WASHINGTON — The Federal Reserve Board and the Federal Deposit Insurance Corp. should rethink the review process for big banks' resolution plans, the Government Accountability Office said in a report released Tuesday.

Twelve of the largest bank holding companies with operations in the U.S. submitted resolution plans known as "living wills" in July, and despite making an effort to come to a decision on whether those plans are "credible" by the end of the year, the federal regulators have yet to release a determination. If the regulators jointly determine that a plan is not credible and would not facilitate an orderly wind-down, the regulators can require the banks to start divesting assets in order to make them less risky.

The GAO report determined that the Fed and FDIC should consider a longer timeline for reviewing the resolution plans and also provide more information on the framework they use to grade the plans.

"The annual filing cycle may not be feasible," the report said, noting that the review process for plans submitted in 2012, 2013 and 2014 has taken nine months on average.

The watchdog suggested that regulators move to a two-year cycle. The GAO also said the regulators should "publicly disclose information about their respective frameworks for assessing and recommending to their boards whether a plan is not credible or would not facilitate an orderly resolution under the Code."

"A lack of information on how the regulators assess plans and allow some companies to file reduced plans could undermine public and market confidence in resolution plans," it added.

In a March letter to GAO Director Lawrence Evans, top officials at the Fed and FDIC agreed with the GAO's recommendations to improve the living-will review process.

"The agencies are committed to enhancing the public disclosure around resolution planning and the agencies plan to make public the information needed to understand their frameworks," Arthur Murton, director of the FDIC's Office of Complex Institutions, and Michael Gibson, director of banking supervision and regulation at the Fed, wrote in the letter.

They also added that they agreed with the GAO that those filing living wills should have more time to incorporate the regulators' feedback on the plans in between filings and that they "will work to find the most appropriate way to ensure that sufficient time is provided."

House Financial Services Committee Chairman Jeb Hensarling, who asked for the report, also criticized a lack of transparency with the review process for living wills.

"The secrecy and lack of accountability can lead to abuse by Washington regulators and is a tool for them to potentially exercise de facto management authority over major financial institutions," he said in a statement.

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