Resolution Plans Required for Insured Depository Institutions With $100 Billion or More in Total Assets; Informational Filings Required for Insured Depository Institutions With at Least $50 Billion But Less Than $100 Billion in Total Assets

Federal RegisterSep 19, 2023

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AF90

Resolution Plans Required for Insured Depository Institutions With $100 Billion or More in Total Assets; Informational Filings Required for Insured Depository Institutions With at Least $50 Billion But Less Than $100 Billion in Total Assets

AGENCY:

Federal Deposit Insurance Corporation (FDIC).

ACTION:

Notice of proposed rulemaking and request for comment.

SUMMARY:

The FDIC is seeking comment on a proposal to revise its current rule that requires the submission of resolution plans by insured depository institutions (IDIs) with $50 billion or more in total assets. The proposal would modify the current rule by revising the requirements regarding the content and timing of resolution submissions as well as interim supplements to those submissions provided to the FDIC by IDIs with $50 billion or more in total assets in order to support the FDIC's resolution readiness in the event of material distress and failure of these large IDIs. IDIs with $100 billion or more in total assets will submit full resolution plans, while IDIs with total assets between $50 and $100 billion will submit informational filings. The proposed rule would also enhance how the credibility of resolution submissions will be assessed, expand expectations regarding engagement and capabilities testing, and explain expectations regarding the FDIC's review and enforcement of IDIs' compliance with the rule.

DATES:

Comments must be received by November 30, 2023.

ADDRESSES:

You may submit comments on the notice of proposed rulemaking, identified by RIN 3064-AF90, by any of the following methods:

•

Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow instructions for submitting comments on the FDIC's website.

•

Email: comments@fdic.gov

. Include “RIN 3064-AF90” in the subject line of the message.

•

Mail:

James P. Sheesley, Assistant Executive Secretary, Attention: Comments/Legal OES (RIN 3064-AF90), Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.

•

Hand Delivery/Courier:

Comments may be hand delivered to the guard station at the rear of the 550 17th Street NW building (located on F Street NW) on business days between 7:00 a.m. and 5:00 p.m.

Public Inspection:

All comments received, including any personal information provided, will be posted without change to

https://www.fdic.gov/resources/regulations/federal-register-publications/

. Commenters should submit only information that the commenter wishes to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of this document will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT:

Elizabeth Falloon, Senior Advisor, Division of Complex Institution Supervision and Resolution, 202-898-6626,

efalloon@fdic.gov

; Kent R. Bergey, Associate Director, Division of Complex Institution Supervision and Resolution, 917-320-2834,

kebergey@fdic.gov

; Aaron Wishart, Chief, Policy Analysis, Division of Complex Institution Supervision and Resolution 202-898-6982,

awishart@fdic.gov

; Audra Cast, Deputy Director, Division of Resolutions and Receiverships 312-382-7577,

acast@fdic.gov

; Shawn Khani, Deputy Director, Division of Resolutions and Receiverships 703-254-0843,

skhani@fdic.gov

; Varanessa Marshall, Assistant Director, Division of Resolution and Receiverships 678-916-2233,

vamarshall@fdic.gov

; Celia Van Gorder, Senior Counsel, Legal Division 202-898-6749,

cvangorder@fdic.gov

; F. Angus Tarpley, III, Counsel, Legal Division 202-898-8521,

ftarpley@fdic.gov

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction/Policy Objective

II. Background

III. Proposed Rule

A. Resolution Submissions

1. Scope

2. Submission Schedules

a. Submission Cycle and Additional Information Between Submissions

b. Resolution Submission by New CIDIs; Changes to Submission Dates

c. Status as a CIDI

3. Content Requirements

a. Identified Strategy

b. Failure Scenario

c. New and Modified Definitions

d. All Other Content Requirements

e. Interim Supplement

B. Credibility; Review of Resolution Submissions

1. Credibility Criteria

2. Resolution Submission Review and Credibility Determination; Resubmission; Notice of Feedback

C. Engagement and Capabilities Testing

1. Engagement

2. Capabilities Testing

3. Conclusion Letter

D. Enforcement

E. Additional Provisions

1. Approval by the CIDI Board of Directors

2. Incorporation from Other Sources

3. Financial Information

4. Indexing of Information and Analysis to Resolution Submission and Interim Supplement Content Requirements

5. Combined Resolution Submission and Interim Supplement by Affiliated CIDIs

6. Form of Resolution Submissions; Confidential Treatment of Resolution Submissions

7. Extensions and Exemptions

8. Transition

IV. Expected Effects

A. Proposed Changes to Current Rule, as Implemented

1. Effects on Group A CIDIs

a. Previously-Exempted Content Reinstated

b. No Routine FDIC-Issued Case-By-Case Exemptions

c. Codifying Guidance, New and Modified Plan Content Requirements, and Deleting Plan Content Requirements

d. Updated Reporting Compliance Estimates

2. Effects on Group B CIDIs

3. Marginal Effect of Proposed Changes

a. Marginal Effect of Proposed Change to Biennial Filing Cycle

b. Marginal Effect of Proposed Changes in Content

B. Effects on Insured Deposits and the Deposit Insurance Fund

C. Additional Economic Considerations and Effects

D. Overall Effects

V. Alternatives Considered

VI. Regulatory Analysis and Procedures

A. Paperwork Reduction Act

B. Regulatory Flexibility Act

C. Plain Language

D. Riegle Community Development and Regulatory Improvement Act of 1994

I. Introduction/Policy Objective

The FDIC's regulation “Resolution plans required for insured depository institutions with $50 billion or more in total assets,

” issued in 2012

(current rule), requires insured depository institutions (IDIs) with $50 billion or more in total assets (covered IDIs or CIDIs) to submit resolution plans periodically. This resolution plan requirement was established to facilitate the FDIC's readiness to resolve a CIDI under the Federal Deposit Insurance Act of 1950, as amended (FDI Act) in the event of its insolvency.

The proposed rule would determine total assets for the purpose of identifying CIDIs, including group A CIDIs and group B CIDIs, as described in proposed § 360.10(b), which adopts the approach used in the current rule. The phrase “total assets” refers to the total assets of the IDI as described in that section.

12 CFR 360.10. The rule was published as an interim final rule with an effective date of January 1, 2012, 76 FR 2011 (Sept 11, 2011); the final rule was effective April 1, 2012, 77 FR 3075 (January 23, 2012).

This proposal builds on the FDIC's more than a decade-long experience implementing the current rule, providing guidance and feedback to CIDIs, and leveraging the content of submissions for the development of resolution strategies by the FDIC. Through this process, the FDIC has gained a better understanding of the challenges of resolving CIDIs and the importance of resolution plans and other related submissions to facilitate the FDIC's readiness in the event of a failure of one of these CIDIs. Part of the challenge arises from the wide range of business models and structures among CIDIs. While some of these CIDIs are engaged largely in traditional banking activities, with nearly all assets and activities conducted within the CIDI or its subsidiaries (the bank chain), others conduct significant non-banking activities. Many of the CIDIs have a broker-dealer subsidiary or affiliate that provides services to bank customers. The CIDIs subject to the current rule also include banks primarily engaged in a particular business segment, such as credit card services, as well as U.S. IDIs that are part of large foreign banking organizations. There is no one-size-fits-all resolution approach for these institutions; rather, the FDIC must be prepared to execute a range of resolution options, recognizing the trade-offs among those options. The FDIC's development of resolution strategies—and its assessment of the options and trade-offs that inform them—benefit from the CIDI's knowledge of its own firm, an understanding of the CIDI's relevant capabilities, and an awareness of the impediments to executing an orderly resolution of the CIDI. Across the different CIDI business models and structures, there are a variety of factors that increase the challenges and complexity of resolution in the event of the failure of these large banks. These factors include deposit profile as well as size and organizational complexity.

In general, the CIDIs tend to have a more significant proportion of uninsured deposits as compared to smaller banks. In the aggregate, more than 42 percent of deposits of IDIs over $50 billion in total assets are uninsured. High ratios of uninsured deposits increase resolution challenges, as was recently demonstrated in the failures of three large banks in the spring of 2023; Silicon Valley Bank (SVB), Signature Bank and First Republic Bank (First Republic). All were over $100 billion in size,

and at the time shortly before their distress and failure, the vast majority of their deposits was uninsured.

The failure of Washington Mutual Bank in 2008 remains the largest bank failure in U.S. history. At the time of its failure, its assets totaled approximately $300 billion. First Republic, SVB, and Signature Bank, respectively, were the second, third, and fourth largest bank failures in history.

As of December 31, 2022, SVB reported 88% of its deposits were uninsured; its total assets were approximately $209 billion. Signature Bank reported 90% uninsured deposits and total assets of approximately $110 billion. First Republic reported 68% uninsured deposits and total assets of approximately $213 billion.

The failures of SVB and Signature Bank on March 10 and 12, 2023, respectively were primarily caused by illiquidity precipitated by contagion effects, especially those resulting from withdrawals by uninsured depositors at unprecedented speed and volumes. The withdrawals were prompted in part by news of stress amplified through social media and other channels. As a result, the FDIC's resolution preparation runway and ability to market pre-failure were severely compressed. For both IDIs, the FDIC established a bridge depository institution (BDI) to continue bank operations during a brief marketing period. Less than two months following those failures, First Republic was placed in receivership and sold; although First Republic had a similar profile of largely uninsured deposits, it was able to manage its liquidity for several weeks prior to failure. With additional time to market First Republic pre-failure, the FDIC was able to transfer all of the assets and liabilities to a single acquirer without the necessity of establishing a BDI, although the FDIC stood ready to exercise the authority to form a BDI if needed.

In addition, the FDIC lacked important resolution planning information to facilitate marketing the IDIs. While SVB and First Republic had filed their first resolution plans just a few months before their failures, the

FDIC had neither completed review nor had the opportunity to provide feedback on those plans. In general, the FDIC has found that development of fulsome resolution plans is an iterative process, building on feedback. Signature Bank had not yet filed any resolution plan, as its first submission was due in June 2023. Thorough and timely resolution planning information would have supported the FDIC's ability to prepare to more effectively and efficiently market the failed IDIs, including providing options for franchise components and asset portfolios that could have been offered in useful combinations and alternatives.

In addition to increasing the risk of a precipitous liquidity failure, a high level of uninsured deposits also increases resolution complexity in other ways. Under the FDI Act, any transaction using FDIC assistance—including where assistance is provided in connection with the establishment of a BDI—must meet the least-cost test, absent a systemic risk exception. Under the least-cost test, the cost to the deposit insurance fund (DIF) as a result of any sale needs to be less than the cost to the DIF from simply liquidating the bank's assets and paying off insured deposits. Where the proportion of insured deposits is very low, potential costs to the DIF of paying out insured depositors and liquidating is low relative to any other option in resolution. In the case of SVB and Signature Bank, a systemic risk exception to the least-cost test was necessary to protect uninsured depositors to maintain franchise value and mitigate adverse effects on economic conditions or financial stability, including the risk of contagion to other IDIs.

Size of an IDI also can significantly impact the resolution options available to the FDIC under the FDI Act, as well as provide a marker for other resolution challenges, such as organizational complexity and higher levels of uninsured deposits. In particular, as IDIs increase in size, the likelihood of a timely sale to a single acquirer diminishes. Currently, there are 45 IDIs with at least $50 billion in total assets and 31 over $100 billion. As a group, these CIDIs represent approximately $13.8 trillion in total deposits. While a closing weekend sale may be an option in some cases, its availability cannot be assumed in view of the size, complexity, and potential speed of failure of a CIDI. This is particularly true for the largest CIDIs with $100 billion or more in total assets because the pool of potential acquirers for these institutions is extremely limited, and the complexity of any possible transaction is increased. While there is a larger pool of possible acquiring institutions for CIDIs in the $50 to $100 billion total asset range, some of these institutions engage in highly complex activities and pose similar levels of operational complexity as those over $100 billion in total assets. As such, these activities must be identified and considered when contemplating resolution strategies.

Thus, this proposal addresses two distinct groups of CIDIs based on size, with differing corresponding obligations for each group under the proposed rule.

The first group comprises those IDIs with $100 billion or more in total assets (group A CIDIs). The proposed rule would require group A CIDIs to submit full resolution plans containing an identified strategy appropriate to the CIDI for its orderly and efficient resolution, as well as providing all other content elements described in the proposed rule. The second group comprises those IDIs with at least $50 billion but less than $100 billion in total assets (group B CIDIs). The proposed rule would require resolution submissions from group B CIDIs in the form of an informational filing. The informational filing would not require development of an identified strategy for resolution nor the demonstration of capabilities necessary to produce valuations needed in assessing the least-cost test. All CIDIs would be required to participate in engagement and capabilities testing regarding matters related to their resolution submissions.

Based upon these considerations, and the FDIC's experience in planning for and executing bank resolutions since the adoption of the current rule, the FDIC is proposing changes intended to make the resolution submissions more useful and appropriately focused on the resolution challenges presented by both group A CIDIs and group B CIDIs.

Specifically, this proposal would:

• Clarify and enhance resolution submission requirements applicable to IDIs with $50 billion or more in total assets, including resolution plans submitted by group A CIDIs and informational filings submitted by group B CIDIs;

• Require each group A CIDI to provide an identified strategy for resolution that ensures timely access to insured deposits, maximizes value from the sale or disposition of assets, minimizes any losses realized by creditors of the group A CIDI in resolution, and addresses potential risks of adverse effects on U.S. economic conditions or financial stability;

• Clarify requirements with respect to the assumptions for the failure scenario used by group A CIDIs in the resolution plan submission and reserve the ability of the FDIC to provide additional parameters for the failure scenario for all group A CIDIs or specific individual group A CIDIs in future plan submission cycles;

• Strengthen resolution submission content elements and associated requirements regarding capabilities to support optionality available to the FDIC and ensure that the FDIC's development of resolution strategies reflects considerations related to the characteristics of the individual CIDI and potential challenges that could be faced in resolution;

• Refine the requirements for group A CIDIs with respect to least-cost analysis and focus on ensuring that the FDIC has the building blocks and capabilities it needs to undertake the least-cost test in resolution in the event of failure of a group A CIDI;

• Adjust the frequency of resolution submissions to accommodate a two-year cycle that includes engagement and capabilities testing as well as periodic interim supplements containing specified resolution submission content items;

• Establish an enhanced credibility standard for resolution submissions and clarify the process for review and feedback to identify and address weaknesses in resolution submissions and enforce the rule;

• Establish a requirement for informational filings to be submitted by group B CIDIs that is focused on information most important and appropriate for resolution of those CIDIs, and establish a credibility standard appropriate to the informational filings; and

• Codify certain aspects of guidance and feedback previously issued to IDIs subject to the current rule.

