Federal Reserve and FDIC Require First Wave Filers to Show “Significant Progress” on Specific Shortcomings for 2015 Resolution Plans

On August 5, 2014, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (the “Agencies”) released a Joint Statement identifying common shortcomings and action steps for the 11 largest financial companies that initially filed resolution plans in 2012. Contemporaneously with the Joint Statement, the Agencies sent letters to each of the First Wave Filers in which they identified more detailed and specific shortcomings in individual First Wave Filers’ 2013 resolution plans and additional information required for the 2015 plans (the “Joint Letters”).

The Joint Statement and the Joint Letters represent the first company specific feedback provided to the First Wave Filers since they filed their initial resolution plans in 2012. While the Joint Statement received considerable media attention, in large part because the FDIC’s Board of Directors determined “that the plans submitted by the first wave filers are not credible and do not facilitate an orderly resolution under the U.S. Bankruptcy Code”, the Federal Reserve did not make this finding. As a result, the FDIC’s finding did not trigger the regulatory provisions that would follow a joint decision.

In effect, the Joint Statement—as well as the FDIC’s finding—simply represents a strong message from both Agencies that the First Wave Filers must take “immediate action to improve resolvability” and make “significant progress to address all the shortcomings” in their 2015 resolution plans. If the First Wave Filers do not do so, the Agencies stated that they “expect to use their authority” to find that the plans do “not meet the requirements of the Dodd Frank Act.”