FDIC board backs reg relief proposals for foreign banks, living wills
WASHINGTON — The Federal Deposit Insurance Corp. board on Tuesday proposed easing resolution plan requirements for large financial firms as well as certain capital and liquidity standards for foreign banking giants operating in the U.S.
The board advanced three items: a proposal drafted jointly with the Federal Reserve Board that tailors the frequency and content of "living will" filings based on a bank parent company's size; a companion proposal issued just by the FDIC on adjusting resolution plan requirements for bank subsidiaries; and an interagency proposal codifying capital and liquidity changes for foreign banks with a U.S. footprint.
The latter proposal mirrors regulatory relief measures under consideration for domestic banking firms after the passage last year of a law rolling back certain provisions of the Dodd-Frank Act.
The living will proposal issued with the Fed would stagger timelines for turning in plans, with larger and riskier firms subject to a more demanding schedule than regional banks. However, the proposal would codify longer timelines even for the biggest banks. Smaller U.S. banks with $100 billion to $250 billion in assets would not have to submit a resolution plan while larger firms could submit plans biannually, rather than annually.
“Under the staggered cycles the agencies would be able to concentrate resources on addressing systemic risks and those areas more closely associated with building greater resilience and resolvability,” said FDIC Chairman Jelena McWilliams. “Importantly, the proposal ensures rigorous resolution planning will continue at the largest, most complex firms.”
The Fed's board of governors approved the living will and foreign bank proposals on April 8.
Board member Martin Gruenberg, formerly the agency's chairman, dissented on all three items. He said the resolution plan proposal crafted with the Fed exceeds regulatory relief provisions passed by Congress.
“The proposed rule before the FDIC Board today would ... go beyond the [congressional] requirements” currently “to weaken significantly, in my view, the resolution plan framework that has been developed in this post-crisis period,” Gruenberg said during the meeting. “I believe the proposed rule is significantly underestimating the challenges and the risks associated with the failure of institutions with assets over $100 billion.”
The FDIC board passed, with one dissenting vote from Gruenberg, an advance notice of proposed rulemaking asking for public comment on how to tailor resolution plans for insured depository institutions. It would also extend the next deadline for these institutions to submit the next round of plans until the board takes further action.