WASHINGTON — The Federal Reserve Board on Monday signed off on a set of rules that will require U.S. banks to submit plans that can be used to unwind the firm in the event of a failure.
The rule, jointly written and previously approved by the Federal Deposit Insurance Corp. on Sept. 13, will apply to bank holding companies with assets of more than $50 billion and non-bank financial companies designated by the Financial Stability Oversight Council.
Living wills, which are required as part of the Dodd-Frank financial overhaul effort, are designed to give regulators a road map on how otherwise healthy firms could one day be cleaned up if they failed, allowing the government to be more prepared in the event of a crisis. The regulatory reform law also gave the FDIC enormous new resolution powers to seize and dismantle firms deemed too big to be wound down through bankruptcy.
Companies will submit their initial plans on a staggered basis. The largest, most complex firms with nonbank assets of $250 billion and above will submit their plans first by July 1, 2012. Institutions with between $100 billion and $250 billion of assets must file their living wills by July 1, 2013. All remaining firms have until Dec. 31, 2013 to comply.
Regulators also gave nonbank firms that will be named by the FSCO up to 270 days to comply with the new requirement.