In finalizing this proposal, the FDIC proposes to supersede all prior guidance and feedback related to the current rule.

The proposed rule retains the approach of the current rule in requiring each group A CIDI to develop a strategy for resolution that is appropriate for its size, complexity, and risk profile. However, the FDIC is mindful that the scenario for failure of a large, complex IDI cannot be predicted and could occur across a wide range of circumstances, both idiosyncratic to the institution and with respect to the greater economy. The FDIC will need to determine the strategy most appropriate to the scenario at the time, which may or may not be the strategy described in the group A CIDI's resolution plan.

While approximately 95 percent of the resolutions conducted by the FDIC since 2007 involved the sale of the IDI's

franchise and assets to an open institution, the option of a transaction with a single acquirer where nearly all of the liabilities of the failed IDI are assumed that can close at the time of failure cannot be assumed to always be available to the FDIC. In particular, for the group A CIDIs under the proposed rule, the likelihood of a closing weekend sale is diminished because of the potential for a rapid liquidity failure, the limited pool of possible acquirers, and the complexity of such a transaction. Thus, while a transaction with a single acquirer over closing weekend poses the least execution risk for the FDIC, and is often the least disruptive and most efficient, it may not be available. In that case, the FDIC would likely consider an approach that relies on the establishment of a limited-duration BDI, pursuant to a charter granted by the Office of the Comptroller of the Currency (OCC), that can continue the operations of the group A CIDI while it is being restructured, sold, or otherwise returned to private ownership in whole or in parts, or wound down in an orderly fashion. Accordingly, the group A CIDI's identified strategy would need to provide for the establishment and stabilization of a BDI and an exit in which the IDI is sold to one or more acquirers. This approach provides considerable useful optionality to the FDIC in preparing for a resolution across a wide range of possible failure scenarios. As noted above, the FDIC did not have sufficient time to widely market SVB and Signature Bank prior to their failure. In order to provide time for bidders to conduct appropriate due diligence, the FDIC established BDIs for both banks, and provided flexible bidding options with respect to businesses and assets acquired. The rapid failure and lack of advanced resolution planning information created challenges in establishing optionality with respect to the components offered in the bidding framework. This resulted in a broad range of bidding structures that added challenge and complexity to evaluating bids and combinations of bids.

Although the FDIC believes that the proposed requirement to develop a scenario using a BDI will enable the FDIC to adopt a strategic approach with useful optionality to support resolution in most cases, the FDIC is aware that for some group A CIDIs, the structure and profile of the institution may suggest that another resolution strategy is better suited to the goals described in the proposed rule. In such a case, the group A CIDI may use a different identified strategy that best meets the goals established in the proposed rule, such as a payout and liquidation of the bank, or a BDI to a different exit option. The proposed rule would not, however, permit the CIDI's identified strategy to be simply a sale of substantially all assets and liabilities over closing weekend. As noted, the FDIC cannot rely upon the availability of that strategy for group A CIDIs. In addition, its use as an identified strategy would provide less benefit to the FDIC in terms of information upon which to build optionality, as compared to a BDI strategy or liquidation. Regardless of the identified strategy used, the proposed rule would seek information and analysis that would inform the decisions that would be made by the FDIC at the time of an actual failure, and development of the strategic approaches appropriate to the actual scenario. The FDIC's goals in resolution are unchanged from those expressed in the current rule, and the proposed rule would seek to embed them more explicitly in an enhanced credibility standard and reflect them more fully in the requirements for resolution submission content. In order to meet the goals of an orderly resolution that is least-costly to the DIF, protects depositors, and maximizes return, the FDIC must have an understanding of the obstacles to an individual IDI's resolution—and potential mitigants to those obstacles—including the impact of separation of the IDI from its parent company and affiliates and the impact on the business of the IDI and the continuity of its critical services. Because the use of a BDI may be a likely approach in many scenarios, an important focus of the proposed rule is the information, analysis, and capabilities necessary to establish and stabilize a BDI, including valuation information and capabilities that would support the FDIC's least-cost test analysis in evaluating a BDI strategy against other options.

The proposed rule requires a more limited informational filing from group B CIDIs, and does not require group B CIDIs to develop a resolution strategy or submit certain other content elements. The FDIC believes that the approach taken for group B CIDI requirements appropriately recognizes the additional complexity and greater resolution challenges applicable to the group A CIDIs. The threshold of $100 billion in total assets—which is also used in the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended (Dodd-Frank Act)

and other rulemakings as a basis for assessing a banking organization's financial stability and safety and soundness risks

—is an appropriate threshold to apply to distinguish resolution submission requirements for group A and group B CIDIs.

See

12 U.S.C. 5365(a)(2)(C). The threshold for enhanced prudential standards under that provision was established through passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018.

See, e.g.,

84 FR 59230 (Nov. 1, 2019) (codified at 12 CFR parts 3, 50, 217, 249, 324, & 329).

Finally, the proposed rule would establish an expectation of complete resolution submissions by the CIDIs biennially. This biennial submission cycle is intended to balance the need for up-to-date information the time that it takes for CIDIs to prepare a complete submission, and to allow for thorough plan review, engagement and capabilities testing to supplement that review. In order to facilitate the FDIC's planning and readiness, CIDIs would be required to provide current information in non-submission years through an interim supplement that would include limited specified information that would be provided in years where a complete submission is not required.

II. Background

The current rule was proposed in 2010 and became effective in 2012;

it has not been amended to date. It requires IDIs with $50 billion or more in total assets to periodically submit resolution plans that should enable the FDIC to resolve the CIDI in the event of its insolvency under the FDI Act. Since issuing the current rule, the FDIC and many CIDIs have been through multiple resolution plan submission cycles. As a result of this experience, the FDIC has identified those aspects of the resolution planning process that are most valuable and those that could be clarified or enhanced to ensure that the CIDIs' submissions and participation better support the rule's objectives.

77 FR 3075 (Jan. 23, 2012) (Final Rule); 76 FR 58379 (Sep. 21, 2011) (Interim Final Rule); 75 FR 27464 (May 17, 2010) (Proposed Rule). In 2014, the FDIC issued guidance for CIDIs' resolution plans. Guidance for Covered Insured Depository Institution Resolution Plan Submissions (2014),

https://www.fdic.gov/news/news/press/2014/pr14109a.pdf.

In 2014, the FDIC provided further clarification, guidance, and direction for the preparation of subsequent CIDI resolution plans with a focus on the failure scenario, resolution strategies, least-cost analysis, and identified obstacles to be discussed in the

resolution plan.

In addition, following each resolution plan submission cycle, the FDIC issued feedback letters to CIDIs with information for the subsequent plan submission.

See

FDIC Issues Guidance for the Resolution Plans of Large Banks (Dec. 17, 2014),

https://archive.fdic.gov/view/fdic/4821

After several plan submission cycles, in 2018 the FDIC announced a moratorium (moratorium) on the rule's requirements for all institutions pending completion of a new rulemaking.

At the time the moratorium was adopted, the FDIC also published an advance notice of proposed rulemaking (ANPR),

which requested comment on how to tailor and improve the current rule, including how to reduce the burden associated with the least-cost test analysis and whether requirements should be tiered based on size or complexity factors of cohorts of CIDIs. The ANPR also requested comment on potential enhancement of engagement and capabilities testing. At that time, the FDIC extended the due date for future plan submissions pending completion of the rulemaking process.

See

Press Release, Fed. Deposit Ins. Corp., FDIC Seeks Comment on New Approaches to Insured Depository Institution Resolution Planning (Apr. 16, 2019), available at

https://www.fdic.gov/news/press-releases/2019/pr19034.html

See

FDIC Seeks Comment on New Approaches to Insured Depository Institution Resolution Planning (April 16, 2019),

https://www.fdic.gov/news/press-releases/2019/pr19034.html

Following the issuance of the ANPR, the FDIC continued to further develop its thinking regarding resolution planning for large IDIs and how to maximize the FDIC's resolution readiness. In 2020-2021, the FDIC undertook targeted engagement with select CIDIs on their 2018 plan submissions, a step consistent with the enhanced emphasis on engagement and capabilities testing envisioned under the ANPR.

In January 2021, the FDIC Board took action to lift the moratorium on the resolution plan requirement for CIDIs with $100 billion or more in assets

and, in June 2021, the FDIC issued a policy statement (Statement) to describe how it planned to implement going forward certain aspects of the current rule with respect to those CIDIs. All prior guidance and feedback was superseded by this Statement.

For CIDIs with total assets of at least $50 billion and less than $100 billion, the moratorium on submission of resolution plans remained in effect. CIDIs with $100 billion or more in total assets are submitting resolution plans in accordance with a schedule established by the FDIC from December 1, 2022, through December 1, 2023. Consistent with the Statement, each of these CIDIs received exemptions from certain content requirements under the current rule and may submit streamlined resolution plans for review in this cycle. The proposed rule would build upon the Statement, eliminating on a permanent basis some of the content elements where exemptions were provided to all or some CIDIs for the current submission cycle and adjusting and providing additional context and clarity to others, as well as incorporating limited proposed new content requirements. It also would propose a modified approach to the CIDIs with at least $50 billion and less than $100 billion in total assets that provides clarity and certainty with respect to the requirements applicable to those CIDIs and limits the submission requirements for those CIDIs to an informational filing that is appropriate to the relative complexity of the resolution of those CIDIs.

See

FDIC Announces Lifting IDI Plan Moratorium (Jan. 19, 2021),

https://www.fdic.gov/resauthority/idi-statement-01-19-2021.pdf.

Superseded guidance and feedback included the guidance issued in 2014 and the feedback letters provided to IDIs following review of IDIs' 2015 and 2016 resolution plan submissions.

In addition to enacting and implementing the current rule, the FDIC has instituted several rulemakings that support its mission as deposit insurer to make timely insured deposit payments and, as resolution authority, to resolve a failed IDI in the manner that is least costly to the DIF. These separate rulemakings address certain difficulties the FDIC could face in the closing of a large, complex IDI, and include

Recordkeeping for Timely Deposit Insurance Determination

(part 370) and

Recordkeeping Requirements for Qualified Financial Contracts

(part 371).

Part 370 requires covered institutions, namely IDIs with two million or more deposit accounts, to put in place mechanisms to facilitate prompt deposit insurance determinations. Part 371 requires IDIs in a troubled condition to keep detailed records in a specified, standard format regarding their qualified financial contracts. This information would be used by the FDIC, were it appointed receiver, in making a determination of which qualified financial contracts entered into by the failed institution (if any) will be transferred within the brief statutory window.

Codified at 12 CFR part 370 and 12 CFR part 371, respectively.

The period between the day on which the FDIC is appointed receiver and 5:00 p.m. Eastern time on the following business day;

see

12 U.S.C. 1821(e)(8)(G)(ii)(II).

Separate from the FDI Act and the current rule's requirements, section 165(d) of the Dodd-Frank Act mandates that certain bank holding companies and nonbank financial companies (covered companies) submit resolution plans (DFA resolution plans) for the rapid and orderly resolution of the covered company under the U.S. Bankruptcy Code.

The goal of DFA resolution plans, which is different from that of resolution plans under the current rule, is to reduce the likelihood that the financial distress or failure of a covered company would have serious adverse effects on financial stability in the United States by requiring covered companies to report periodically their plans for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure and without public support.

12 U.S.C. 5365(d). The DFA resolution plan of a foreign-based covered company must provide for the rapid and orderly resolution of its U.S. operations and entities.

In November 2019, the Board of Governors of the Federal Reserve System (FRB) and the FDIC published a joint final rule (section 165(d) rule)

to reflect improvements identified since the FDIC and the FRB finalized their initial joint resolution plan rule in November 2011

and to address amendments to the Dodd-Frank Act made by the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Key changes to the initial section 165(d) rule include an extension of the DFA resolution plan filing cycle from annual to once every two or three years and the establishment of risk-based categories for determining the frequency and scope of resolution plan submissions.

84 FR 59194 (Nov. 1, 2019) (codified at 12 CFR parts 243 & 381).

76 FR 67323 (Nov. 1, 2011).

Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115-174, 132 Stat. 1296 (2018).

While the current rule and the section 165(d) rule both require planning for the resolution of large, complex financial institutions, to minimize the cost and disruption of failures, there are some noteworthy differences between the section 165(d) rule requirements and the current rule. Most fundamentally, the section 165(d) rule requirements are focused on financial stability and mitigating systemic risk. The current rule's requirements, by contrast, are focused on the FDIC's ability to resolve a particular IDI. This focus includes two critical priorities: (1) that insured depositors have access to their cash in an orderly fashion and as quickly as possible; and (2) that the FDIC must

protect taxpayers and minimize potential losses to the DIF, which taxpayers stand behind.

Another difference between the section 165(d) rule requirements and the current rule is that the section 165(d) rule focuses on the entire banking organization, including the holding company and nonbank affiliates and envisions a resolution under the U.S. Bankruptcy Code.

By contrast, the current rule (and likewise the proposed rule) focuses only on the IDI subsidiary and envisions a resolution using the FDIC's traditional resolution tools under the FDI Act. In some cases, the preferred strategy in a firm's DFA resolution plan includes the separate resolution of material entities within the group under applicable insolvency regimes other than bankruptcy, including resolution of a subsidiary IDI under the FDI Act, and the FDIC would need to be prepared to execute that portion of a multiple point of entry strategy where necessary. Thus, while there are important differences between the two rules, they are complementary, with the IDI plans specifically focused on the execution of a resolution by the FDIC under the FDI Act and DFA resolution plans addressing the resolution considerations of the group as whole.

