By Steve Gelsi
Bank of America, Citibank, Goldman Sachs and JPMorgan are flagged, while BNY Mellon, Morgan Stanley, State Street and Wells Fargo get passing grades
The U.S. Federal Deposit Insurance Corp. and the Federal Reserve Board on Friday said they have found “shortcomings” in the “living wills” of four of the eight largest U.S. banks, following a review of plans of financial firms to wind down in the event of another global financial meltdown.
The banks face a deadline of July 1, 2025, to provide resolution plans.
Since the 2008 financial crisis and the Dodd-Frank legislation to shore up the U.S. banking system, big banks have been required to file living wills with regulators to lay out plans for an orderly bankruptcy.
The FDIC and the Federal Reserve Board said they “identified a weakness in the plans” from Bank of America Corp. (BAC), Citigroup Inc. (C), Goldman Sachs Group (GS) and JPMorgan Chase & Co. (JPM).
The agencies did not identify any shortcomings with Wells Fargo & Co. (WFC), State Street Corp. (STT), Bank of New York Mellon Corp. (BK) and Morgan Stanley (MS).
The regulators also flagged the 2023 plans from Bank of America, Goldman Sachs and JPMorgan Chase as containing “weakness that raises questions about the feasibility of the plan.”
The FDIC and the Fed also jointly identified a weakness in Citigroup’s 2023 plan but reached different conclusions on its severity, the government said.
The FDIC determined that the Citigroup plan is not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code and considers the weakness to be a ‘deficiency.'”
Since the two agencies differed on their conclusions, Citi’s plan will be determined as containing shortcomings, not a deficiency.
In a statement to the Wall Street Journal last week, Citi said it has a plan to wind down properly and that it has been making “substantial improvements” in its infrastructure.
Also read: Citi to get lower grade for its living will from the FDIC: WSJ
The regulators said they sent letters to the banks that identified development areas for bank-resolution strategies and capabilities.
The Dodd-Frank Act requires that bank holding companies with $250 billion or more, as well as other big financial firms, provide a plan for a “rapid and orderly resolution in the event of material financial distress or failure.”
-Steve Gelsi
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06-21-24 1214ET
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