Oct 24 -- The Board of Governors of the Federal Reserve System (Board) and Federal Deposit Insurance Corporation (FDIC) (together, the agencies) are publishing for public comment this advance notice of proposed rulemaking (ANPR) to solicit public input regarding whether an extra layer of loss-absorbing capacity could improve optionality in resolving a large banking organization or its insured depository institution, and the costs and benefits of such a requirement. This may, among other things, address financial stability by limiting contagion risk through the reduction in the likelihood of uninsured depositors suffering loss, and keep various resolution options open for the FDIC to resolve a firm in a way that minimizes the long term risk to financial stability and preserves optionality. The agencies are seeking comment on all aspects of the ANPR from all interested parties and also request commenters to identify other issues that the Board and FDIC should consider. Comments must be received on or before December 23, 2022.
Over the past decade, the Board of Governors of the Federal Reserve System (Board) and Federal Deposit Insurance Corporation (FDIC) (together, the agencies) have promulgated rules and guidance, both jointly and individually, to support the orderly resolution of large banking organizations. These rules and related guidance are tiered based on the complexity and risks of different banking organizations: the most stringent rules apply only to global systemically important bank holding companies (GSIBs) and include requirements to submit a resolution plan every two years, follow a “clean-holding company” requirement that prohibits top-tier holding companies from entering certain financial arrangements (such as short-term borrowings or derivatives contracts) that might impede orderly resolution, adopt resolution-related stay provisions in qualified financial contracts (for example, establishing a set period of time during which a party to a qualified financial contract is restricted from terminating, liquidating, or netting such contract in the event of resolution), and maintain minimum outstanding amounts of total loss-absorbing capacity (TLAC) and long-term debt. The Board has issued supervisory guidance on recovery planning that applies to GSIBs, and the FDIC has issued a rule to require certain covered insured depository institutions (CIDIs), including IDI subsidiaries of GSIBs, to periodically submit resolution plans to ensure that the FDIC can effectively carry out its responsibilities for the resolution of a CIDI in the event that it is appointed receiver under the Federal Deposit Insurance Act (FDI Act).
For large banking organizations that are not U.S. GSIBs, resolution planning requirements under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act apply at a reduced frequency. Category II and Category III large banking organizations file resolution plans on a triennial cycle, alternating between submission of full and targeted resolution plans. Further, large banking organizations that are not GSIBs generally are not subject to TLAC or long-term debt requirements, clean holding company requirements, rules related to qualified financial contract stay provisions in resolution, or Board guidance on recovery planning.
Since resolution-related rules and guidance were adopted, the U.S. banking system has continued to evolve. . . . The agencies periodically review their existing regulations to ensure they appropriately address risks to safe and sound banking and financial stability and are issuing this ANPR to explore whether and how resolution-related standards applicable to large banking organizations could be strengthened to enable a more efficient resolution of a large banking organization, while mitigating effects to the financial system. The agencies are considering tiered requirements that distinguish between the set of standards in this area that are applied to GSIBs and the framework to be applied to other large banking organizations, given differences between their resolution strategies as well as large banking organizations' smaller size, less complex operations, and generally more limited operations outside of their U.S. insured depository institution. The agencies are interested in public comment on how appropriately-adapted elements of the GSIB resolution-related standards—including a long-term debt requirement potentially at the insured depository institution and/or the holding company level, a clean holding company requirement, or recovery planning guidance—could be applied to large banking organizations to enhance financial stability by providing for a wider range of resolution options and address related risks to safe and sound banking, the potential costs of such changes, and how these policies might be structured to achieve those goals most effectively and efficiently. [12 questions]