Regulators Reject ‘Living Will’ Plans of Three
BanksBy Matthew Heller
U.S. bank regulators have found the “living will” resolution plans of three foreign banking organizations to be “not credible,” asking them to make improvements by the end of the year. France’s BNP Paribas and U.K.-based HSBC Holdings and the Royal Bank of Scotland submitted the plans to comply with the Dodd-Frank Act, which requires systemically important financial institutions (SIFIs) to establish living wills. A living will is designed to describe a bank’s strategy for rapid and orderly resolution under the U.S. bankruptcy code in the event of material financial distress or bank failure. But the Federal Reserve Board and the Federal Deposit Insurance Corporation on Monday sent the three banks back to the drawing board, saying their plans would not “facilitate an orderly resolution” and would need to be revised. Karen Shaw Petrou, managing partner of policy analysis firm Federal Financial Analytics, told The Wall Street Journal that the foreign banks will need to “look very hard at their U.S. operations to identify what the problems are and whether they can be resolved to U.S. satisfaction without damage to the franchise.