Resolution planning: A public peek into the plans

October 2013


Last week, the Federal Reserve and the FDIC released the public sections of the second annual resolution plans filed by 11 Category 1 firms (i.e., financial institutions with $250 billion or more in US nonbank assets). The regulators had extended the deadline from July 1st to October 1st, in recognition of the firms’ need for additional time to incorporate guidance published in April (the “April Guidance”).

The plans have evolved since the first versions were submitted in July 2012. First, and most notably, all but two of the 11 plans identified more Material Entities than they included in 2012. Second, many of the public sections indicated that the firms considered additional resolution strategies, including a “single point of entry” approach. Although resolution strategies are not fully explored within the public sections, many firms have availed themselves of the options provided by the April Guidance to present feasible resolution strategies that assume the idiosyncratic failure of the parent firm without the requirement that all Material Entities also fail.

What has not evolved is that the plans’ public sections continue to be very short (i.e., under 50 pages) as compared to the actual plans themselves which run thousands of pages. Relative to the plans themselves, the public sections reveal limited information, and what is revealed makes the plans seem more alike than they actually are. This generic nature is in part due to the public sections’ brevity, but the driving reasons are firms’ competitive concerns and the reality that resolution plans can be politicized (with press headlines and congressional scrutiny of “too big to fail” frequently re-emerging).

This Financial Services Regulatory Brief places the Guidance in context, explains its importance, and provides our view of its key points.

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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