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Resolution Authority

Friday, June 29, 2012

First “Living Will” Plans Due to Regulators

The FDIC and Federal Reserve Board have announced the process for receiving and evaluating initial resolution plans—also known as living wills—from the largest banking organizations operating in the U.S.

The Dodd-Frank Act requires that bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for supervision by the Federal Reserve submit resolution plans annually to the FDIC and the Federal Reserve.

Each plan must describe a strategy for rapid and orderly resolution in the event of material financial distress or failure. The FDIC and Federal Reserve must review each resolution plan and jointly may determine that a resolution plan is not credible or would not facilitate an orderly resolution of the company.

Companies subject to the rule are required to file their initial resolution plans in three groups and on a staggered schedule. Firms in the first group, which includes U.S. bank holding companies with $250 billion or more in total nonbank assets and foreign-based bank holding companies with $250 billion or more in total U.S. nonbank assets, must submit their initial resolution plans on or before July 2, 2012.

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