The Federal Reserve and the FDIC approved a final resolution planning rule (the "Final Rule") significantly revising the original rule adopted in 2011.1 The Final Rule revamps the 2011 requirements by aligning the timing and certain requirements for resolution planning with the filer's categorization under the Federal Reserve's October 10th final tailoring rule. Most significantly, the Final Rule allows all filers to submit more targeted or reduced resolution plans, rather than full plans, in their next submission, generally streamlines content requirements for many filers, and creates new waiver and related procedures that could permit further tailoring of requirements based on the potential systemic significance of different filers. The Final Rule largely adopts the April proposal, but provides important clarifications and procedural improvements.

The most significant changes from the proposal are 1) the shift from full to targeted plans for the next submissions and 2) new deadlines and procedures to request waivers or to de-identify critical operations. First, the Agencies confirmed that all firms in Categories I, II, and III will submit targeted plans, rather than full plans, by July 1, 2021.2 Category IV firms must submit reduced plans by July 1, 2022. Second, while the Final Rule did not specify additional substantive tailoring of resolution plan content, the Final Rule clarified the process for seeking waivers of certain content elements and/or de-identification of critical operations. These requests must be filed 18 months before the next due date of the next full resolution plan, and if no decision to grant the requests is provided by 12 months before that due date, the request will be deemed denied. In response to commenters, the Agencies also specified that, in general, all feedback or guidance, as well as any requirement to provide an update or additional submission, would be provided 12 months before the next due date.

Key Takeaways

  • The Final Rule is intended to align with the Federal Reserve's final tailoring rule, also adopted on October 10th.3 This Final Rule adopts most of the substantive revisions as proposed on April 8, 2019 (the "Proposed Rule") and implements changes required by the Economic Growth, Regulatory Relief, and Consumer Protection Act ("EGRRCPA"). For a complete summary of the Proposed Rule, please review our April 11, 2019 alert memo.
  • In substance, the Final Rule declined to make material changes to the substantive resolution planning requirements included in the Proposed Rule. As in the Proposed Rule, the only material tailoring between Categories I, II, and III lies in the Biennial filing deadlines for Category I U.S. global systemically important banks ("U.S. G-SIBs") and the Triennial filing deadlines for all others. The Agencies clearly are leaving further tailoring of the substantive requirements for resolution plans to the waiver process and the separate de-identification process for critical operations.
  • Compared to current requirements, and consistent with the Proposed Rule, the Final Rule considerably reduces the resolution planning requirements for all current filers, eliminates the requirements for all U.S. filers with total consolidated assets below $250 billion and virtually eliminates the requirements for all other filers except U.S. G-SIBs, and a limited number of foreign banking organizations ("FBOs") and U.S. regional banking organizations.
  • The Final Rule establishes the four classifications of resolution plan filers—Categories I, II, III and IV—based on asset size and defined indicia of potential risk, while establishing three types of resolution plans: Full Plans, Targeted Plans and Reduced Plans.
  • The Final Rule requires the following filing deadlines based on an organization's categorization:
    • Category I: The eight U.S. G-SIBs will be required to submit alternating Targeted Plans and Full Plans every two years, beginning with a Targeted Plan on July 1, 2021 and then a Full Plan on July 1, 2023.
    • Categories II and III: The 13 U.S. banking organizations and FBOs within these categories will be required to submit alternating Targeted Plans and Full Plans every three years, beginning with a Targeted Plan on July 1, 2021. The first Full Plan will be due July 1, 2024.
    • Category IV: The 53 FBOs with greater than $250 billion in global consolidated assets not subject to Categories II & III will be required to submit Reduced Plans every three years, beginning July 1, 2022.
  • In the interim, four FBOs with shortcomings identified in their 2018 plans will submit information in July 2020 regarding remediation of such shortcomings. Northern Trust Corporation will submit an update in January 2020 regarding projects undertaken to address a shortcoming identified in its 2015 plan.
  • The Agencies affirmed industry comments, committing that future guidance will be subject to notice and comment, except in circumstances beyond the control of the Agencies.4 The Agencies further provided that all such guidance will be finalized 12 months prior to the next applicable resolution plan filing deadline.5

To read the full alert memorandum, click here.

Footnotes

1. Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, Resolution Plans Required (Oct. 10, 2019) (the "Final Rule"). The Final Rule implements Section 165(d) of the Dodd-Frank Act, and does not apply to FDIC-insured banks. Together the Federal Reserve and the FDIC will be referred to as the "Agencies".

2. The Category I U.S. G-SIBs are Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo. The thirteen firms identified by the Agencies as Category II and III filers are Barclays, Capital One, Credit Suisse, Deutsche Bank, HSBC, Mizuho, MUFG, Northern Trust, PNC Financial, Royal Bank of Canada, Toronto-Dominion, UBS and U.S. Bancorp.

3. Board of Governors of the Federal Reserve System, Prudential Standards for Large Bank Holding Companies, Savings and Loan Holding Companies, and Foreign Banking Organizations (October 10, 2019). Available at https://www.federalreserve.gov/aboutthefed/boardmeetings/files/tailoring-rule-fr-notice-20191010a2.pdf.

4. Final Rule at 41-42.

5. Id

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