The FRB and FDIC have finalized earlier resolution-plan guidance to increase the likelihood that a GSIB could be resolved under the Bankruptcy Code. Part of a continuing process dealing with the resolution complexities posed by these banks, the new living-will guidance focuses on capital and liquidity along with payment, settlement, and clearing (PCS) and derivatives and trading operations. Issues related to intra-group liquidity and internal loss-absorbency capacity in resolution will be addressed at some future date and then incorporated into this guidance to ensure a single, ongoing set of GSIB resolution standards. These do not apply to foreign banking organizations (FBOs) that are GSIB affiliates, but it is likely that the FDIC and/or FRB will consider them in reviewing FBO/GSIB plans on a going-forward basis despite differences with global or home-country requirements in areas such as counterparty notifications. These remain largely unchanged in the final guidance, adding considerable transparency in the payment, settlement, and clearing arena but possibly also reducing what was once considered the “constructive ambiguity” that made it easier for large banks to ride out high-risk scenarios without costly client flight.
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