In the case of a foreign-banking organization, the section 165(d) rule's focus on U.S. entities and operations may include U.S. nonbank operations and intermediate holding companies.

In keeping with the complementary purposes of the current rule and the section 165(d) rule, in developing this proposal, the FDIC has been mindful of the guidance that the FDIC and the FRB anticipate developing to help certain firms further develop their DFA resolution plans. That guidance is expected to be specifically addressed to Category II and Category III banking organizations,

a group that includes some firms with a subsidiary IDI that would be a CIDI under the proposed rule. The FDIC will continue to coordinate the elements of this proposal with the forthcoming guidance. In addition, where the information or content expectations of the section 165(d) rule and the proposed rule overlap, the proposed rule would specifically allow the incorporation of information from an affiliate's DFA resolution plan into a CIDI's resolution plan.

Category II and III banking organizations generally comprise banking organizations, other than the Category I U.S. global systemically important bank holding companies, that have over $250 billion in qualifying assets or over $100 billion in qualifying assets and meet certain other risk-based indicators. Qualifying assets are, for a domestic banking organization, average total consolidated assets, or, for a foreign-based organization, average combined U.S. assets.

See

12 CFR 252.5.

Recent events underscore the importance of robust resolution planning in advance of failure, particularly for these large and complex CIDIs. The speed of bank runs has been accelerated by advances in banking technology that allow deposits to move electronically, with no need to stand in line or wait for physical checks or bills. Advances in communications technology allow a message to reach hundreds of millions of screens instantaneously. In the case of SVB, the speed of the run was the fastest and largest withdrawal of deposits in a single day in the nation's history. From a resolution planning perspective, this new reality underscores the need for effective resolution planning long before a bank's failure is on the horizon.

III. Proposed Rule

A. Resolution Submissions

1. Scope

Like the current rule, the proposed rule would apply to all IDIs with $50 billion or more in total assets. Under the proposed rule, however, the requirements pertaining to group A CIDIs (

i.e.,

IDIs with $100 billion or more in total assets) would differ from those pertaining to group B CIDIs (

i.e.,

IDIs with at least $50 billion but less than $100 billion in total assets).

Each group A CIDI would be required to periodically submit a resolution plan to the FDIC, including an identified resolution strategy for its resolution under an identified failure scenario. The development of this strategy, together with a description and analysis of institution-specific information and capabilities relevant to resolution, will facilitate the FDIC's ability to resolve a group A CIDI across a range of scenarios in a manner that ensures timely access to insured deposits, maximizes value from the sale or disposition of assets, minimizes any losses realized by creditors of the CIDI in resolution, and addresses potential risk of adverse effects on U.S. economic conditions or financial stability, while minimizing the cost of the resolution to the DIF. The resolution plan would be assessed based on the credibility of the resolution strategy as well as with respect to other information, analysis and capabilities included and described in the resolution plan. Each group A CIDI would also be required to participate in engagement and capabilities testing as described below in section III.C.

Each group B CIDI would be required to periodically submit an informational filing to the FDIC that would consist of the informational content required under the proposed rule, but would not include the requirement for the development of an identified strategy as described in section III.A.3.a below, or the requirement to develop capabilities necessary to produce valuations needed in assessing the least-cost test and provide the related content described in section III.A.3.d below. The informational filing would assist the FDIC in developing its own resolution strategy for the firm. Each group B CIDI would be required to participate in engagement and capabilities testing as described below in section III.C.

The FDIC invites comment on all aspects of the scope of the proposed rule and the tiering of requirements for group A and group B CIDIs. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(1) Do commenters believe that total assets is the right metric to use to determine the scope of IDIs subject to the rule? If not, please suggest any better metrics to use to determine the scope of IDIs subject to the proposed rule's requirements.

(2) Do commenters believe that $50 billion is the right amount of total assets to use to distinguish CIDIs from IDIs not subject to the proposed rule? If not, please suggest a better threshold to use to establish the scope of IDIs subject to the proposed rule, and explain why the suggested threshold is a better option.

(3) Do commenters believe that there are CIDIs with less than $50 billion in total assets that should be subject to the proposed rule due to their complexity or other factors? If so, please explain the factors that suggest an IDI should be a CIDI regardless of its total assets and explain why those factors show that an IDI should be treated as a CIDI.

(4) Do commenters believe that total assets is the right metric to use to distinguish between group A CIDIs and group B CIDIs? If not, please suggest any better metrics to use to distinguish between groups of CIDIs and explain why the suggested metrics are preferable.

(5) Do commenters believe that $100 billion is the right level of total assets to use to distinguish between group A CIDIs and group B CIDIs? If not please suggest an alternative amount of total assets to use to distinguish between groups of CIDIs and explain why the suggested amount is preferable.

(6) Do commenters believe that there are CIDIs with between $50-$100 billion in total assets that would warrant group A CIDI status due to their complexity or other factors? If so, please explain the factors that suggest these CIDIs should

be group A CIDIs regardless of their average total assets and explain why those factors show the CIDI warrants group A CIDI treatment.

2. Submission Schedules

a. Submission Cycle and Additional Information Between Submissions

Since the current rule's enactment in 2012, the FDIC has observed that the annual plan submission requirement has been challenging for both the CIDIs and the FDIC. An annual submission cycle does not allow the FDIC sufficient time to thoroughly review CIDIs' submissions and develop meaningful feedback, nor does it provide sufficient time for CIDIs to incorporate that feedback into their subsequent submissions. Moreover, an annual cycle limits the opportunity for meaningful engagement between the FDIC and a CIDI between submissions. As discussed in section III.C below, the FDIC expects engagement and capabilities testing to be significant components of the resolution planning process under the proposed rule. At the same time, the FDIC is aware of the importance of up-to-date submissions, particularly as CIDIs continue to change, in some cases rapidly. In the case of rapid liquidity failures, which are more likely for large banks as reflected in the failures of spring 2023, timely information on hand is needed to support a short period to prepare for resolution, including establishment of a BDI and marketing the IDI franchise and the franchise components.

To balance these considerations, going forward, the FDIC proposes to establish a submission schedule that provides adequate time for review of a submission and the development of feedback; engagement and capabilities testing; and the CIDI's development of content for the next resolution submission that is responsive to feedback, as well as requiring limited interim supplements to provide timely updates of the most critical information.

Accordingly, under proposed § 360.10(c)(1), each CIDI would provide a complete resolution submission to the FDIC every two years, with the submission of a limited interim supplement every other year. The interim supplement is intended to provide critical up-to-date information that will update certain limited elements of submission content. In considering what information should be included in the supplement, the FDIC intends to limit the information to the most essential data elements that are can be efficiently updated year over year to maximize the utility of the information to the FDIC, while limiting the burden to CIDIs of the interim supplement requirement.

The FDIC retains the discretion to alter the submission dates upon written notice to the CIDI. Consistent with past practice, the FDIC expects to provide notice of a different schedule in a timely fashion to accommodate appropriate time for preparation of the submission.

Under the proposed submission schedule, the FDIC would create two submission cohorts of group A CIDIs, comprising roughly the same number of CIDIs, with each cohort to file a complete resolution plan on a date that will be specified by the FDIC every other year, beginning at least 270 days from the effective date of the final rule. This approach would allow for improved workflow and efficiency, would permit the FDIC to create filing cohorts of group A CIDIs with like characteristics to support horizontal analysis across the submission cohort, and would further support engagement and capabilities testing. Section III.E.8 below discusses in more detail the proposed approach to transition to filing under the amended rule's requirements after it is finalized.

All group B CIDIs would be in the same cohort, with an initial filing date at least 270 days from the effective date of the final rule.

The proposed rule would retain in modified form the existing section of the current rule concerning the provision of information in the event of material changes to CIDIs between resolution submissions. Proposed § 360.10(c)(4)(i) would retain the requirement of the current rule that a CIDI must provide the FDIC with a notice and explanation no later than 45 days after certain events. The proposed rule also would retain the current rule's exemption from this requirement if the date on which the CIDI would be required to submit the notice would be within 90 days before the date on which the CIDI is required to provide a regular submission. The proposed rule would, however, modify the set of events triggering the notice requirement. Proposed § 360.10(c)(4)(i) would replace the current trigger—a “material event”—with “material change.” Under the current rule, a “material event” is “any event, occurrence, change in conditions or circumstances or other change that results in, or could reasonably be foreseen to have, a material effect on the resolution plan of the CIDI.”

Under the proposed rule, a “material change” would be a change in a CIDI's identified material entities, critical services, or franchise components or in its capabilities described in the most recent submission. “Material change” also would include a change to the CIDI's organizational structure, core business lines, size, or complexity, for example by merger, acquisition, or divestiture of assets, or similar transaction that may have significant impact on the CIDI's identified strategy. The purpose of the proposed change is twofold: first, to better reflect the modified informational requirements of the proposed rule; and second, to reflect the FDIC's experience under the current rule concerning the types of events for which contemporaneous notice is most useful to the FDIC.

12 CFR 360.10(c)(1)(v)(A).

The FDIC requests comments on all aspects of the proposed definition of material change and the proposed requirement that the CIDI provide notice of any material change. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(7) Is the proposed “material change” definition clear? Should other or different events trigger this notice requirement? Is 45 days an appropriate time frame for the notice requirement? The term “material change” is used in a similar context in the section 165(d) rule (12 CFR 381.2). Should the definition be revised to more closely align to the definition in the section 165(d) rule?

(8) Is the definition of material change over- or under-inclusive? Does it include all material events that would significantly impact the resolution submission and provide the FDIC with the notice it needs to assure consideration of whether new or updated resolution submission content would be important, necessary, or useful as a result of the change?

b. Resolution Submission by New CIDIs; Changes to Submission Dates

Under proposed § 360.10(c)(2), an IDI that becomes a CIDI after the effective date of the final rule would be required to provide its initial submission upon the date specified in writing by the FDIC, which would be no earlier than 270 days after the insured depository institution became a CIDI. The current rule provides that an IDI that becomes a CIDI after April 1, 2012, must submit its initial resolution plan no later than the following July 1, provided such date occurs no earlier than 270 days after the date it became a CIDI.

12 CFR 360.10(c)(1)(ii).

The FDIC invites comments as to all aspects of the proposed submission schedule and the timing of submission

of resolution plans by group A CIDIs and informational filings by group B CIDIs, including the two-year cycle, the interim supplements, the FDIC's discretion to change the timing of submissions, and the treatment of material changes at a CIDI. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(9) Is the proposed two-year submission cycle appropriate? What would be the benefits or trade-offs of a longer or shorter period between submissions?

(10) Does a two-year cycle provide adequate time for all aspects of the resolution submission cycle (review, engagement, capabilities testing, provision of feedback, and development of responsive content in the next submission)?

(11) The FDIC is interested in comments on the dates of submissions, which would be commenced approximately a year after the effective date of the final rule. In the past, submissions have been required on December 1, December 31, or July 1. The FDIC may also consider other dates. In considering timing of submissions, are there dates that are more suitable or should be avoided? If so, what makes those dates more suitable or problematic?

(12) Under the current rule, the FDIC retained discretion to obtain material updates to a submission at its discretion upon notice to the CIDI, including but not limited to upon the occurrence of a material change. The proposed rule would eliminate that specific authority, relying upon the biennial complete submissions and interim supplements and would retain the FDIC's ability to change filing dates upon notice to the CIDIs. The FDIC seeks comment on whether the FDIC should retain the flexibility to change one or more filing dates upon its discretion, or upon the occurrence of a material change, or require additional interim updates, and if so, on what terms or conditions.

(13) Is a minimum of 270 days enough time for an IDI that becomes a CIDI to prepare a complete resolution submission? The FDIC notes that, under the proposed rule, the FDIC would have the authority to change the date by which a CIDI must submit its resolution submission subsequent to its initial submission, and that the FDIC would endeavor to provide written notice of the revised submission date at least one calendar year before the resolution submission is due.

c. Status as a CIDI

The proposed rule would clarify aspects of the current rule concerning when an IDI becomes, or ceases to be, a CIDI. The proposed rule also would address a CIDI moving between group A and group B.

First, the proposed rule would retain the approach taken in the current rule, that an IDI is deemed to be a CIDI based upon whether it has crossed the threshold of $50 billion based on the average of the total assets as shown on its four most recent reports of Condition and Income. For clarity, the proposed rule would expressly address the event of an increase in size due to merger or acquisition of assets, which is not explicitly addressed in the current rule. Proposed § 360.10(b) would provide that in the case of an IDI whose total assets have increased as the result of a merger, acquisition, combination, or similar transaction, the status of the IDI as a CIDI or a group A CIDI will be based upon the date of the consummation of the merger, acquisition, combination or other transaction. While the four quarter average protects against the possibility that firms move quickly in and out of the rule's scope, growth by merger and acquisition tends not to be transitory, and the combined IDI should become subject to the rule promptly, based upon its combined balance sheet.

In addition, the proposed rule would add clarity about when an IDI ceases to be a CIDI. The current rule defines a CIDI as an IDI with $50 billion or more in total assets, but does not specifically address how and when an IDI ceases being a CIDI.

Under proposed § 360.10(b), an IDI would cease to be a CIDI when it has less than $50 billion in total assets, as determined based upon the average of the institution's four most recent Reports of Condition and Income. The proposed rule provides a similar provision addressing when a group B CIDI would become—or cease to become—a group A CIDI. Addressing explicitly the circumstances under which an IDI ceases to be a CIDI would add useful clarity for IDIs and the public and would facilitate the FDIC's administration of the rule.

12 CFR 360.10(b)(4).

The FDIC requests comments on all aspects of the proposed approach to determining whether an IDI is a CIDI and whether it is a group A or a group B CIDI. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(14) Are the proposed changes to the rule concerning the process for determining when an IDI becomes, and ceases to be a CIDI, clear and appropriate? Should the FDIC consider Report of Condition and Income data for a period other than four consecutive quarters in ascertaining whether an IDI is a CIDI and whether a CIDI is a group A CIDI or a group B CIDI? This approach, which is also used in determining applicable requirements under the

section 165(d) rule,

lessens the likelihood that IDIs bounce back and forth across the $50 billion or $100 billion threshold, but also delays the imposition of the requirements of the rule for IDIs that experience rapid growth, as was the case of SVB and Signature Bank. Should the FDIC consider other approaches to determining whether an IDI is subject to the requirements of the rule, or whether a CIDI is a group A CIDI, and if so, what other approaches should the FDIC consider, in weighing the balance between obtaining information promptly in the event of rapid growth, versus the risk that an IDI becomes subject to the requirements of the rule temporarily, if it hovers near the asset thresholds?

