    (6) Engagement. Each CIDI must provide the FDIC such information 
and access to such personnel of the CIDI as the FDIC in its discretion 
determines is relevant to any of the provisions of this section 
(``engagement''). Personnel made available must have sufficient 
expertise and responsibility to address the informational and data 
requirements of the engagement. Engagement between the CIDI and the 
FDIC may be required at any time. This engagement may include the FDIC 
requiring the CIDI to provide information or data to support the 
content items required by paragraph (d) or (e) of this section, other 
information related to a group A CIDI's identified strategy, or, for 
any CIDI, other resolution options being considered by the FDIC. The 
FDIC will provide the CIDI with timely notification of the scope of any 
engagement before such engagement begins and will notify the CIDI on 
the conclusion of the engagement.
    (7) Capabilities testing. At the discretion of the FDIC, the FDIC 
may require any CIDI to demonstrate the CIDI's capabilities described, 
or required to be described, in the full resolution submission, 
including the ability to provide the information, data and analysis 
underlying the full resolution submission (``capabilities testing''). 
The CIDI must perform such capabilities testing promptly, and provide 
the results in a time frame and format acceptable to the FDIC. 
Capabilities testing may be included in connection with full resolution 
submission review under paragraph (f)(2) of this section or any 
engagement under paragraph (f)(6) of this section. The FDIC will 
provide the CIDI with timely notification of the scope of any 
capabilities testing before such capabilities testing begins and will 
notify the CIDI on the conclusion of the capabilities testing.
    (g) No limiting effect on FDIC. No full resolution submission or 
interim supplement provided pursuant to this section will be binding on 
the FDIC as supervisor, deposit insurer, or receiver for a CIDI or 
otherwise require the FDIC to act in conformance with such full 
resolution submission or interim supplement.
    (1) Financial information. The full resolution submission or 
interim supplement must, to the greatest extent possible, use financial 
information as of the most recent fiscal year-end for which the CIDI 
has financial statements or, if the use of financial information as of 
a more recent date as of which the CIDI has financial statements would 
more accurately reflect the operations of the CIDI on the date of the 
submission, financial information as of that more recent date.
    (2) Indexing of information and analysis to full resolution 
submission and interim supplement content requirements. A full 
resolution submission or interim supplement must include an index of 
each content requirement in paragraph (d) or (e)(2) of this section, as 
applicable, required to be included in that full resolution submission 
or interim supplement, as applicable, to every instance of its location 
in the full resolution submission, or interim supplement, as 
applicable.
    (3) Combined full resolution submission or interim supplements by 
affiliated CIDIs. CIDIs that are affiliates may submit a single, 
combined full resolution submission or interim supplement, but only if 
all affiliated CIDIs submitting the combined full resolution submission 
or interim supplement are within the same CIDI group, whether group A 
or group B. The combined full resolution submission or interim 
supplement must satisfy the content requirements for each CIDI's full

[[Page 56657]]

resolution submission or interim supplement, as applicable, and the 
FDIC must be able to readily identify the portions of a combined full 
resolution submission or interim supplement that comprise each CIDI's 
full resolution submission or interim supplement.
    (h) Form of full resolution submissions; confidential treatment of 
full resolution submissions and interim supplements. (1) Each full 
resolution submission must be divided into a Public Section and a 
Confidential Section. Each CIDI must segregate and separately identify 
the Public Section from the Confidential Section. The Public Section 
must consist of a summary overview of the full resolution submission 
that describes the business of the CIDI. For each CIDI, the Public 
Section must include, to the extent material to the CIDI's full 
resolution submission:
    (i) The names of material entities;
    (ii) A description of core business lines;
    (iii) Consolidated financial information regarding assets, 
liabilities, capital and major funding sources;
    (iv) A description of derivative activities and hedging activities;
    (v) A list of PCS service providers;
    (vi) A description of foreign operations;
    (vii) The identities of material supervisory authorities;
    (viii) The identities of the principal officers;
    (ix) A description of the corporate governance structure and 
processes related to resolution planning;
    (x) A description of material management information systems; and
    (xi) For group A CIDIs only, a description, at a high level, of the 
CIDI's identified strategy.
    (2) The confidentiality of full resolution submissions and interim 
supplements must be determined in accordance with applicable exemptions 
under the Freedom of Information Act (5 U.S.C. 552(b)) and the FDIC's 
Disclosure of Information Rules (12 CFR part 309).
    (3) Any CIDI submitting a full resolution submission, interim 
supplement, or related materials pursuant to this section that desires 
confidential treatment of the information submitted pursuant to 5 
U.S.C. 552(b)(4) and 12 CFR part 309 and related policies may file a 
request for confidential treatment in accordance with those rules.
    (4) To the extent permitted by law, information comprising the 
Confidential Section of a full resolution submission and the 
information comprising an interim supplement will be treated as 
confidential.
    (5) To the extent permitted by law, the submission of any non-
publicly available data or information under this section will not 
constitute a waiver of, or otherwise affect, any privilege arising 
under Federal or State law (including the rules of any Federal or State 
court) to which the data or information is otherwise subject. 
Privileges that apply to full resolution submissions and related 
materials are protected pursuant to 12 U.S.C. 1828(x).
    (i) Extensions and exemptions--(1) Extension. Notwithstanding the 
general requirements of paragraph (c) of this section, on a case-by-
case basis, the FDIC may extend, on its own initiative or upon written 
request, any time frame or deadline of this section.
    (2) Waiver. The FDIC may, on its own initiative or upon written 
request, exempt a CIDI from one or more of the requirements of this 
section.
    (j) Enforcement. Violating any provision of this section 
constitutes a violation of a regulation and may subject the CIDI to 
enforcement actions under 12 U.S.C. 1818, including paragraph (t) 
thereunder.

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on June 20, 2024.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2024-13982 Filed 7-8-24; 8:45 am]
BILLING CODE 6714-01-P

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