(Finance) – The Federal Deposit Insurance Corporation and the Federal Reserve Board have announced that, following the joint review of resolution plan submitted for July 2023 by the eight largest and most complex banks, have identified a weak point in the plans of Bank of America, Citigroup, Goldman SachsAnd JPMorgan. The agencies found no weaknesses in the plans of other banks (BNY Mellon, Morgan Stanley, State Street And Wells Fargo).
Resolution plans, also known as “living wills“, must describe a bank’s strategy for orderly bankruptcy resolution in the event of severe financial distress or bankruptcy. The agencies jointly determined that any weakness identified in the 2023 plans of Bank of America, Goldman Sachs and JPMorgan Chase is a “shortcoming “. A shortcoming is a weakness that raises doubts about the feasibility of the plan.
The agencies jointly identified a weakness in the 2023 plan presented by Citigroupbut they have come to different conclusions on its severity. The FDIC has determined that the Citigroup plan is not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code and considers the weakness a “deficiency.” A deficiency is a weakness that could undermine the viability of the plan. The Council concluded that the weakness is only a shortcoming. According to the agency resolution planning rule, when one agency finds a shortcoming in a resolution plan and the other agency finds a deficiency, the plan is deemed to be shortcoming. As a result, Citigroup’s plan for 2023 is believed to feature shortcomings. The agencies also previously identified a shortcoming in Citigroup’s 2021 plan related to data quality and management, and that shortfall remains unaddressed.
Agencies have sent feedback letters to each of the eight banks where they identify areas of ongoing development of the banks’ resolution strategies and capabilities. For the four banks with an identified deficiency, the letters describe the specific weaknesses that led to the deficiency and the corrective actions required by the agencies. The deficiencies will need to be addressed in the next resolution plans expected by 1 July 2025.
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