The FDIC has finalized a rule required jointly of it and the FRB by the Dodd-Frank Act to ensure that systemic firms plan for an orderly dissolution under Title 11 of the Bankruptcy Code without systemic risk, as well as for recovery under stress. The final rule reflects comments that sought phased-in implementation initially focused on the largest banking organizations and prevents immediate sanctions in most cases in which supervisors question a resolution plan. However, the FRB and FDIC did not carve out nonbank institutions from the requirement, making clear that insurance companies, investment advisers and other nonbanks subject to systemic regulation will also need to plan for orderly resolution under the Bankruptcy Code and face sanctions should the FRB and FDIC not be satisfied, even if their functional regulator does not fear systemic risk under applicable resolution regimes. Foreign banks with relatively small U.S. operations also did not win the exemption they sought. The final rule does not include a proposed approach to credit-exposure reports, as the FRB and FDIC decided to defer this pending FRB action on related regulation.
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