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BNY Mellon pivots to single-point-of-entry in living will

Bank of NewYork Mellon Corp. has transitioned its resolution plan towardsingle-point-of-entry as it hopes to avoid regulatory constraints such asincreased capital requirements.

The Federal Reserve and FDIC jointly found the bank'sresolution plan, or "living will," to be "not credible" inApril, requiring remediation by Oct. 1 or else regulators could imposerestrictions on the bank's activities or growth rate. Regulators released thepublic portions of the new living wills Oct. 4, but the agencies have not yetreviewed the new plans.

In failing Bank of New York Mellon's original submission,regulators found deficiencies in the bank's operational and legal entityrationalization strategies.

To address legal entities, the bank said it has establisheda new legal entity governance structure and was making progress on variousprojects. One of those projects includes the dissolution of low-activity anddormant entities, an initiative the bank said was "on track consistentwith its deadlines," but the company did not disclose how many legalentities have been eliminated as part of that effort. The bank did state thatit had liquidated or consolidated 19 leasing subsidiaries as part of itsproject analyzing its leasing entity structure.

Switching to a single-point-of-entry resolution plan,instead of a bridge bank, addresses many of the bank's operationaldeficiencies. Single-point-of-entry, which has been clearly favored byregulators, ensures subsidiaries remain functioning while the holding companyis placed into receivership. By switching to the strategy, Bank of New YorkMellon nixes some of the regulators' concerns, such as how custodial assetswould be transferred to a bridge bank.

Finally, the bank also addressed regulators' worries overthe remediation of shared services with an intensive mapping process of thebank's critical services and any interconnections.