Federal authorities have spotlighted critical deficiencies in the crisis management strategies—known as “living wills”—of four major U.S. banks, signaling a push for stronger safeguards against financial turmoil. The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve announced that plans from Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase fell short of expectations, setting a 2025 deadline for necessary revisions.
Federal Watchdogs Flag 4 Major US Banks for Lack of Crisis Management; Demand Living Will Revisions
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Big Banks Under Scrutiny: FDIC, Fed Call for Overhauled Living Wills
Living wills, mandatory since the 2008 financial meltdown and subsequent Dodd-Frank reforms, require banks to outline an orderly bankruptcy process without resorting to taxpayer bailouts. However, recent evaluations by the FDIC and the Fed disclosed notable weaknesses in the strategies of these banking giants, casting doubts on their ability to mitigate systemic risks effectively.
Notably, Citigroup’s plan was contested between the two agencies, labeled as lacking credibility and failing to ensure an orderly resolution under the U.S. Bankruptcy Code—a stark reminder of the stringent regulatory standards now expected. Despite these setbacks, the banks remain committed to rectifying their deficiencies. Citigroup has acknowledged the urgency of enhancing its data quality and regulatory frameworks to comply with federal requirements.
“We’ve acknowledged that we have had to accelerate our work in certain areas, including improving data quality and regulatory processes such as resolution planning,” Citigroup said in a report published by Marketwatch. “We continue to have confidence that Citi could be resolved without an adverse systemic impact or the need for taxpayer funds,” the bank added.
As the deadline nears, these financial institutions are anticipated to revamp their resolution plans, focusing on contingency measures and obtaining the essential approvals from international authorities to implement their strategies. This directive comes in the wake of last year’s financial disruptions, which saw the collapses of Silvergate Bank, Silicon Valley Bank, First Republic Bank, and Signature Bank.
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