Living-Will Grades for Foreign Banks Are Already Obsolete
By Lalita Clozel
WASHINGTON — The living-wills process remains a guessing game for the largest, most complex financial institutions, which are still awaiting regulators’ evaluation of last year’s effort even while they prepare for a new round of submissions due in July. But for foreign banks, this year’s cycle is extra complicated. On the same month they are required to file their 2016 resolution plans, they must also complete a restructuring of their U.S. operations under an intermediate holding company…. According to experts, U.S. regulators appear to favor the single-point-of-entry [resolution] strategy, a process developed by the Federal Deposit Insurance Corp. as a way to place a bank under the agency’s receivership and keep it running as it winds it down under Title II of the Dodd-Frank Act…. But foreign banking organizations have struggled to adopt such a strategy because of the more contained nature of their subsidiaries. Instead, some of these companies have laid out a process in which important subsidiaries such as broker-dealers go through separate bankruptcy proceedings. “Structures of several of the foreign banks doing business in the United States generally presume multiple point of entry,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics.  Regulators have not explicitly indicated that they would favor one strategy over the other, but many believe there is one.