Tuesday’s daily briefing provided an immediate overview of the FRB and FDIC’s stunning release on big-bank resolution; here, we turn to its strategic implications for the eleven firms covered by the 2013 round and for banks that filed their third resolution plans earlier this summer. The new statement reflects longstanding differences between the FRB and FDIC over resolvability, as well as pressure publicly to sanction at least one of the complex G-SIBs. As we see it, the FRB sacrificed its qualms over immediate sanctions not only to demands from the FDIC – which for the first time unanimously (Comptroller Curry included) agreed that all eleven banks failed to file “credible” plans – but also due to recognition that, absent public action, Congress could well act on pending initiatives to repeal Title II, with or without a new section in the U.S. Bankruptcy Code (see FSM Report RESOLVE24). As detailed in this report, we expect both the FDIC and FRB to scrutinize the 2015 living wills with considerable skepticism, and the FRB has also threatened near-term supervisory actions, possibly in part to avert still more sweeping FDIC action or punitive legislation from Sen. Brown (D-OH) and others who believe TBTF remains largely unaddressed.
The full report is available to retainer clients. To find out how you can sign up for the service, click here