(15) Is the approach in the proposed rule to a change due to merger, acquisition, or similar transaction, based on the date of consummation of the transaction, appropriate for determining whether an IDI is a CIDI, or a group A or B CIDI, appropriate and clear? If not, please suggest an alternative with justification.

3. Content Requirements

a. Identified Strategy

Like the current rule, the proposed rule would require a CIDI to develop a strategy for resolution that is appropriate for its size, complexity, and risk profile. As noted, however, this requirement would apply only to group A CIDIs and not to group B CIDIs. Since the current rule was issued in 2012, the FDIC and CIDIs have been through multiple resolution plan submission cycles, allowing the FDIC to further its resolution readiness and strategic planning for the resolution of CIDIs. In reviewing and evaluating options for resolution of CIDIs, the FDIC has considered a variety of resolution strategies across the range of CIDIs. This has informed the approach in the proposed rule and the parameters provided as to the expectations for the development of an identified strategy.

The current rule requires the resolution plan to provide a “strategy for the sale or disposition of the deposit franchise, including branches, core business lines and major assets of the CIDI in a manner that ensures that depositors receive access to their

insured deposits within one business day of the institution's failure (two business days if the failure occurs on a day other than Friday), maximizes the net present value return from the sale or disposition of such assets and minimizes the amount of any loss realized in the resolution of cases.”

The current rule also requires the resolution plan to provide a “strategy to unwind or separate the CIDI and its subsidiaries from the organizational structure of its parent company in a cost-effective and timely fashion.”

12 CFR 360.10(c)(2)(vi).

12 CFR 360.10(c)(2)(v).

In guidance and the preamble to the current rule, the FDIC has provided insight regarding strategies to be considered by CIDIs as they prepare their resolution plans, including a cash payment of insured deposits, a purchase and assumption agreement with an insured depository institution to assume only insured or all deposits, a purchase and assumption agreement with multiple insured depository institutions in which branches are broken up and sold separately, and a transfer of insured deposits to a BDI. Over time, the FDIC provided additional guidance and feedback with respect to the development of a strategy that includes transfer of assets and liabilities to, and the various options for exit from, a BDI, including through a multiple acquirer exit, initial public offering, or other capital markets transaction.

The proposed rule would require each group A CIDI to provide an identified strategy, which would describe the resolution from the point of failure through the sale or disposition of the group A CIDI's franchise, (including all of its significant business lines and segments and all of its major assets) in a manner that meets the credibility standard set forth in the proposed rule.

Because of the size and complexity of CIDIs, the development of an identified strategy that takes into account each IDI's organization, structure, business lines, and other characteristics provides significant insight into the obstacles that the FDIC might face in resolving the IDI, and what mitigating actions it can take to address those obstacles.

Prong (i) of the credibility criteria provides that a resolution submission by a group A CIDI is not credible if it would not provide timely access to insured deposits, maximize value from the sale or disposition of assets, minimize any losses realized by creditors of the group A CIDI in resolution, and address potential risks of adverse effects on U.S. economic conditions or financial stability. Prong (ii) of the credibility criteria provides that a resolution submission is not credible if the information and analysis in the resolution submission is not supported with observable and verifiable capabilities and data and reasonable projections or the CIDI fails to comply in any material respect with the informational content requirements of the proposal.

The strategic option that the FDIC considers most likely to be implemented for the group A CIDIs across the widest range of scenarios is the establishment of a BDI that can continue the operations of the CIDI. Generally, a BDI approach will allow the continuity of business operations and thereby preserve franchise value, and will allow time for restructuring and marketing to facilitate the sale or disposition of the business lines and related assets, while providing insured depositors with prompt access to their accounts. Accordingly, the proposed rule would establish the BDI approach as the default identified strategy. A BDI strategy must provide for the establishment and stabilization of a BDI and an exit strategy from the bridge, such as a multiple acquirer exit involving the regional breakup of the group A CIDI or sale of business segments, an orderly wind down of certain business lines and asset sales, an exit via restructuring and subsequent initial public offering or other capital markets transaction, or another exit strategy appropriate to the size, structure and complexity of the CIDI.

In addressing the establishment of the BDI, the proposed rule would not require that a resolution plan demonstrate that the identified strategy be the least-costly to the DIF of all available strategies; in particular, it would not be required to demonstrate that it would be less costly to the DIF than liquidation. Similarly, it would not be required to demonstrate satisfaction of the chartering condition set forth in section 11(n)(2)(A) of the FDI Act such as by demonstrating that the amount which is reasonably necessary to operate the BDI will not exceed the amount which is reasonably necessary to save the cost of liquidating the IDI.

Rather, each group A CIDI would be required to support its estimation that the identified strategy maximizes value and minimizes losses to the creditors of the group A CIDI. Valuation analysis discussed in section III.A.3.d below will support the FDIC's ability to evaluate the strategy's impact on value and its potential costs to the DIF across a range of options.

See

section 11(n)(2)(A)(i) of the FDI Act. There are three alternative conditions specified in the FDI Act, any one of which must be met.

In addressing the stabilization of the BDI, the identified strategy may assume continuation of Federal Home Loan Bank advances and the availability of short-term liquidity advances from the DIF to meet temporary liquidity needs, provided that the identified strategy provides for timely repayment of those funds. The identified strategy should not assume use of the DIF to avoid losses to creditors of the BDI; all DIF advances must be made through a loan with an assured means of timely repayment.

Recognizing that the BDI approach may not be optimal for all group A CIDIs, the proposed rule would permit a different identified strategy if that different strategy would best address prong (i) of the credibility criteria (discussed in section III.B.1 below), could reasonably be executed by the FDIC across a range of likely failure scenarios, and would be more appropriate for the size, complexity and risk profile of the specific group A CIDI. An alternative identified strategy under the proposed rule could include transferring some but not all business lines and assets to a BDI and liquidating others in a receivership. For some group A CIDIs, a cash payment of insured deposits

and liquidation of all business lines and assets in receivership may be the most appropriate identified strategy.

This task could be accomplished through a Deposit Insurance National Bank (DINB) established by the FDIC pursuant to 12 U.S.C. 1821(m).

Regardless of the identified strategy, under the proposed rule, any identified strategy would be required to include meaningful optionality for execution across a range of scenarios and provide the information and analysis that would inform the decisions that would be made by the FDIC at the time of an actual failure that could support optionality for the FDIC in undertaking a resolution of the CIDI following its material stress and failure. Meaningful optionality reflects an expectation that an identified strategy be flexible so that it can be adapted to a change in the failure scenario or an unexpected obstacle to its execution. The nature and extent of meaningful optionality will vary based upon the size and complexity of the CIDI. For instance, a relatively smaller and less complex CIDI with a focus on traditional banking may identify only a breakup between two business lines, or the spinoff or sale of a separable business unit. For the largest or most complex CIDIs, meaningful optionality might include alternatives such as a breakup by business lines and a regional breakup, or by sale of one or more identified franchise components as options for a sale of the IDI franchise.

Unlike the current rule, the proposed rule would expressly provide that the identified strategy may not be based

upon the sale of substantially all assets and liabilities over closing weekend. While the FDIC recognizes that such a resolution outcome may be the most favorable approach when it is available, the FDIC will not accept this as the identified strategy for the group A CIDIs. For group A CIDIs, the pool of possible acquirers is very limited and any such transaction may involve long timelines and complex restructuring. In addition, the FDIC has learned that a resolution plan that assumes a single-acquirer all-deposit sale does not comprehensively address the complexities that would arise if that approach were not available, including the establishment and stabilization of a BDI, continuity of critical services, and the identification of franchise components. Therefore, utilizing an identified strategy that is a full purchase and assumption over resolution weekend is less useful to the FDIC for its resolution readiness than the identified strategy that would be required under the proposed rule.

The FDIC invites comment on all aspects of the requirement to include an identified strategy in the resolution plan. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(16) The proposed rule establishes formation and stabilization of a BDI as the default identified strategy. Do commenters agree with this choice as the default strategy or do they believe there should be a different default strategy? If a different approach is preferable, what strategy should be used and why?

(17) Is there a resolution planning benefit in providing a wider range of strategies and/or exit options as possible default identified strategies from which a CIDI may choose?

(18) Are the criteria for a group A CIDI choosing a different identified strategy other than the default clear and appropriate?

b. Failure Scenario

The proposed rule would streamline and clarify the framework for development of the failure scenario under which group A CIDIs develop an identified strategy. This scenario, known as the “failure scenario,” would be also used in connection with valuation analysis. Under the current rule, resolution plans are required to “take into account that failure of the CIDI may occur under the baseline, adverse and severely adverse economic conditions developed by the FRB pursuant to 12 U.S.C. 5365(i)(1)(B).”

The proposed rule would require analysis considering severely adverse economic conditions only and not baseline or adverse conditions. This change generally would incorporate the approach that the FDIC has permitted in recent resolution plan submissions. While an IDI can fail under any economic conditions, a severely adverse scenario is a reasonable assumption, and the FDIC has found that analysis under three different scenarios does not provide significant additional resolution information of value.

12 CFR 360.10(c)(2).

The proposed rule also would incorporate more specific requirements concerning the circumstances assumed to lead to the CIDI's failure. In the FDIC's more than ten years of experience of reviewing resolution plans under the Dodd-Frank Act and the current rule, the FDIC has learned that the submission is most valuable when it is based on the assumption that the CIDI has experienced material financial distress such that its failure is a result of the depletion of capital and/or liquidity. While the resolution strategy may be based on an idiosyncratic event or action, including a series of compounding events, the firm should justify all assumptions, consistent with the conditions of the economic scenario. Where the identified strategy assumes the sale of franchise components or a multiple acquirer exit, the resolution plan should take into account all issues surrounding its ability to sell in market conditions present in the applicable economic condition at the time of sale. To ensure that the resolution plan addresses the challenges that may occur in a wider range of scenarios, the proposed rule would require the identified strategy to be based on a failure scenario that demonstrates that the CIDI is experiencing material financial distress.

More specifically, the failure scenario would be required to assume and demonstrate that the CIDI experienced a deterioration of its asset base and that its high quality assets have been depleted or pledged due to increased liquidity requirements from counterparties and deposit outflows. While the immediate cause of failure may be based on liquidity shortfalls, the failure scenario also should consider the likelihood of the depletion of capital and losses in the assets of the CIDI, which may include embedded losses that have been realized but may not have been recognized by the CIDI for financial reporting purposes. The failure scenario must assume that the U.S. parent holding company is in bankruptcy, as this is often the case in a bank failure, and is consistent with the approach taken in DFA resolution plans. This proposed failure scenario requirement draws upon the requirement that a DFA resolution plan must assume that the firm has experienced material financial distress.

The FDIC expects that this consistent approach to the failure scenario would facilitate incorporation of information from the affiliate's DFA resolution plan to the CIDI resolution plan, as would be permitted under the proposed rule.

See, e.g.,

12 CFR 381.5(b)(i).

While the FDIC anticipates that the proposed approach to the scenario for CIDI resolution planning would facilitate development of an identified strategy and other plan information that is most useful to the FDIC across a range of scenarios, the FDIC is aware that likely failure scenarios are different for CIDIs with different business models, balance sheets, and risks. In addition, in future plan reviews, the FDIC might find value in focusing on particular kinds of failure scenarios, such as a rapid failure due to a run on uninsured deposits or deposits associated with a particular line of business; or cyber or other operational risks; or other risks that focus on particular business lines. For that reason, the proposed rule includes flexibility for the FDIC to devise specific failure scenario assumptions, with respect to macroeconomic conditions or the precipitating cause of failure, for individual CIDIs, for cohorts of CIDIs, or for all group A CIDIs in future resolution plan submissions. Any specific failure scenarios would be communicated in writing, at least twelve months before the next resolution plan is due.

The FDIC invites comments on all aspects of the proposed failure scenario requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(19) Are there additional factors which would make the failure scenario more useful for the FDIC in resolution planning? How do those factors improve the quality of resolution plans?

(20) Are there aspects of the proposed failure scenario requirement that are unclear? For example, would further explication of what would constitute Federal assistance in recapitalization provide helpful clarity?

(21) Under the proposed rule, the FDIC may provide additional or alternative parameters for the failure scenario. Will this flexibility improve the usefulness of resolution plans in resolution planning? Is the process and timing for identifying changes to scenario assumptions clear and appropriate?

c. New and Modified Definitions

The proposed rule would introduce a number of new defined terms and modify others, while other terms will be unchanged from the current rule. The proposed new and revised defined terms are as follows:

Affiliate.

The proposed definition would be substantively unchanged from the current rule. The proposed rule would make a non-substantive wording change.

Appropriate Federal banking agency.

This term is used in the current rule but is not defined. The proposed rule would add a definition from the FDI Act.

BDI.

The proposed rule would create this defined term using the FDI Act's definition of bridge depository institution.

Capabilities testing.

The proposed rule would add this new defined term, which is discussed in section III.C.2 below.

CIDI or covered insured depository institution.

This definition would be modified to reflect that the proposed rule would create two categories of CIDIs: group A CIDIs and group B CIDIs.

Control.

This term is used in the current rule but is not defined. The proposed rule would define it using the term in the FDI Act.

Core business lines.

In addition to a technical revision to the definition, core business lines would be revised to mean the CIDI's business lines that are significant to the CIDI's revenue, profit, or franchise. Under the current rule's definition, core business lines are those that, upon failure, would result in a material loss of revenue, profit, or franchise value. This change is intended to reflect the designation of core business lines used by CIDIs in their business and regulatory reporting.

Critical services.

