Shortly before the holidays, the FDIC significantly heightened its expectations for the resolution plans submitted to it by the largest insured depositories. Divorcing these from the overall living wills that must be filed with both the FDIC and FRB, the agency made it clear that acceptable plans must lay out how a bank can be closed at the least cost to the FDIC, including through pay-out only of insured depositors. Scenarios that assume least-cost resolution through other routes – e.g., sale of a core deposit franchise – now must be supported by substantial analysis and credible demonstration that an acquirer large enough with sufficient capital at hand under systemic-stress scenarios could ride to the bank’s rescue.

Planning for early-termination rights is a critical aspect of the new FDIC guidance, reflecting strong dissatisfaction by some at the agency following Congressional reversal of the Lincoln push-out provisions of the Dodd-Frank Act. Insured depositories with non-U.S. parents face particular challenges under the FDIC’s new approach.

Importantly, the FDIC statement raises immediate issues not only with regard to ensuring satisfactory living wills, but also on pending policy decisions. The FDIC has promised to build out SPOE to enhance its credibility, and action here early this year is critical to reassuring Congressional critics that Dodd-Frank is indeed a meaningful TBTF remedy. Global regulators have now issued a consultation on total loss absorption capacity (TLAC) – a vital SPOE element – but the FRB not only has yet to do so, but its ability to lay out requirements that achieve the FDIC’s least-cost objectives remains to be seen.

Federal Financial Analytics provided clients with an in-depth analysis of the FDIC’s guidance, as well as analyses of TLAC, Congressional action, and another important policy not widely noted at year-end: an interim final rule from the FRB and OCC – most notably not the FDIC – revising capital, liquidity, and lending-limit regulations to reflect the new ISDA contractual agreement on close-out rights and new EU resolution protocols.  

We would be pleased to answer any questions you may have about these policy actions and their impact on resolution plans, as well as on the critical analytical and advocacy challenges facing the current U.S. resolution framework as Dodd-Frank critics mount a formidable campaign to roll much of it back.

Please do not hesitate to address inquiries to us via e-mail to