Priya Patel
The Federal Reserve has extended the deadline for 15 large banks to submit their resolution plans by eight months, giving them until March 31, 2025, to submit the plans. These banks include Capital One, Truist Financial, and PNC Financial Services Group. A resolution plan, also known as a living will, outlines a bank’s strategy for handling bankruptcy or dissolution in the event of failure or financial distress. The extension comes as federal regulators consider changing the requirements for resolution plans, which were established by the Dodd-Frank Act of 2010. The changes aim to improve banks’ preparedness for deposit runs and other issues without putting the Deposit Insurance Fund at risk.
The proposal to update the resolution plan requirements was put forth by the Federal Reserve and Federal Deposit Insurance Corp. in August. It includes criteria for specific risks within individual banks and calls for stricter requirements for banks with at least $100 billion in assets. However, Fed Gov. Michelle Bowman has expressed concerns that the provision for stricter requirements for all banks with at least $100 billion in assets may conflict with the Fed’s commitment to tailoring regulations to the size and riskiness of banks. Bowman has called for a delay in issuing guidance on resolution planning standards until a final rule is adopted.
In a statement, Bowman expressed support for the Fed’s decision to extend the deadline for the 15 banks. She noted that the current resolution plan rule requires banks to be given at least a year’s notice of a new submission deadline. If the new rules are not finalized by the end of March 2024, Bowman expects the board to provide another extension so that banks would have 12 months from the date of finalized guidance to submit their next resolution plan.
The comment period on the proposal closed on Tuesday, and regulators will now consider the public feedback and incorporate it into a final rule, a process that often takes several months.