The proposed rule would not materially change the current rule's definition of critical services. The examples of critical services would be eliminated from the definition because proposed § 360.10(d)(8), which incorporates, clarifies, and builds upon past guidance, would provide more robust descriptions of the content required, including clarifying that critical services can include both shared and outsourced services. The proposed rule would also add that critical services includes the CIDI's services and operations that support the execution of the identified strategy.

Critical services support.

The proposed rule would add this new defined term, which is discussed in section III.A.3.d below.

DFA resolution plan.

The new defined term would mean a CIDI's parent company's resolution plan submission pursuant to 12 U.S.C. 5365(d).

Engagement.

The proposed rule would add this new defined term, which is discussed in section III.C.1 below.

Failure scenario.

The proposed rule would add this defined term, which is discussed in section III.A.3.b above.

FDI Act.

The current rule defines this term in 12 CFR 360.10(a). The proposed rule would retain that definition in proposed § 360.10(a) and would add a cross-reference to that definition.

Franchise component.

The proposed rule would add this new defined term, which is discussed in section III.A.3.d below.

Group A CIDI:

The proposed rule would add this defined term to mean CIDIs with $100 billion or more in total assets that would be required to submit resolution plans under the proposed rule.

Group B CIDI:

The proposed rule would add this defined term to mean CIDIs with between $50 billion and $100 billion in total assets that would be required to submit informational filings under the proposed rule.

Identified strategy.

The proposed rule would require each group A CIDI to choose for its resolution plan a strategy for its resolution in the event of its failure. Accordingly, the proposed rule would create a defined term to refer to such a strategy.

IDI franchise.

The proposed rule would introduce this new defined term to mean all core business lines and all other business segments, branches, and major assets that constitute the IDI and its business as a whole. The current rule uses the term “deposit franchise” to mean a similar idea, but the current rule does not define this term.

Informational filing.

The proposed rule would introduce the concepts of group B CIDIs and the distinct submissions that would be required of them. The proposed rule would create this term to mean the resolution submission that a group B CIDI would submit under the proposed rule.

Insured depository institution.

The proposed definition would be substantively unchanged from the current rule. The proposed rule would make a non-substantive wording change.

Key depositors.

The proposed rule would add this new defined term, which is discussed in section III.A.3.d below.

Key personnel.

The proposed rule would add this new defined term, which is discussed in section III.A.3.d below. The definition of key personnel, which incorporates prior guidance

would clarify that key personnel includes personnel with an essential role or having a function, responsibility, or knowledge that is important to the resolution of the CIDI. Thus, while management are likely to be key personnel, the definition is not limited to responsible managers, but includes staff with specialized knowledge and responsibilities that are essential to continuity of operations. The definition makes clear that key personnel can be employed by any entity, or through contractors.

Statement, p. 7-8.

Least-cost test.

The proposed rule would add this new defined term to mean the process for meeting the requirements regarding least-cost resolution under the FDI Act at 12 U.S.C. 1823(c).

Material asset portfolio.

The proposed rule would add this defined term, which means a pool or portfolio of assets, including loans, securities or other assets, that is significant in terms of income or value to a core business line, and that could be sold in resolution.

Material change.

The proposed rule would change the current rule's term “material event” to “material change.” In lieu of the current rule's focus on the occurrence of an event or a change in condition that could have an effect on the CIDI's resolution plan, the proposed rule's definition of material change would focus on changes to the CIDI, including the identification of material entities, or changes to the CIDI's capabilities described in the resolution submission. In administering the current rule, the FDIC has observed that not all CIDIs have interpreted the material change concept similarly. Accordingly, the intent of revising the defined term is to provide greater clarity and achieve improved consistency.

Material entity.

The proposed rule would retain the current rule concept that a material entity is a company that is significant to the activities of critical services or core business lines, and would add that it also means a company that is significant to a franchise component. This proposed change reflects the introduction of the franchise component concept into the proposed rule. The proposed definition specifies that all IDIs in the firm, regardless of size or other characteristics are material entities, reflecting that all affiliated IDIs would be significant to the resolution of the CIDI under the FDI Act.

Multiple acquirer exit.

This proposed new defined term is related to the identified strategy described above. The multiple acquirer exit is an option for

exit from the BDI as part of a group A CIDI's default resolution strategy by divesting the operations and assets of the group A CIDI to multiple acquirers. This definition would clarify that this exit strategy is focused on the sale of going concern elements of the group A CIDI's businesses,

e.g.,

through a regional breakup of the CIDI's deposit franchise or a sale of business segments to multiple acquirers. It is not intended to describe a liquidation of the group A CIDI's assets, although asset sales that are incidental to these divestitures may be included in a multiple acquirer exit. The business segments or regional or other components identified for divestiture in the multiple acquirer exit should be appropriate to the business of the CIDI and its regional footprint and other characteristics.

Parent company affiliate.

The proposed definition would be substantively unchanged from the current rule. The proposed rule would make a non-substantive wording change.

Qualified financial contract.

This defined term would have the same meaning as set forth in the FDI Act to define qualified financial contract.

Regulated subsidiary.

The proposed rule would add this defined term that encompasses a variety of domestic and foreign entities that are subsidiaries of the CIDI, including those that are subject to supervision or regulation by, or registration with, various domestic and foreign governmental entities. This definition is based upon the definition of “functionally regulated subsidiary” contained in 12 U.S.C. 1844(c)(5)(B), but has been expanded to include comparable subsidiaries formed and regulated under foreign law, as well as corporations organized under section 25A of the Federal Reserve Act (12 U.S.C. 611

et seq.

) or corporations having an agreement or undertaking with the Federal Reserve Board under section 25 of the Federal Reserve Act (12 U.S.C. 601

et seq.

), commonly known as Edge Act corporations.

Resolution plan.

The proposed rule would change this definition so that it only includes a resolution submission submitted by a group A CIDI instead of all submissions by CIDIs. This change would reflect the proposed rule's differing proposed requirements of group A CIDIs and group B CIDIs, as opposed to the uniform requirements of the current rule for all CIDIs.

Resolution submission.

The proposed rule would require each group A CIDI to submit a resolution plan and each group B CIDI to submit an informational filing, with each type of submission having its own informational requirements. However, certain aspects of the proposed rule would apply to both types of submission; accordingly, the proposed rule would create this defined term to capture both types of submission.

Subsidiary.

The proposed definition would be substantively unchanged from the current rule. The proposed rule would make a non-substantive wording change.

Total assets.

The proposed rule would make non-substantive changes to improve wording, to reflect the current name of the Report of Condition and Income, and to clarify that the instructions to the Report of Condition and Income relate to the determination of total assets and not identification of CIDIs, which is addressed in the proposed rule.

United States.

The proposed definition would be substantively unchanged from the current rule. The proposed rule would make a non-substantive wording change.

Virtual data room.

The proposed rule would require a resolution submission to provide specified information concerning a virtual data room. Accordingly, the proposed rule would create a defined term to describe the concept and its parameters.

The FDIC invites comment on all aspects of the definitions in the proposed rule. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(22) Are all definitions clear and useful?

(23) Should additional changes be made?

d. All Other Content Requirements

In an effort to collect information that would better help the FDIC prepare to resolve a CIDI and to ensure that all CIDIs have key resolvability capabilities, the proposed rule would make a number of changes to the information a CIDI must submit to the FDIC in its resolution submission. Many of these proposed changes would incorporate and codify guidance the FDIC previously provided to CIDIs. The proposed changes would delete certain submission requirements, and modify others, in ways that may increase or lessen the type and amount of information required with respect to those content elements. The rule, as proposed, would supersede all prior guidance.

Except where otherwise noted, the following discusses the content requirements for both group A CIDIs' resolution plans and group B CIDIs' informational filings.

Executive summary,

located at proposed § 360.10(d)(3), applicable only to group A CIDIs. Like the current rule, whose executive summary requirement is located at subpart 12 CFR 360.10(c)(2)(i), the proposed rule would require a group A CIDI to include an executive summary describing the key elements of its resolution plan. However, this revised subpart would reflect concepts that would be introduced by the proposed rule or incorporated from prior guidance, including asking for a description of the group A CIDI's identified strategy, an overview of the CIDI's franchise components, and a description of material changes. The proposed rule would also require a discussion of changes to the group A CIDI's previously submitted resolution plan resulting from any change in law or regulation, guidance or feedback from the FDIC, or any material change. Finally, the proposed rule would require a discussion of any actions the group A CIDI had taken since submitting its most recent resolution plan to improve the resolution plan's information and analysis, or to improve its capabilities to develop and timely deliver that information and analysis. The FDIC believes these changes would better reflect the key elements of a group A CIDI's resolution plan.

Organizational structure: legal entities; core business lines; and branches,

located at proposed § 360.10(d)(4). The proposed rule would retain and modify the corresponding subpart in the current rule, 12 CFR 360.10(c)(2)(ii). The proposed rule would retain the current rule's requirement to describe the CIDI's domestic and foreign branch organization and would add the requirement to provide addresses and asset size. An organizational chart showing all relevant entities and their place in the CIDI's organizational structure may be helpful. The proposed rule would also retain the current rule's requirement to identify and describe the core business lines of the CIDI, the parent company, and parent company affiliates.

The proposed rule would introduce the requirement to identify all regulated subsidiaries, a new defined term discussed above in section III.A.3.c. The FDIC is seeking this information because it would assist the FDIC in identifying entities with capital, liquidity, and other requirements, and in assessing these entities' capital and liquidity needs when it is resolving a CIDI using a BDI. The proposed rule would modify the requirement in the current rule that core business lines be

mapped to material entities, by eliminating the mapping to assets and liabilities and instead require mapping to franchise components and to regulated subsidiaries. This would improve the utility of mapping and support the analysis of franchise components and, for group A CIDIs, multiple acquirer exit considerations.

The proposed rule would also revise the current rule by requiring that the resolution submission describe whether any core business line draws additional value from, or relies on, the operations of the parent company or a parent company affiliate, and identify whether any such operations are cross-border. This information would support and inform the FDIC's analysis of the impact of breakup of the CIDI from its parent company and parent company affiliates.

As noted below, elements of the current rule's organizational structure; legal entities; core business lines and branches subpart would be incorporated into other provisions of the proposed rule, including the discussion of the deposit base and key personnel, in order to improve the organizational structure of the rule as proposed.

The FDIC invites comments on all aspects of the proposed organizational structure; legal entities; core business lines and branches requirements. In particular, the FDIC asks the following question on specific aspects of the proposal:

(24) The proposed rule would require a CIDI to identify each of its subsidiaries that is a “regulated subsidiary”, a new proposed defined term. Is the defined term clear and understandable? Does it include all of the types of entities that are subject to capital, liquidity or other material requirements or are there others that should be included?

(25) The FDIC considered other approaches for collecting this type of information concerning regulated entities, including limiting this requirement to a CIDI's subsidiaries that are material entities, or requiring that all regulated subsidiaries be deemed material entities. Does the proposed rule's approach seek an appropriate amount and type of information? If not, how can this aspect of the proposed rule be improved for utility in resolution planning?

Methodology for material entity designation,

located at proposed § 360.10(d)(5). This would be a new component to the proposed rule. The proposed rule would require each CIDI to describe its methodology for identifying material entities. The proposed rule would not be prescriptive regarding such methodology, but rather would afford each CIDI the flexibility to develop a methodology that is appropriate to the nature, size, complexity, and scope of its operations. This would assist the FDIC in understanding the application of the material entity concept throughout the resolution submission, which is significant to the scope of other informational requirements. As noted in section III.A.3.c above, the proposed rule's definition of material entity would largely be the same as the definition in the current rule.

Separation from parent; potential barriers or material obstacles to orderly resolution,

located at proposed § 360.10(d)(6). The proposed rule would retain the current rule's requirement to describe the actions needed to separate a CIDI from the organizational structure of its parent company and parent company affiliates, as well as how to separate the CIDI's subsidiaries from this structure, as described in current subparts 12 CFR 360.10(c)(2)(iv), (v).

The proposed rule would also retain the current rule's requirement to identify potential barriers or other material obstacles to an orderly resolution,

and would add the requirement to identify how such barriers or obstacles could pose risks to a group A CIDI's identified strategy. The proposed rule would also require that a resolution submission address the CIDI's ability to operate separately from the parent company's organization, and that the CIDI assume that its parent company organization and the parent company affiliates have filed for bankruptcy or are in resolution under another insolvency regime. It would also require addressing the impact on the BDI's value if the CIDI were separated from the parent company's organization.

12 CFR 360.10(c)(2)(iv), (v).

12 CFR 360.10(c)(2)(iv).

While some CIDIs' operational structures are relatively simple, with the majority of assets and operations within the CIDI, others are significantly more complex. Even where the structure is relatively simple, there may be significant services, licenses, contracts, or operations—even those whose asset value is relatively small, that the CIDI uses that would impact the ability to establish and operate a BDI while the parent company and parent company affiliate are in bankruptcy or other resolution. These complexities include not only the challenge of continuity of critical services, but also the economic viability of the BDI as a going concern upon separation from the parent company, and the impact on BDI's franchise value. In the proposed revisions to the rule, this section has been revised to focus on whether the IDI, and therefore the BDI, can be a viable stand-alone entity from the point of view of economic value and viability of business lines. The issues related to continuity of critical services provided by or through the parent company and parent company affiliates would be discussed and addressed in the critical services discussion below.

The FDIC invites comments on all aspects of the proposed separation from parent; potential barriers or material obstacles to orderly resolution requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(26) Would it be helpful to resolution analysis to require certain assumptions with respect to the possible risk of multiple competing insolvencies when the parent company and parent company affiliates are being resolved in bankruptcy or other insolvency regime?

(27) Would it be useful in developing resolution analysis to have challenging fact patterns for a wide range of contingencies, for example, if the resolution submission were required to address the possible outcome of adverse interests between the insolvency regimes and no support or services being provided by the parent company and parent company affiliates?

(28) Are there other assumptions or contingencies that should be explored?

Overall deposit activities,

located at proposed § 360.10(d)(7). While the current rule's organizational structure subpart asks for some information about a CIDI's deposit base and systems, the proposed rule would expand and build upon the information related to deposit activities required by the current rule.

