Resolution planning: Category 3 debrief

January 2014


The Federal Reserve and the FDIC recently released the public portions of 115 Category 3 institutions' first resolution plans. Category 3 contains the largest number and most diverse group of resolution plan filers.

Particularly striking across the Category 3 US plans is the consistency of resolution strategies. Every Category 3 filer with a CIDI indicated that its primary strategy for its CIDI(s) was an immediate purchase and assumption (“P&A”) to a single buyer after passing through receivership. In each of these cases, the alternative to the preferred strategy was the creation of a bridge bank followed by a delayed P&A to a single buyer.

Alternate strategies may be emphasized by the regulators in 2014. From the perspective of a single institution (and assuming an idiosyncratic stress event which is the required assumption for the 2013 plans), the P&A strategies seem reasonable and appropriate as preferred strategies. However, from a macro perspective, particularly when required to incorporate weaker economic assumptions such as the adverse or severely adverse environments, industry strategies that consist exclusively of a whole bank P&A seem insufficient.

This Financial Services Regulatory Brief analysis provides key background pertinent to the Category 3 plan filings, and analyzes the public portions for both US based firms and FBOs.

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Dan Ryan
US Banking and Capital Markets Leader
Tel: +1 (646) 471 8488

Alison Gilmore
US Asset and Wealth Management Marketing Leader
Tel: +1 (646) 471 0588