Bank Policy Institute and SIFMA Respond to Banking Agencies’ Proposed Guidance on the Living Will Process

The Bank Policy Institute (BPI) and the Securities Industry and Financial Markets Association (SIFMA) submitted a comment letter on the proposed guidance issued by Federal Reserve and FDIC that would apply to the living wills prepared by the eight U.S. banks designated as G-SIBs. The letter strongly endorses the living wills process for these banks and offers suggestions for improvements based on experience to date.  Emphasizing that that living wills are an important pillar of the post-crisis rulebook for the largest banks, BPI and SIFMA in the letter commend the agencies’ effort to update and refine their guidance through a public notice and comment process to make it more efficient and effective.

BPI and SIFMA offer several recommendations for improving the proposed guidance, including:

  • The agencies should explicitly acknowledge in the guidance what they have already indicated in practice–that an effective version of a single-point-of-entry (SPOE) resolution strategy is a credible means of resolving a G-SIB in an orderly manner.
  • The separate resolution plan requirement for large insured depository institution subsidiaries (the IDI plan) should be eliminated for filers that have adopted SPOE as their preferred resolution strategy in their resolution plan for their U.S. bank holding company, as it is at odds with SPOE.
  • Reflecting what has become current practice, the agencies should formalize the two-year submission and review cycle (including for the separate IDI plan, should it be retained).
  • To improve transparency to the public, all applicable resolution planning requirements should be consolidated and made public, and all past guidance that is not consolidated and public should be deemed superseded.
  • As a reflection of the importance of a coordinated and well-orchestrated approach to resolving global institutions, the agencies should engage more proactively with non-U.S. regulators to improve the efficiency of resolution planning requirements and enhance information-sharing across jurisdictions.