On August 29, at a Board Meeting for the Federal Deposit Insurance Corporation (FDIC), Comptroller of the Currency Michael J. Hsu issued a statement supporting the insured depository institution (IDI) Resolution Plan Rule, which would require covered banks to develop and submit detailed plans demonstrating how they could be resolved in an orderly fashion in the event of receivership. Describing the impetus for this rule, Comptroller Hsu stated, “as the large bank failures of this spring have shown, banks and regulators cannot afford to be complacent when it comes to resolution.”
Under the proposed rule, covered banks would be required, among other things, to demonstrate the capability to promptly establish a virtual due diligence data room and populate it with sufficient information for interested parties to bid on the bank, certain assets, or operations. The proposed rule would also require covered banks to identify franchise components, such as asset portfolios or lines of business, that could be separated and sold.
Relatedly, Comptroller Hsu issued a second statement supporting a staff proposal regarding conditions to certain receivership delegations of authority and procedures related to Midsize and Large Failed Bank Sales. For example, in cases when the underlying situation is highly complex or when the time for decision-making is limited, requiring a board vote could potentially impede the FDIC’s ability to achieve a cost-efficient resolution in an orderly manner. According to Hsu, giving the board the flexibility to decide whether a vote should be taken in connection with a failed bank with assets of $50 billion or more helps mitigate that risk.
Comptroller Hsu’s comments were made in the broader context of large bank resilience and resolvability and, as with the Long-Term Debt proposal for large banks (see our earlier post here), the measures discussed would not apply to community banks. Both proposals are currently open for public comment. The proposed Resolution Plan Rule and the procedures for Midsized and Large Failed Bank Sales — along with regulatory memoranda and fact sheets related thereto, as well as the statements of Comptroller Hsu and his colleagues from the FDIC — are available here.