Understanding the deposit structure of the CIDI is important to understanding entry into a BDI and stabilization of its operations, and is useful in supporting valuation analysis as well. To improve the organizational structure of the current rule, the proposed rule would create a separate subpart for this information.

“Discuss the CIDI's overall deposit activities including, among other things, unique aspects of the deposit base or underlying systems that may create operational complexity for the FDIC, result in extraordinary resolution expenses in the event of failure and a description of the branch organization, both domestic and foreign.” 12 CFR 360.10(c)(2)(ii).

The proposed rule would require a discussion of foreign deposits, and identification of deposits dually payable in the U.S., which is relevant to the determination of priority of payments in resolution.

The proposed rule would also require information about insured

and uninsured deposits, and commercial deposits by business line.

12 CFR 330.3(e).

The proposed rule would also require information about deposit sweep arrangements with affiliates and unaffiliated parties, which would inform the FDIC about interconnections and assist in assessing depositor behavior; a CIDI would also have to identify the contracts governing those arrangements. The proposed rule would also require information about reporting capabilities for omnibus, sweep and pass-through accounts. Understanding those capabilities and the accuracy and timeliness of deposit reporting by accountholder is important for these deposits where the information for deposit insurance determinations is not maintained on the CIDI's systems.

In addition to requiring information about the deposit structure, the proposed rule would require information regarding key depositors, which would be defined in the proposed rule as depositors that hold or control the largest deposits (whether in one account or in multiple accounts) that collectively are material to one or more core business lines. Identification of key depositors is important to evaluation of strategic options in resolution, and to understanding the relationships between key depositors and other services provided by the CIDI or its parent company or parent company affiliates. Each key depositor must be identified by name, line of business and geographic location, where that information is known.

Finally, the proposed rule would require information about the relationship of deposit segments to core business lines and franchise components. In a multiple acquirer sale, the deposits related to a particular franchise component must be readily identified to facilitate the separation and sale of the franchise component along with the associated liabilities.

The FDIC invites comments on all aspects of the proposed overall deposit activities requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(29) Is the information proposed to be required concerning the overall deposit structure available to CIDIs and would it be useful to understanding the impact of different resolution strategies?

(30) The FDIC considered different approaches to defining “key depositors,” including by defining it as the top 100 depositors by size, or as those depositors that collectively represent the largest deposits making up 25 percent of the CIDI's deposits. Because the appropriate range of metrics varies from CIDI to CIDI based on its size and business model, the proposed rule would provide flexibility to the CIDIs in describing key depositors. Is this definition sufficiently clear and useful? Is there a way to define a CIDI's key depositors that would provide more useful information to support the FDIC's understanding of the profile of significant depositors and the impact of different resolution strategies on those depositors? What metrics or descriptions would be most useful to identify these significant depositors?

Critical services,

located at proposed § 360.10(d)(8). Because the ability to continue critical services in resolution is essential to the ability to establish and stabilize a BDI, the continuity of critical services is an area of focus for the FDIC in assessing options for resolving a CIDI. Accordingly, the proposed rule would make express the implicit expectation of the current rule that a CIDI must be able to demonstrate capabilities necessary to ensure continuity of critical services while it is in resolution.

The proposed rule would expand on the information required by the current rule at 12 CFR 360.10(c)(2)(iii), and would incorporate and clarify guidance the FDIC previously provided on this topic. As explained in section III.A.3.c, the definition of “critical services” would remain largely the same as in the current rule, but the proposed rule would require a resolution submission to explain the criteria by which critical services are identified in order to provide to the FDIC additional context and understanding to the CIDI's approach to this content element.

The proposed rule would also introduce the defined term “critical services support,” which are the resources necessary to support the provision of critical services, including systems, technology infrastructure, data, key personnel, intellectual property, and facilities. CIDIs' past resolution plans did not consistently address these elements, which are mentioned in various places throughout the current rule. Bringing together this information in a defined term and expressly stating the relationship to critical services is expected to provide additional clarity and promote consistency in the approach to these elements. For this reason, the proposed rule would consolidate informational elements relevant to critical services that are separated in various parts of the current rule, and incorporate and codify prior guidance,

such as breakup from parent and cross-border considerations, to the extent that they relate to critical services.

Statement, p. 6.

The proposed rule would also require that a CIDI identify critical services provided by the parent company or a parent company affiliate as well as the physical locations and jurisdictions of critical service providers and critical services support that are located outside of the United States. The proposed rule would also require that a CIDI map critical services to material entities that provide those services directly or indirectly through third parties, and to the material entities, core business lines, and franchise components supported by those critical services. Further, the proposed rule would make express the requirement for information about the critical services and critical services support that may be at risk of interruption if the CIDI fails, as well as the CIDI's approach for continuing critical services in the event of its failure, and information about the contracts governing the provision of such services.

The proposed rule would also require a CIDI to provide information about its process for collecting and monitoring the contracts governing critical services and critical services support. Providing information about the systems that store these contracts and how this information is stored (

e.g.,

centrally, by business line or material entity, by business function, etc.) would provide the FDIC valuable information when seeking to understand a CIDI's operations and business relationships.

The FDIC invites comments on all aspects of the proposed critical services content element requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(31) Are the proposed requirements with respect to mapping critical services clear? Are they appropriate to the FDIC's goal of understanding the risks and mitigants to continuity of critical services in a BDI strategy, and in the course of disposition of franchise components? Is the concept of “critical services support” clear and useful? If not, how could it be improved?

(32) Would it be helpful to provide more explicit expectations with respect to mitigants to the risk of discontinuity of critical services, such as resolution-friendly contractual provisions, arms-length terms for services provision, or the establishment of critical services and critical services support within the bank chain?

Key personnel,

located at proposed § 360.10(d)(9). As mentioned above, rather than retaining the current rule's approach of requiring information about

key personnel in the discussion of organizational structure; legal entities; core business lines and branches,

the proposed rule would create a new, separate subpart for this information. The proposed rule would also create “key personnel” as a defined term: personnel tasked with an essential role in support of a core business line, franchise component, or critical service, or having a function, responsibility, or knowledge that may be important for the FDIC's resolution of the CIDI. The proposed rule would note that key personnel can be employed by the CIDI, a CIDI subsidiary, the parent company, a parent company affiliate, or a third party entity.

“Identify key personnel tasked with managing core business lines and deposit activities and the CIDI's branch organization.” 12 CFR 360.10(c)(2)(ii).

The FDIC invites comments on all aspects of the proposed key personnel definition and use requirements. In particular, the FDIC asks the following questions on a specific aspect of the proposal:

(33) Is the definition of “key personnel” appropriate and clear? Does it clearly include the personnel most important to continuing operations in a BDI, in a way that is usefully limited and focused?

The information that would be provided in response to this subpart, which would incorporate guidance previously provided by the FDIC,

is important because, among other things, it is relevant to helping enable continuity of a BDI's operations. The proposed rule would require a CIDI to describe its methodology for identifying key personnel to provide to the FDIC additional context and understanding of the CIDI's approach to this content element. The proposed rule would also require information including identification of employee benefit programs provided to key personnel, as well as identifying any applicable collective bargaining agreements or similar arrangements. This information would assist the FDIC in planning for the retention of key employees by the BIDI, or assist with necessary receivership functions.

Statement, p. 7-8.

Further, the proposed rule would require a CIDI to provide a recommended approach for retaining key personnel during its resolution. A framework for, for example, specifying retention bonuses and other incentives to help retain key personnel could help the FDIC facilitate a program that could help minimize disruptions when a CIDI is in resolution.

Franchise components,

located at proposed § 360.10(d)(10), would build upon the current rule

and would incorporate and codify certain elements of past guidance, with some modifications. Under the proposed rule, the term “franchise component” would be defined as a business segment, regional branch network, major asset or asset pool, or other key component of the IDI franchise that currently can be separated and marketed in a timely manner. By specifying that the CIDI should identify franchise components that “currently” can be separated, the proposed rule would emphasize that identified franchise components should be those that can be separated based upon the organizational structure and capabilities of the firm, and the regulatory requirements in effect, at the time of the resolution submission.

12 CFR 360.10(c)(2)(vi).

This proposed subpart would provide information that the FDIC believes will be critical in developing strategic options and meaningful optionality for resolution of a group A CIDI. The FDIC has previously described franchise components as the “building blocks” of resolution options.

Under the proposed rule, the identification of actionable, marketable franchise components is a required element of all resolution submissions. A franchise component must be identifiable and separable such that it can be marketed and sold in its current state in a timely manner. While this requirement applies to all CIDIs, the number of franchise components and the level of complexity of the approach to the sale and marketing of the franchise components would vary based on the size and complexity of the CIDI. The number of franchise components necessary to have an actionable plan and meaningful optionality in the resolution of a $50 billion group B CIDI would likely be considerably less than the expectation for a $500 billion group A CIDI.

Statement, p. 5.

For some CIDIs, particularly the largest and most complex CIDIs, the pool of possible acquirers is limited and the challenges associated with a sale of the IDI franchise to a single acquirer are the greatest. The multiple acquirer exit is more likely to be the most appropriate approach for such a CIDI. The multiple acquirer exit, a newly defined term in the proposed rule, would be a strategy for disposition of going concern elements of the group A CIDI where a single acquirer transaction is not available, thereby avoiding a potentially disruptive and value-destroying liquidation of the failed CIDI. The time required for a multiple acquirer exit or another exit option that requires significant restructuring may require restructuring and divestiture options that present greater obstacles than those presented in addressing separability of the franchise components. For group A CIDIs, restructuring and divestiture options should include those necessary to the identified strategy, as well as currently separable and marketable franchise components that provide additional optionality. For example, if the identified strategy includes a multiple acquirer exit from the BDI, the restructuring and divestiture options should include the parts of the CIDI to be divested as part of a regional breakup of the CIDI's IDI franchise or sale of business segments, in addition to identifying currently separable and marketable franchise components that would provide additional optionality.

The proposed rule would require a description of the extent to which franchise components are currently separable, which would be supported by a description of all significant impediments and obstacles to execution of a divestiture of a franchise component, including legal, regulatory, or cross-border challenges, as well as operational challenges. It would also require that a CIDI be able to demonstrate capabilities necessary to ensure that franchise components are separable and marketable in resolution. While the proposed rule would not set an express standard for separability of a franchise component, identification of franchise components that are readily and quickly separable promptly after failure and stabilization of the BDI will provide useful optionality and may facilitate a brief bridge period.

While the goal is to provide optionality to the FDIC in marketing the failed CIDI, the number and nature of separable, marketable franchise components will vary based upon the size and complexity of the CIDI. The proposed rule would also require that resolution submissions provide information relating to, among other things, key assumptions underpinning each franchise component divestiture.

The proposed rule would set forth basic informational elements required for each franchise component, including identification of responsible senior management and metrics depicting each franchise component's size and significance. The metrics the FDIC would expect a CIDI to provide may include total revenue, net income, percentage market share and, if applicable and available, total assets and liabilities.

The proposed rule also would require a description of the CIDI's capabilities and processes to initiate marketing of the franchise component, and to provide a description of necessary actions and a timeline for the divestiture, which would be supported by a description of the key underlying assumptions. The proposed rule would require the CIDI to identify the process it would use to identify prospective bidders for such franchise components. The FDIC makes every effort to market failed banks—and their assets and business segments—as widely as possible. A requirement that CIDIs provide analysis on identification of prospective bidders of franchise components would support that effort. In addition to describing the process for identification of prospective bidders, identification of prospective bidders would also be helpful.

The proposed rule would incorporate and clarify the informational requirements with respect to capabilities to establish a virtual data room promptly in the run-up to or upon failure of the bank, which must include the data elements sufficient to permit a bidder to provide an initial bid on the IDI franchise or the CIDI's franchise components. While the proposed rule is not prescriptive in length of time within which a data room must be able to be populated, the capabilities should support a very short time frame and not rely upon a stabilized BDI to extend the time necessary. The proposed rule would require a description of the length of time and any challenges or obstacles to providing complete and accurate information necessary to support a competitive bid, with an expectation that this time frame will be brief and measured in days.

The proposed list of content elements is indicative and not comprehensive; the specific information and data that would be appropriate and sufficiently detailed to support prompt and competitive bids would vary among CIDIs. For instance, deposit data and information elements might include a complete, current deposit trial balance reconciled to the general ledger, a description of the largest depositor relationships, information regarding sweeps and brokered deposits and other data useful to inform a bid. Loan and lending operations information might include a loan tape or loan trial balance reconciled to the general ledger, loan portfolio file samplings, underwriting policies, information regarding real estate owned, and key lending relationships. Where the CIDI has non-traditional business lines, the information provided should be appropriate to the sale of those elements as franchise components or as part of the IDI franchise. The data and information as a whole should support a sale of the IDI franchise as a whole, while providing optionality for the sale of separable franchise components.

Finally, to effectuate a timely sale of a failed IDI, the FDIC must have access and control of data in a virtual data room. Historically, the FDIC has established a virtual data room controlled by the FDIC and migrated the information into that virtual data room. The proposal seeks information as to how the CIDI could support that process, either through providing sufficient access and controls to the CIDI's virtual data room to the FDIC as receiver for the failed IDI, or by establishing a process to timely and securely migrate all data to an FDIC-controlled virtual data room.

Because many of the CIDIs have a broker-dealer subsidiary or parent company affiliate, the proposed rule would also contain a provision specifically addressing content related to a broker-dealer. That is not intended to exclude or limit information related to other non-banking activities such as insurance or asset management.

The FDIC invites comments on all aspects of the proposed franchise components requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(34) Are the proposed definitions and required informational content clear and appropriate to the identification of franchise components? Is the information and analysis proposed to be required useful to support the FDIC's understanding of the challenges to separation of franchise components, useful mitigants to those challenges, and the timeline for execution of a multiple acquirer exit?

(35) Is the proposed language clear with respect to the expectation for franchise components that can be timely divested, both for the purpose of identifying franchise components that are “currently” and “quickly” separable and for separation of franchise components where more restructuring or other actions would be necessary to implement an identified strategy, such as in a multiple acquirer exit? Would establishing prescribed time requirements, such as 60 or 90 days for divestiture of most franchise components, be appropriate or useful? If so, what time range would be appropriate for the most currently actionable franchise components, and what time range would be appropriate for execution of a more complex exit strategy, such as a multiple acquirer exit?

