Via Electronic Mail
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551
Attention: Ann E. Misback, Esq., Secretary
Docket No. OP-1614
Federal Deposit Insurance Corporation
550 17th Street NW
Washington D.C. 20429
Attention: Robert E. Feldman, Executive Secretary
Re: Resolution Planning Guidance for Eight Large, Complex U.S. Banking Organizations
Ladies and Gentlemen:
The Bank Policy Institute and the Securities Industry and Financial Markets Association (together, the Associations)1 appreciate the opportunity to comment on the Board of Governors of the Federal Reserve System’s (the Federal Reserve) and the Federal Deposit Insurance Corporation’s (the FDIC and, together, the Agencies) proposed guidance for the 2019 and subsequent resolution plan submissions by the eight largest, complex U.S. banking organizations (the Proposed Guidance).2 The Associations strongly support the Agencies’ decision to make the Proposed Guidance available for public notice and comment. The iterative process put in place by the Agencies seven years ago to develop the complex resolution planning framework was a wise path during the phase of resolution planning when it was new and unknown. The Associations appreciate the Agencies’ engagement with the filers over the years, their commitment to developing sophisticated approaches to resolution planning and their participation in international standards-setting bodies. As a consequence, there has been an immense increase in knowledge by, both the filers 3 and the Agencies over the last seven years, and tremendous progress has been made towards eliminating obstacles to an orderly resolution of a global systemically important banking organization (GSIB). The time has come to refine, consolidate and rationalize past guidance with current best practices, make the content of the guidance more transparent, streamline and focus the content of the submissions and engage more proactively with non-U.S. regulators to enhance the efficiency of the resolution planning process.
The Associations strongly support the Agencies’ intentions to revise the guidance issued in 2016 for the 2017 submissions (the 2017 Guidance) 4 in order to “streamline the firms’ submissions and to provide additional clarity”5 and believe that this objective should cover the entire resolution planning process and alleviate some of what is now known to be the outsized burdens associated with producing resolution plans. In addition, the Associations welcome the opportunity provided by the Agencies to comment on all aspects of the Proposed Guidance. This letter discusses four principles that the Associations believe should underpin the Final Guidance and any future resolution planning initiatives by the Agencies. Attached to this cover letter are detailed annexes that discuss our specific
recommendations relating to consolidation and rationalization of past guidance as well as our recommendations relating to substantive areas of the Proposed Guidance. Each of our recommendations is summarized in Annex 1.
I. Executive Summary
Reflecting the immense amount of learning that has taken place over the last seven years, the Agencies should explicitly acknowledge that an effective version of a single-point-of-entry (SPOE) resolution strategy is a credible means of resolving a G-SIB in an orderly manner.
• The separate resolution plan requirement for large insured depository institution subsidiaries (the IDI Plan) should be eliminated for filers that have adopted SPOE as their preferred resolution strategy in their resolution plan for their U.S. bank holding company (the 165(d) Plan).
• Guidance designed to address potential vulnerabilities of multiple-point-of-entry (MPOE) resolution strategies should be explicitly removed or made applicable to only those filers not adopting an SPOE resolution strategy.
The resolution planning submission process as a whole should be streamlined.
• The Agencies should formalize the two-year submission and review cycle.
• If the separate IDI Plan requirement is retained, the IDI Plan should also move to a two-year submission and review cycle, with the IDI Plan due in alternating years to the 165(d) Plan.
• A filer should be allowed to rely on previously submitted materials and provide updates only for quantitative financial analysis important to the execution of the resolution strategy and for material changes in factual and other information.
All applicable resolution planning requirements should be consolidated and made public, and all past
guidance that is not consolidated and public should be deemed superseded.
• All past guidance that is not consolidated in the Final Guidance should be deemed superseded.
• Guidance that has become irrelevant or redundant or has been directly superseded should be excluded from the consolidated Final Guidance.
• All resolution planning requirements, assumptions and guidance should be made public.
The Agencies should engage more proactively with non-U.S. regulators to improve the efficiency of resolution planning requirements and enhance information-sharing across jurisdictions.
• The Agencies should engage more proactively with non-U.S. regulators so that internationally agreed standards are implemented consistently and not at levels above what those standards would require, including by:
o Further engaging with non-U.S. regulators to inform them about how the certainty offered by secured support agreements reduces any justification they might otherwise have for requiring an excessive amount of internal total loss-absorbing capacity (TLAC) or corresponding prepositioned assets; and
o Recalibrating the internal TLAC requirements set by the Federal Reserve for the U.S. intermediate holding companies (IHC) of FBOs at the low end of the Financial Stability Board’s (the FSB) range of 75% to 90% of external TLAC.
The Agencies should develop information-sharing protocols with non-U.S. regulators that would expand and clarify the type of information that firms may share with cooperating regulatory authorities.