U.S. units of HSBC, RBS, BNP Paribas hit with criticism of bankruptcy plans
By Ryan Tracy
U.S. regulators added three foreign-owned banks to the list of big financial firms that haven’t shown they can collapse without causing broader economic damage. The Federal Reserve and the Federal Deposit Insurance Corp. found shortcomings in the “living wills,” or bankruptcy plans, of the U.S. units of BNP Paribas SA,HSBC Holdings PLC and Royal Bank of Scotland Group PLC. The banks could face sanctions if they don’t fix the issues by the end of this year, when new drafts of the plans are due, the regulators said. BNP and HSBC declined to comment, while Royal Bank of Scotland had no immediate comment. The FDIC found the three foreign-owned firms’ plans were “not credible,” but the Fed stopped short of that finding, regulators said in a statement. Both agencies must agree a bank’s plan is “not credible” before they can begin the process of considering sanctions, which could take two years or more. The Fed and FDIC split along similar lines when rejecting the living wills of the 11 other large banks in August. But they also promised to be harsher in the future if banks don’t make improvements. Karen Shaw Petrou, managing partner of policy analysis firm Federal Financial Analytics Inc., said Monday’s decision “is going to be a significant strategic event” for the foreign-owned firms, which 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.”