(36) Are the proposed definitions and required informational content clear and appropriate with respect to the multiple acquirer exit strategy? Is there additional or different information that would be useful to the FDIC in undertaking such a strategy, or to support strategic alternatives that may involve such a separation and disposition of franchise components to multiple acquirers in an existing BDI?

The FDIC is interested in all aspects of the proposed rule regarding the establishment of a virtual data room, including the timing, content, processes for integration with the FDIC's marketing efforts and capabilities described. In particular:

(37) Are the information and data elements required for the establishment of a virtual data room clear and appropriate for the timely sale of the IDI franchise or CIDI's franchise components? Are there additional useful elements that a bidder would need to timely submit a competitive bid for the IDI franchise or the CIDI's franchise components?

(38) Would a more prescriptive and detailed list of items to set a minimum standard of informational elements necessary for a virtual data room be useful to filers in preparing their resolution submissions, or helpful to assure readiness to facilitate timely sale of the IDI franchise or the CIDI's franchise components in the event of its material distress and failure?

(39) Would it be helpful or appropriate to establish a specific or prescriptive time frame for establishment and population of a virtual data room, and, if so, what would be the appropriate length of time to complete that process?

Asset portfolios,

located at proposed § 360.10(d)(11). The proposed rule would require CIDIs to include information about material asset portfolios, a new defined term discussed above in section III.A.3.c, including how the assets within the portfolio are valued and recorded in the CIDI's records. The proposed rule would also require a CIDI to identify and discuss impediments to the sale of each material asset portfolio and to provide a timeline for each portfolio's disposition. This information will support resolution planning and development for options in marketing the CIDI, including identification of assets portfolios that can be sold separately from the franchise components with going concern value. Recent experience has demonstrated the importance of clear and timely identification of foreign assets, which is specifically requested in the proposed rule.

Valuation to facilitate FDIC's assessment of least-costly resolution method,

located at proposed § 360.10(d)(12), applicable only to group A CIDIs. The current rule requires CIDIs to describe how their chosen resolution strategies “can be demonstrated to be the least costly to the Deposit Insurance Fund.”

Additionally, the current rule provides that the CIDI must provide a detailed description of its asset valuation process, and “the impact of any sales, divestitures, restructurings, recapitalizations, or other similar actions” on the CIDI and its core business lines.

12 CFR 360.10(c)(2)(vii).

12 CFR 360.10(c)(2)(viii).

For all resolution plans submitted in 2022 or to be submitted in 2023, the FDIC has exempted the CIDIs from addressing how the strategies described in the resolution plan could be demonstrated to be the least costly to the DIF of all possible methods for resolving the CIDI. The FDIC granted these exemptions after having concluded that the current rule's requirement resulted in submissions that provided limited utility to the FDIC relative to the burden of producing the relevant information and analysis. However, the FDIC is required under the FDI Act to determine in all cases whether the proposed resolution strategy is least costly to the DIF as compared to other available strategic options, including liquidation. While the FDIC has experience in this analysis, the determination of costs for a BDI strategy, absent a bid price to establish value, is an element that varies by an IDI's businesses and by the failure scenario. Thus, rather than requiring CIDIs to demonstrate, on an

ex ante

basis, that the least-cost test can be met under a hypothetical scenario for an identified strategy, the FDIC proposes to require each group A CIDI to provide analysis that can serve as building blocks for conducting valuations that will result in a usable valuation roadmap that the FDIC may apply in an actual failure scenario.

Under the proposed rule, group A CIDIs would be required to demonstrate the capabilities necessary to produce valuations that the FDIC can use to conduct the statutorily required least-cost analysis on its own at the time of an actual failure. To demonstrate valuation capabilities, a group A CIDI would be required to describe its valuation process in its resolution plan and include a valuation analysis that includes a range of quantitative estimates of value as an appendix to its resolution plan. While both of these components would be required under the proposed rule, the FDIC would not make a credibility determination as to the identified strategy based on the valuation information provided in response to this requirement. There would be no requirement to compare that valuation estimate to liquidation or other possible resolution strategies.

The proposed valuation analysis included in the resolution plan would require that a group A CIDI provide a narrative description of how it values its franchise components, and the IDI as a whole, including its approach to gathering information needed to support its analysis and its ability to produce updated and timely valuation information. An appendix to the resolution plan would also be required to include a valuation analysis, including a range of quantitative estimates of value, based upon its assumed failure scenario and identified strategy. Where a multiple acquirer exit is chosen as the preferred BDI exit, the analysis would be required to provide valuation estimates based on the net present value of proceeds that may be received under an enterprise valuation based on the disposition of the group A IDI franchise and a sum-of-the-parts analysis that values each IDI franchise component separately. In preparing estimates of value, the group A CIDI would need to consider appropriate valuation approaches and assess whether the valuation should reflect the results of one valuation method or a combination of methods, and provide support for the methods chosen and why other valuation methods were deemed inappropriate. In determining whether one or more valuation approach is appropriate, the CIDI should consider the nature of the business lines of the CIDI as a whole as well as of the particular franchise components that are part of the identified strategy. The valuation approaches should be appropriate to the complexity and size of the CIDI, and the identified strategy. As appropriate, the group A CIDI would be required to discuss the relevance and weight given to the different valuation approaches and methods used.

Under the proposed rule, the valuation analysis also would need to include a qualitative and quantitative analysis of the destruction of franchise value that may result from not transferring any uninsured deposits to a BDI, including a narrative describing any options to mitigate franchise value destruction at different levels of loss to uninsured depositors. To the extent necessary to provide a meaningful quantitative analysis, the group A CIDI would be instructed to make such adjustments to the failure scenario used in the identified strategy to demonstrate the impact on value where losses invade the depositor class in the loss waterfall. The group A CIDI would need to provide a discussion of the assumptions that underlie the analysis, including a brief narrative explanation of factors such as assumptions with respect to depositor behavior. Useful analysis may also consider potential depositor loss levels of 5 percent, 10 percent, and 15 percent. One option that would be permissible under the proposed rule as a possible mitigant to reduce the impact of losses to uninsured depositors is the payment of an advance dividend to uninsured depositors, in an amount reasonably expected to be fully repaid to the FDIC from the disposition of assets during the resolution process.

Section 13(c)(4) of the FDI Act requires any resolution action to be the least-costly to the DIF of all possible resolution options (including payout and liquidation) and directs the FDIC to conduct the least-cost analysis.

The proposed rule would ensure that the burden of performing the least-cost analysis remains with the FDIC. Nevertheless, understanding how a group A CIDI values its assets and business lines provides valuable insight the FDIC can use to conduct an accurate least-cost analysis. A requirement for a group A CIDI to describe its valuation process and provide an actual valuation analysis using the assumed scenario would provide the FDIC with a better understanding of the assumptions and methodologies that can be applied in an actual resolution.

12 U.S.C. 1823(c)(4).

The FDIC invites comments on all aspects of the proposed valuation requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(40) Do commenters believe that the information proposed to be required will be useful to the FDIC in determining cost to the DIF of a bridge strategy for comparison to other available options in the event of a failure? If not, please describe in detail what the commenter believes would be the more useful information and analysis to support the determination of value in the BDI under a range of scenarios.

(41) Do the insured depository institutions that would be group A CIDIs currently have processes to develop the information and analysis that would be required under this provision of the proposal? If not, what additional information or analysis or capabilities would such insured depository

institutions be required to obtain or develop in order to satisfy the proposed requirements concerning valuation to facilitate the FDIC's assessment of least-costly resolution method?

Off-balance-sheet exposures,

located at proposed § 360.10(d)(13). The proposed rule would retain the current rule's requirement, located at 12 CFR 360.10(c)(2)(x), that a CIDI describe any of its material off-balance sheet exposures, including unfunded commitments, guarantees, and contractual obligations; it would specify that a CIDI describe the amount and nature of unfunded commitments. In addition to a non-substantive wording change, the proposed rule would add to the current rule's mapping requirement that CIDIs map material off-balance-sheet exposures to franchise components as well as core business lines and material asset portfolios. This information would support the FDIC's understanding of the franchise components identified in the resolution submission.

Qualified financial contracts,

located at proposed § 360.10(d)(14). Since the adoption of the current rule, the FDIC has continued to develop its capabilities and understandings with respect to derivatives contracts and, more generally, qualified financial contracts, including through information received following the 2017 revisions to the QFC recordkeeping rule, 12 CFR part 371.

In lieu of the current rule's

Trading, derivatives and hedges

subpart,

the proposed rule would seek information about qualified financial contracts (QFCs), which would support and enhance the information provided under the FDIC's QFC recordkeeping rule,

which was adopted after the current rule went into effect. The FDIC is seeking to change the name of this subpart and to require information about QFCs to better align with the FDI Act, which has provisions specific to the treatment of QFCs, and in recognition that the definition of QFCs is somewhat broader than the more limited “derivatives transactions” term that is used in the current rule.

See

82 FR 35599 (July 31, 2017).

12 CFR 360.10(c)(2)(xii).

See generally

12 CFR part 371.

In particular, the focus of this element of the proposed rule would be on the relationship of QFCs to the CIDI's core business lines and franchise components, and how these transactions are integrated with other services provided to customers. The proposed rule would require CIDIs to provide information about their booking models for risk, and how QFCs are used to manage hedging or liquidity needs. This information would help the FDIC to make decisions with respect to transferring QFCs to a BDI, and to better understand the impact of any decision not to transfer certain QFCs. The FDIC has, in the past, exempted this content element for certain CIDIs, with the view that for certain firms, understanding the CIDI's use of QFCs is not a significant element in resolution planning. However, the importance of QFC activities to a line of business is not determined solely on the basis of notional values and varies with the business of the firm. Accordingly, the proposed rule would require this information for all CIDI resolution submissions, with the expectation that where the activity is limited the burden of providing the information will consequently be limited as well.

Unconsolidated balance sheet; entity financial statements,

located at proposed § 360.10(d)(15). The proposed rule would retain the current rule's requirement to provide an unconsolidated balance sheet and consolidating schedules for all material entities that are subject to consolidation with the group A CIDI,

and would add that amounts attributed to entities that are not material entities can be aggregated on the consolidating schedule.

12 CFR 360.10(c)(2)(xiii).

The proposed rule would maintain the requirement that a CIDI provide financial statements for each material entity, and add this requirement with regard to regulated subsidiaries. The proposed rule would also maintain that audited financial statements should be provided where they are available. The FDIC has found that this information is helpful in developing options for sale of franchise components and understanding the financial structure of the organization, and that this information is complementary to the unconsolidated balance sheet and consolidating schedules.

Payment, clearing, and settlement systems,

located at proposed § 360.10(d)(16). The continuity of payment, clearing, and settlement systems is important to stabilizing and continuing operations of a failed CIDI in a BDI, and identification and mapping of these systems would assist the FDIC in identifying whether the entity accessing these systems is part of the CIDI or one of its subsidiaries and thus would be under the control of the BDI, and where there may be a potential for interruption of access or services and a resolution of the CIDI.

Accordingly, the proposed rule would build on the current rule's requirement, located at 12 CFR 360.10(c)(2)(xiv), that a CIDI identify each payment, clearing, and settlement system of which the CIDI is a member or that it indirectly accesses by limiting such identification to each system (including financial market utilities) that is a critical service or a critical service support. The proposed rule would also require CIDIs to map payment, clearing, and settlement system memberships and access (including through correspondent and agent banks or intermediaries) to legal entities, core business lines, and franchise components. CIDIs would also be required to describe the services provided by these systems, including the value and volume of activities on a per-provider basis.

The proposed rule would also require CIDIs to describe payment, clearing, and settlement services they provide as an intermediary, agent, or correspondent bank that are material in terms of revenue to or value of any franchise component or core business line. The information that the proposed rule would require would help the FDIC be aware of these important relationships in resolution and to better understand any impact of interruption of those systems or services.

Capital structure; funding sources,

located at proposed § 360.10(d)(17). Even though information regarding the capital resources available to a CIDI prior to failure is available through supervisory procedures, such resources are likely to be different once the CIDI is placed into receivership. It is generally the case that as a result of receivership appointment, capital is significantly depleted. This is likely the case whether the failure is the result of capital or liquidity issues in light of the temporal constraints of historical cost accounting. Therefore, the proposed rule would require identification of resources that would be available in resolution, including unsecured, non-deposit liabilities of the CIDI at the time of failure. These liabilities are subordinate to deposits and are unlikely to be transferred to a BDI. By causing these liabilities to remain in the receivership as claims against the estate, the BDI's capital resources would be significantly enhanced, which would assist in stabilizing the BDI and increasing optionality for BDI exit. The FDIC believes that such transactions would be more effective in preserving the franchise value of the failed CIDI. As a result, a CIDI with a material amount of the unsecured, non-deposit liabilities would be more likely to be able to devise a credible strategy involving an

all-deposit transaction, potentially both to establish a viable BDI and ultimately in a sale to a third-party acquirer.

Accordingly, the proposed rule would require all CIDIs to provide more detail than is required by the current rule under 12 CFR 360.10(c)(2)(xv). Information regarding the composition of the liabilities of the CIDI and its material entities, including whether the liabilities are publicly issued, and information about maturity and call rights and, where applicable, indenture trustees would be required.

The proposed rule would also build upon the current rule and prior guidance regarding required information about funding. Specifically, the proposed rule would require that a resolution submission describe the current processes used to identify the liquidity and capital needs and resources available to each CIDI subsidiary that is a material entity,

and to describe the CIDI's capabilities to project and report its near-term funding and liquidity needs. It would also require a CIDI to describe material funding relationships and inter-affiliate exposures between the CIDI and its subsidiaries that are material entities. This information would support the FDIC's understanding of the impact of liquidity on divestiture of franchise components, and would inform considerations related to stabilizing the BDI and continuity of operations.

