U.S. regulators increases oversight on resolution plans for foreign banks

Resolution plans, also known as living wills, require large banks to detail how they could be unwound in cases of bankruptcy with minimal disruption to the financial system.

In a significant development, U.S. bank regulators stated they have not found any shortcoming in the “living wills” that was submitted by 82 foreign banks, which details the manner in which their U.S. operations could be safely dissolved in case of a crisis.

However, the Federal Deposit Insurance Corporation as well as the Federal Reserve have sought additional information from 7 banks following their plan submissions. These include Banco Bilbao Vizcaya Argentaria, HSBC Holdings Plc, Royal Bank of Canada, S.A., Toronto-Dominion Bank, BNP Paribas, Banco Santander S.A., and Bank of Montreal.

In a statement the regulators stated, they have extended the deadline for submitting new resolution plans for those foreign companies and 15 large regional banks until July 1, 2021.

Incidentally, regulators have extended relief to Deutsche Bank AG, Barclays PLC, UBS AG, and Credit Suisse, saying they could submit their limited plans on July 1, 2020 detailing how they addressed shortcomings regulators identified in their previous submission; they will however have to submit their full plans in 2021.

Resolution plans, also known as living wills, require large banks to detail how they could be unwound in cases of bankruptcy with minimal disruption to the financial system. In the event their plans do not get regulatory approval, they could potentially face stricter restrictions or even be ordered to divest.



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