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8 major banks' living wills pass, but 'shortcomings' found in 4


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8 major banks' living wills pass, but 'shortcomings' found in 4

Regulators gave the resolution plans, or "living wills," of eight megabanks a passing score.

While the Federal Reserve and Federal Deposit Insurance Corp. did not find deficiencies that would require a resubmission for any bank, they identified shortcomings in the living wills for Wells Fargo & Co., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. The shortcomings were flagged to be addressed in the banks' next plans, which are due July 1, 2019.

The regulators did not flag shortcomings at JPMorgan Chase & Co., Bank of New York Mellon Corp., Citigroup Inc. and State Street Corp.

Systemically important banks are required to submit the resolution plans periodically to regulators under the Dodd-Frank Act. In them, companies detail their strategy for an orderly resolution under bankruptcy.

BofA was asked to address a weakness in derivatives and trading activity. Wells Fargo and Goldman Sachs had shortcomings in their separability analyses related to divestiture options. Morgan Stanley's plan was flagged for weakness in its legal entity rationalization plan, with the regulators noting the risk inherent in having 27 material entities.

The regulators identified four areas that could be improved at all of the companies: intra-group liquidity; internal loss-absorbing capacity; derivatives; and payment, clearing, and settlement activities. They also noted that "significant progress" had been made in areas such as corporate structure.