Proposed Resolution Planning Guidance for U.S. G-SIBs: Federal Reserve and FDIC Seek Comment on Proposed Guidance for Future Resolution Plan Submissions by the Eight U.S. Global Systemically Important Banks

Sullivan & Cromwell LLP - July 2, 2018

On June 29, 2018, the Federal Reserve and the Federal Deposit Insurance Corporation (together, the “Agencies”) proposed for public comment guidance (the “Proposed Guidance”) with respect to future resolution plan submissions under Title I of the Dodd-Frank Act by the eight U.S. Global Systemically Important Banks (“U.S. G-SIBs”), including the plan submissions that are due on July 1, 2019. The Proposed Guidance updates guidance previously issued by the Agencies, most notably the guidance the Agencies issued in 2016 for the 2017 annual resolution plan submissions by the U.S. G-SIBs (the “2016 Guidance”). In contrast to the 2016 Guidance – which was issued in final form without any opportunity for public comment – the Proposed Guidance follows last year’s published recommendation by the U.S. Department of the Treasury that resolution planning guidance should be subject to a public notice and comment process. More generally, the Proposed Guidance appears to reflect a regulatory approach that, because the U.S. G-SIBs have now developed robust resolution plans, the overall process can be more transparent. 

The Proposed Guidance seeks comment on, among other things, the capital and liquidity prepositioning framework that was contained in the 2016 Guidance, but does not include any proposed alteration to those aspects of the prior guidance. It remains to be seen whether the absence of revisions to the prepositioning framework in the Proposed Guidance reflects a determination by the Agencies that it would be preferable, as a procedural matter, to amend the framework through future proposal of a formal rule, as opposed to written guidance. If undertaken, such rulemaking might conceivably be done as part of a package that would include revisions to the total loss-absorbing capacity requirements currently imposed on the U.S. G-SIBs and certain non-U.S. G-SIBs. The proposing release expressly invites comment on the full scope of the Proposed Guidance, but highlights the fact that as a result of the Agencies’ review of U.S. G-SIBs’ most recent resolution plan submissions, the Agencies have identified the following four areas where more work may be necessary to enhance the resolvability of U.S. G-SIBs: payment, clearing and settlement (PCS) activities; derivatives and trading activities; intra-group liquidity; and internal loss-absorbing capacity. The Proposed Guidance limits its proposal of new substantive content to the first two categories: the portions of the guidance that address PCS activities and derivatives and trading activities.