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Living wills have made 'significant' progress in last 5 years, FDIC staff says

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Living wills have made 'significant' progress in last 5 years, FDIC staff says

Significant progress has been made on Title I resolution plans,known as living wills, the director of the FDIC's Office of Complex Financial Institutions,Arthur Murton, said April 14.

"We have made a lot of progress," he said at the agency'sSystemic Resolution Advisory Committee meeting. "In 2008, we didn't have anyof this."

The meeting was held the day after the FDIC and the Fed the living wills of sevenof the largest U.S. banks were deficient. Only Citigroup Inc.'s will was not found to be "not credible"by either regulator but still had shortcomings.

Murton said the agency has put the framework in place in thelast five years to identify obstacles to resolutions under bankruptcy and is workingwith financial institutions to address hurdles. While progress has been made, "I'mnever going to say we're all the way there," he said. An important date tolook at living wills' progress will be Oct. 1 when the institutions are requiredto submit changes to their living wills and in July 2017 when the next round ofplans are due, he said.

While the FDIC staff noted progress, the process still has itsdetractors. FDIC Vice Chairman Thomas Hoenig said April 13 the process was "unrealistic" andthat no firm is able to resolve itself through bankruptcy. "Thus, the goalto end too big to fail and protect the American taxpayer by ending bailouts remainsjust that: only a goal," he said.

The FDIC has also started testing for the resolution of a systemicallyimportant financial institution under Title II, agency staff said at the April 14meeting. Staff members said they've identified a process "that we're preparedto execute today if we need to," but handling the bankruptcy process in theevent of a failure of more than one SIFI still needs to be planned out.