Large Bank Resolution Plan: FDIC & Fed Rule
- Federal regulators have signed off on final guidance dictating how large banks should prepare for potential orderly liquidations.
- The new guidance focuses on key areas of vulnerability, including capital adequacy, liquidity management, and operational capabilities essential during a resolution.
- While supporting the final guidance, some officials voiced reservations.
The FDIC and Federal Reserve have finalized their guidance for large bank resolution plans, also known as “living wills,” a critical step toward financial stability.Banks with over $250 billion in assets must now prepare for potential orderly liquidations,shaping the future of how these institutions handle failures. This comprehensive guidance, influenced by public feedback, focuses on capital, liquidity, and operational readiness. The submission deadline for these crucial resolution plans has been extended to October 1, 2025, offering banks additional time to comply.While the shift is designed to enhance preparedness, some officials suggest further review, particularly regarding the burdens of compliance. News Directory 3 provides up-to-the-minute details on this critical regulatory update. Discover what’s next in terms of implementation and potential future adjustments to these banking regulations.
FDIC, Fed Finalize Large Bank Resolution Plan Guidance
Updated May 30, 2025
Federal regulators have signed off on final guidance dictating how large banks should prepare for potential orderly liquidations. The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve jointly approved the measures,which are similar to those proposed in August 2023,incorporating revisions based on public comment. These resolution plans, often called “living wills,” outline strategies for winding down operations if a bank fails. The guidance primarily targets domestic and foreign banks holding more than $250 billion in total assets.It excludes the largest, moast complex institutions already subject to existing regulations.
The new guidance focuses on key areas of vulnerability, including capital adequacy, liquidity management, and operational capabilities essential during a resolution. It also recognizes that a home contry-led resolution is frequently enough the preferred outcome for foreign banks.The guidance advises these banks on integrating their global resolution strategies with their U.S. operations. The agencies are extending the deadline for banks to submit their resolution plans to Oct. 1, 2025, from the original date of March 31, 2025.
While supporting the final guidance, some officials voiced reservations. federal Reserve Governor Michelle Bowman suggested revisiting the requirement for holding company-level resolution plans for large banks whose assets are primarily held in a bank subsidiary. She questioned whether the benefits justified the burden and expense of preparing and reviewing such plans. FDIC Vice Chairman Travis hill echoed these concerns, suggesting a future review of the guidance depending on the finalization of the proposed long-term debt rule. The new guidance preserves the role of bank management in adopting resolution strategies based on the unique characteristics of the firm.
“The revised final guidance includes several improvements from the proposal. For example,it explicitly states that the agencies are not prescribing a preferred resolution strategy for any firm,instead preserving the role of each firm’s management to adopt whatever strategy they deem appropriate based on the unique characteristics of the firm,” said Federal Reserve Governor Michelle Bowman.
What’s next
Regulators will monitor the implementation of these resolution plans, assessing their effectiveness in promoting financial stability and minimizing disruption in the event of a large bank failure. Future adjustments to the guidance might potentially be considered based on experience and evolving market conditions.