Fed & FDIC cite 'significant uncertainty' in Amex living will

• Key insight: The Federal Reserve and Federal Deposit Insurance Corp. Tuesday questioned whether American Express' proposed single-buyer strategy could work, but those misgivings ultimately did not rise to the level of a formal objection.
• Supporting data: American Express' plan would have the FDIC sell its bank while the company's other businesses go through bankruptcy, creating two liquidation tracks that could make it difficult to find a single buyer for the whole company. 
• Forward look: Regulators told American Express to revisit the strategy for its next resolution plan, which is due in July 2028.

The Federal Reserve and Federal Deposit Insurance Corp. on Tuesday expressed doubt about the feasibility of American Express' resolution plan, but those doubts were not significant enough for them to reject the plan. 

In a review of 15 large banks' resolution plans — also known as "living wills" — released Tuesday afternoon, regulators had no formal objections to any of the plans submitted, but did reserve some scrutiny for American Express' plan. 

American Express' contingency plan for if it were to fail envisions selling its bank, operating company and parent-company assets together in a single sale, but regulators said that may not be feasible because the FDIC would be in charge of selling the bank side of the business and bankruptcy court would run a separate sale process for the remainder, meaning the two parties may not produce the same winning bidder. American Express did not respond to a request for comment. 

"There is significant uncertainty regarding the feasibility of the process outlined in the 2025 Plan, where the single bidder must be the highest bidder for both [American Express National Bank]'s assets and the chapter 11 assets to keep the integrated payments platform intact," the agencies wrote in a letter to the company. "Successfully coordinating a sale of these entities' assets to a single bidder faces significant challenges, including operational complexity, the need for extensive communication across proceedings, and the potential for conflicting outcomes (given that the FDIC is generally required to choose the least costly resolution option, which may not align with the winning bidder in a bankruptcy proceeding). 

The feedback is the latest input regulators have given on resolution plans submitted by Category II and III banks — or banking organizations with more than $250 billion in assets — which the firms submitted last year and must submit every three years. FDIC and the Fed also noted a shortcoming previously identified in BNP Paribas' 2021 resolution plan had been satisfactorily addressed.

American Express' plan envisions a single buyer purchasing the assets of American Express National Bank, Travel Related Services and American Express Co. to keep its integrated payments platform intact. Under the plan, American Express and TRS would enter Chapter 11 proceedings while the FDIC would be charged with selling off the assets of the bank subsidiary. The regulators' doubt did not rise to the level of a formal 'shortcoming or deficiency,' but they advised the bank to go back to address this doubt in their next resolution plan, which is due in July 2028. Regulators also said the plan represented an improvement over American Express' previous submissions.

"The Covered Company should review its preferred resolution strategy for its 2028 resolution plan submission in light of these impediments," they wrote. "If the Covered Company determines that there are no viable options to address the challenges to the Coordinated Sale Strategy, then it should consider selecting another preferred strategy, which could include a strategy wherein coordination between the FDIC with the parties in the bankruptcy proceedings is not necessary." 

Read more:

• Barr: 'now is the time' to prepare for AI-driven job losses
• Bowman: AI cyber threats need 'proactive risk management'
• Fed watchdog flags gaps in security incident oversight
• Senate sends penny bill supported by banks to Trump's desk

The agencies in the second Trump administration have been lowering the bar for resolution planning compliance. In April, FDIC narrowed the requirements big banks must follow when submitting their living wills in an effort to streamline the process and better position the agency to swiftly sell a collapsing bank over a weekend. The FDIC's updated standards allow firms more flexibility and principles-based approach to resolution planning submissions, with several previous requirements either revised or waived. 

The FDIC has waived the requirement that firms prescribe a bridge depository institution strategy as the default resolution plan. Filers may now propose one or multiple feasible strategies based on the specific structure of their business. The requirement to model a failure scenario has also been waived and the FDIC clarified that it will "only issue credibility findings" if a submission is determined to be not credible and its review will evaluate plans holistically rather than verifying banks' projections.