took a numberof actions that it believes addressed deficiencies highlighted by regulators inits living will submission, including the enhancement of program management andgovernance.
Regulatorsfound in April thatState Street's resolution plan was "not credible," with deficienciesin its operations, legal entity rationalization, capital and liquidity.
StateStreet said it has developed a service taxonomy and identified all criticalservices and mapped those services to core business lines, critical operationsand material entities. The company said it has incorporated the mapping intoits legal entity rationalization criteria.
StateStreet said it worked to develop criteria for a rational and less complex legalentity structure and has finalized principles and specific criteria that are"clear and actionable." The company believes the criteria promote thebest alignment of entities to improve resolvability and facilitate theirrecapitalization or injection of any needed liquidity before and throughout theresolution period.
StateStreet said its capital planning now includes enhanced loss methodologies andsensitivity models. The company said it offered regulators an explanation ofadjustments made to the assumed size of the loss and reduction of risk-weightedassets associated with its securities lending program that could occur throughthe resolution period.
StateStreet said it adjusted the methodologies and assumptions used to estimate theamount of liquidity it would need through a resolution period, and furtherdeveloped its modeling capabilities to produce daily cash flows and detailedfinancial projections. The company said it provided regulators a description ofthe model and process enhancement.
StateStreet worked to address shortcomings regarding governance mechanisms bydefining key stages of financial distress and marking the transition from onestage to the next, from business-as-usual to the decision to file forbankruptcy. The company also established a full list of resolution-readinessplaybooks that identify triggers such as the escalation of information fromsenior management to the board, the recapitalization or injection of liquidityto material entities and the timely execution of a bankruptcy filing.
StateStreet also included a legal memorandum assessing the likelihood that itsstrategy would withstand any legal challenges brought by creditors. StateStreet further said it anticipated establishing a pre-funded intermediateholding company that would support its material entities through a resolutionperiod.