On August 5, 2014, Wave 1 filers received feedback on their second resolution plans, ten months after their submissions in October 2013 (and one month after filing their 2014 plans). Each of the eleven firms received letters, signed jointly by the Federal Reserve (“Fed”) and the FDIC. The timing of the long-awaited feedback was largely unanticipated, although it was similar to the nine and a half months taken by regulators to provide general guidance to the initial plans submitted on July 1, 2012 (when the Too-Big-To-Fail ("TBTF") debate was also making headlines).
The letters were substantive (typically 15 to 20 pages in length) and generally reflected a thorough review and analysis of the firms’ plans. They included feedback that was common to all Wave 1 filers, as well as guidance customized for each firm. While the regulators acknowledged some important improvements in the firms’ 2013 submissions versus their 2012 submissions (e.g., a more readable narrative, and progress in addressing the five key categories of obstacles to resolution), the regulators also identified significant shortcomings and actions needed to improve resolvability for the July 2015 submissions.
The strongly worded joint press release by the Fed and the FDIC, as well as statements issued by the Fed and individual FDIC Board members, leave no doubt that there is substantial work to be done over the next year if the firms are to avoid the potential significant consequences of a formal “not credible” determination.
This First take elaborates on these key points.