Treliant Takeaway…FDIC Announces Final Rule for Resolution Planning

FDIC Board of Directors Approves Final Revised Rule to Strengthen Resolution Planning for Large Banks

• Source: fdic.gov

Takeaway

The FDIC recently adopted a final rule regarding the submission of resolution plans and informational filings by insured depository institutions (IDIs). This final rule is an amendment to a previous rule that now requires institutions with $100 billion or more in assets to submit resolution plans (Group A Filers) and those with at least $50 billion but less than $100 billion (Group B filers) to submit informational filings.

The final rule changes bring significant new requirements to Group B filers, many of which have not made a resolution submission, and more stringent requirements for Group A filers.

Banks should be prepared for more granular feedback and tougher assessments of the credibility of resolution plans submitted. Recent criticism from the FDIC and Federal Reserve note deficiencies in four major US bank resolution plans, even before the finalization of the new rule. Specific attention was given to the lack of planning related to derivatives, including stress scenarios and assumptions, data consistency, and resource planning. Findings also highlighted necessary revisions needed to subsequent plan submissions around division of portfolios without a bridge bank being the only potential solution.

Treliant understands the preparation/planning needed for conformance with the revised rule and can assist with:

• Identifying the additional requirements from existing plans to full plans and prioritizing the incremental work that needs to be done.
• Identifying and documenting organizational structure.
• Credible challenge for identified strategies and failure scenarios.
• Drafting of executive summary/challenge of existing executive summaries.
• Evaluating assumptions and/or overall approach.
• Comprehensive review of impact assessments.
• Assessment of capital and liquidity calculations and related governance.

Highlights

The final rule expands the threshold for IDIs subject to new requirements and modifies the previous rule requirements regarding timing and content of submissions. Key changes to the rule include:

• New asset class thresholds (as mentioned above).
• Requirement for Class A filers to submit an “Identified Strategy” detailing their potential point of failure to liquidation/return of assets.
• Informational filing requirements for Group B filers, containing resolution planning and readiness.
• Enhanced assessment of the credibility of resolutions plans by the FDIC.
• Timing requirements- Most covered IDIs will file their resolution plans triennially in 2025 with more limited supplements filed in-between.

The final rule goes into effect on October 1, 2024, with submissions starting in 2025.