US Banking Regulators Issue Updated Guidance on Resolution Plans
Federal Agencies Seek Public Input on Measures to Enhance Stability
Background and Context
The Dodd-Frank Act, enacted in 2010, mandates large banking organizations and certain other financial firms to periodically submit resolution plans to regulators. These plans outline how the companies would be liquidated in an orderly fashion in the event of a failure.
New Guidance
On August 5, 2024, the Federal Reserve released updated guidance for US and foreign banking organizations. The guidance aims to enhance the effectiveness of resolution plans and ensure the orderly resolution of large, complex firms in the event of financial distress.
Key Revisions
The new guidance includes revisions to the following areas:
- Data and information sharing requirements
- Criteria for assessing the resolvability of firms
- Procedures for coordinating with foreign regulators
Public Comment
The Federal Deposit Insurance Corporation and the Federal Reserve Board have invited public comment on the proposed guidance. Comments are due by September 15, 2024.
Conclusion
The updated guidance issued by US banking regulators represents a significant step towards strengthening the financial system and enhancing its resilience against future crises. By ensuring that large banking organizations have robust resolution plans in place, regulators aim to minimize the potential for systemic financial instability and protect the economy.
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