The Statement provided that “the FDIC expects a resolution plan to describe the CIDI's current processes for determining the drivers of liquidity needs.” Statement, p. 8.

The FDIC invites comments on all aspects of the proposed capital structure; funding sources requirements. In particular, the FDIC asks the following question on a specific aspect of the proposal:

(42) The proposed rule would require information about liquidity and capital needs and resources available to each CIDI subsidiary that is a material entity. Should the final rule require this type of information about all entities—regardless of whether they are material entities—that have a regulatory capital and/or liquidity requirement?

Parent and parent company affiliate funding, transactions, accounts, exposures, and concentrations,

located at proposed § 360.10(d)(18). The proposed rule generally would retain the content requirement of the current rule, whose corresponding subpart is located at 12 CFR 360.10(c)(2)(xvi). The proposed rule would make minor technical changes designed to improve and clarify wording and formatting of this subpart and its title, as well as delete the reference to “asset accounts,” which has not proved to be useful information in prior resolution plan submissions.

Effects on U.S. economic conditions,

located at proposed § 360.10(d)(19). The proposed rule would revise the

Systemically Important Functions

informational element required in the current rule. Though the Statement indicated that all CIDIs with $100 billion or more in assets would be exempted from discussing this information in future resolution plan submissions, the FDIC has concluded that such a requirement may provide information that would contribute to the FDIC's resolution planning efforts. Under the proposed rule, CIDIs would be required to identify their activities or business lines that are material (a) to a particular geographic area or regions of the United States, (b) to a particular business sector or product line, or (c) to other financial institutions. The FDIC always seeks to minimize disruptions to customers when it resolves a failed IDI. Better understanding how the interruption of certain services could negatively affect certain geographic regions, industries or other financial institutions should help the FDIC better prepare to avoid disruptions that could have a severe impact on those regions, industries, and institutions. For example, a CIDI may note that it provides a number of transaction account functions like payroll accounts to a large number of customers, serves as a significant lender to a particular industry, or provides PCS services to a number of financial institutions. The more information the FDIC has in advance about these important functions, the better the FDIC can prepare to resolve the CIDI in a way that minimizes disruption. Although the systemic risk exception to the least-cost test was approved in connection with the recent resolutions of SVB and Signature Bank, the FDIC continues to expect to resolve banks under the FDIC without the expectation of that extraordinary action. First Republic was resolved without invoking the exception to the least-cost test requirement. Although particular facts and circumstances, such as macro-economic conditions, risk of contagion, and other factors may support a systemic risk exception for a particular institution or in particular circumstances, those circumstances are not the subject of this requirement. Rather, this content element seeks to understand information specific to the services that the CIDI provides, and whether those services are significant to a particular geographic area, business sector or product line, or other financial institutions.

12 CFR 360.10(c)(2)(xvii).

While this information should be provided by all CIDIs, the level of information provided would be expected to vary based on the size and complexity of the CIDI. For the smaller group B CIDIs, this information may be fairly limited, perhaps only a particular market or sector where the CIDI has a significant presence. Conversely, for the largest group A CIDIs, systemic impact is a significant focus of DFA resolution plans. As discussed below with respect to the credibility assessment of an identified strategy, where the DFA resolution plan of the CIDI's parent company contains relevant analysis and information with respect to the risk of potential adverse effects on U.S. financial stability arising from the failure of a subsidiary group A CIDI, the inclusion of that information by cross-reference is permitted under proposed paragraph (c)(6).

Non-deposit claims,

located at proposed § 360.10(d)(20). The proposed rule would codify and build upon past guidance

regarding non-deposit liabilities to support the FDIC's effective and efficient management of non-deposit claims in resolution, including identifying claims and notifying claimants. Related to the requirement in proposed § 360.10(d)(17) (

Capital structure; funding sources

) to describe material components of the CIDI's and material entities' short-term and long-term liabilities, including unsecured debt, the proposed rule would also require a CIDI to identify and describe its capabilities to identify the non-depositor unsecured creditors of the CIDI and its subsidiaries that are material entities. The proposed rule would also require a description of how the CIDI would identify all non-depositor unsecured liabilities, including contingent liabilities like guarantees and letters of credit, as well as the location of the CIDI's related records and its recordkeeping practices.

Statement, p. 8.

Cross-border elements,

located at proposed § 360.10(d)(21). The proposed rule would maintain and build on the information required in the current rule, but proposes organizational improvements and to require certain information that would provide additional context about the required content.

In general, in the proposed rule, cross-border elements are addressed in connection with the relevant content areas in various subparts. Specifically,

cross-border elements are addressed in the discussion of

Organizational structure; legal entities; core business lines and branches;

foreign deposits are referenced in connection with

Overall deposit activities;

and critical services located outside the United States are referenced in

Critical services,

among other references. Proposed § 360.10(d)(21) would be retained to provide context to that other information by requiring that a resolution submission describe components of cross-border activities of the parent company or parent company affiliates that contribute to value, revenues, or operations of the CIDI. Where the CIDI has a significant interest (

e.g.,

a controlling interest or a significant economic interest) in a foreign joint venture that contributes value to revenue or operations of the CIDI, that should be included. Entities with no meaningful function or contribution to the CIDI's operations, such as single purpose real estate holding companies, should be excluded.

The proposed rule would also require that a resolution submission identify regulatory or other impediments to divestiture, transfer, or continuation of foreign branches, subsidiaries or offices while the CIDI is in resolution, including regarding retention or termination of personnel, or impediments or necessary actions to transfer the CIDI's interest in the entity, such as approvals or restrictions on transfer of a license or other authorization.

The FDIC invites comments on all aspects of the proposed revised cross-border elements requirements. In particular, the FDIC asks the following question on a specific aspect of the proposal:

(43) Does it capture the information that would be most useful to the FDIC in its resolution planning? If there is different or additional information that would be useful, please describe it and explain how it would be helpful in resolution readiness.

Management information systems; software licenses; intellectual property,

located at proposed § 360.10(d)(22). The proposed rule would retain the current rule's requirement, located at 12 CFR 360.10(c)(2)(xix), to identify and describe each key management information system and application, and would add the requirement that a CIDI identify both any core business line that uses it, and the personnel needed to operate it. Each group A CIDI would also be required to identify each system's and application's use and function, which core business lines use it, and its physical location, if any. The proposed rule would also require a resolution submission to specifically identify key systems or applications the CIDI or its subsidiary does not own or license directly from the provider, and to discuss how access to the system or application can be maintained when the CIDI is in resolution. These changes would enhance the content required with respect to management information systems, software licenses, and intellectual property, with a focus on how to assure that these systems can be maintained in a BDI or receivership if necessary. Finally, the proposed rule would require describing the capabilities of the CIDI's processes and systems to collect, maintain, and produce the information and other data underlying the resolution submission. A CIDI would be required to identify all relevant systems and applications, and to describe how the information is managed and maintained. For example, the resolution submission must describe if the information is centralized or organized by region or business line, whether it is automated or manual, and whether the applicable system or application is integrated with other of the CIDI's systems or applications.

The proposed rule would delete the current rule's requirement to identify and discuss any disaster recovery or other backup plans;

this information is addressed through supervisory processes.

12 CFR 360.10(c)(2)(xix).

Digital services and electronic platforms,

located at § 360.10 (d)(23), would be a new content element. The role of digital services and electronic platforms and related services provided to retail and commercial customers has increased dramatically since the current rule was adopted. A better understanding of the value of these services, their impact on customer relationships, and the potential challenges to continuing those services in resolution will be helpful to the FDIC in its resolution planning.

The FDIC invites comments on all aspects of the proposed digital services and electronic platforms requirements. In particular, the FDIC asks the following question on a specific aspect of the proposal:

(44) Does it capture the information that would be most useful to the FDIC in its resolution planning? If there is different or additional information that would be useful, please describe it and explain how it would be helpful in resolution readiness.

Communications playbook,

located at proposed § 360.10(d)(24), would codify and build upon previous guidance. As explained in the Statement,

the FDIC has found that, during a resolution, the timely provision of accurate information can reduce adverse market reaction and address employee and other stakeholder concerns about a CIDI's failure and resolution that could impede an orderly resolution. Therefore, it is important that the FDIC understand a CIDI's communications capabilities, and that a CIDI have a communications strategy that the FDIC could employ as part of the FDIC's communications plan to help mitigate obstacles to the orderly resolution of a CIDI. Accordingly, the proposed rule would require a resolution plan to include a communications playbook describing the CIDI's current communications capabilities and how those capabilities could be used from the point of the CIDI's failure through its resolution.

Statement, p. 5.

The FDIC invites comment on all aspect of the proposed communications playbook requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(45) Is the request clear and would the information be appropriate to the FDIC's goal of establishing a comprehensive communications plan for important stakeholders over closing weekend and throughout the resolution?

(46) Is there additional or different content that is specific to the communication challenges in resolution that CIDIs have or may develop that would be helpful and important to include in resolution submissions?

Corporate governance,

located at proposed § 360.10(d)(25). Other than technical edits, this subpart of the proposed rule would largely be identical to the corresponding subpart of the current rule, located at 12 CFR 360.10(c)(2)(xx). However, the proposed rule would eliminate the current rule's requirement to identify and list the position of the senior management official of the CIDI who is primarily responsible and accountable for the implementation of the resolution submission. In practice, the benefits to the FDIC from this information were minimal and did not warrant the burden on CIDIs of preparing and providing this information.

CIDI's assessment of the resolution submission,

located at proposed § 360.10(d)(26). The proposed rule would retain the current rule's requirement, located at § 360.10(c)(2)(xxi), that a CIDI provide a description of any contingency planning or similar exercise it had conducted since its most recently filed resolution submission that assesses the viability of

or improves the resolution submission. While neither the current nor the proposed rule would require any such assessment or contingency planning or similar exercise, such assessments are useful practice and the FDIC benefits from a description of the nature, extent, and results of any such activities.

The Statement exempted all CIDIs from including information required by this subpart, but in reflecting on resolution plan submissions received, the FDIC has found that information regarding exercises, such as simulations, tabletops, or other tools for self-assessment of resolution plans, processes, and capabilities is helpful to the FDIC. The assessment would be limited to requiring CIDIs to describe contingency planning or exercises they have done or plan to do; it would not require CIDIs to conduct these types of activities, so the associated burden would be limited.

Any other material factor,

located at proposed § 360.10(d)(27). The proposed rule would make a non-substantive wording change for clarity and readability. Otherwise, this requirement is the same as the corresponding subpart in the current rule, which is located at 12 CFR 360.10(c)(2)(xxii).

In addition to the changes already noted, the proposed rule would delete the following subparts in the current rule:

Strategy for the Sale or Disposition of Deposit Franchise, Business Lines and Assets,

located at 12 CFR 360.10(c)(2)(vi). As noted above, this content element is superseded by the proposed franchise components subpart at proposed § 360.10(d)(10).

Least Costly Resolution Method,

located at 12 CFR 360.10(c)(2)(vii). As discussed above, the proposed rule would replace this subpart with proposed § 360.10(d)(11).

Asset Valuation and Sales,

located at 12 CFR 360.10(c)(2)(viii). The proposed rule would delete the entire subpart, codifying the exemption provided to all CIDIs as described in the Statement. The most useful concepts related to valuation have been included in the discussion of valuation to support the least-cost test analysis, as discussed above. Also as discussed above, the rule as proposed would not require analysis under baseline and adverse scenarios. Accordingly, this section is omitted as being duplicative in part, and in part because the burden on CIDIs exceeds the benefit of the information to the FDIC's resolution planning.

Major Counterparties,

located at 12 CFR 360.10(c)(2)(ix). The proposed rule would delete this subpart, codifying the exemption provided to all CIDIs as described in the Statement. The FDIC believes that the burden of this subpart's requirements generally outweighs their utility for the FDIC planning for the resolution of CIDIs. In some cases, relevant information is provided in connection with other content areas, such as payment clearing and settlement systems; in other cases it can be obtained through supervisory or other information channels.

Collateral Pledged,

located at 12 CFR 360.10(c)(2)(xi). The proposed rule would delete this subpart, codifying for all CIDIs the exemption provided to many CIDIs as described in the Statement. The FDIC believes that the burden of this subpart's requirements generally outweighs their utility for the FDIC planning for the resolution of CIDIs because it can be obtained through supervisory or other information channels.

The FDIC invites comment on all aspects of the proposed submission requirements. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(47) Are the proposed submission requirements clear and appropriate to the goals of the proposed rule? Do they seek information that CIDIs can provide or, with reasonable effort, could develop the capabilities to provide?

(48) Would additional or different requirements in any of these or other topical areas better facilitate the FDIC's efforts to plan for and execute an orderly resolution of a failed CIDI?

(49) Should the FDIC retain any of the requirements proposed to be eliminated, potentially with modifications?

As noted above in section II, the current rule was adopted in 2011 through an interim final rule and finalized the following year.

At that time, all IDIs with total assets of $50 billion or more were subject to the submission of a resolution plan under the current rule. This scope of the rule has not changed to the present day, although no resolution plan submission has been made by a CIDI with total assets of at least $50 and less than $100 billion since 2018, and a moratorium on filings by those firms remains in effect. The FDIC has considered whether to require resolution plans from group B CIDIs, whether they should be permanently exempted from any resolution submission requirement, or whether a reduced filing requirement is appropriate for these CIDIs. For the reasons discussed below, the FDIC would not require group B CIDIs to submit a resolution plan under the proposed rule, but would have a requirement for an informational filing by the group B CIDIs.

See generally

Resolution Plans Required for Insured Depository Institutions with $50 Billion or More in Total Assets, 77 FR 3075 (Jan. 23, 2012).

The size of an institution significantly impacts the FDIC's options for resolution. A significant constraint on the FDIC's ability to resolve large institutions is the limited set of institutions that could acquire an entire large institution. In the FDIC's experience, generally an institution of significantly greater size is the most likely potential acquirer of a failed IDI. In light of the fact that the group B CIDIs are smaller than the group A CIDIs, there are more potential acquirers. The FDIC is obligated by statute to find the least-costly resolution, which may well be a whole-bank sale immediately at failure. However, despite group B CIDIs' smaller size, that option may not be available. Where there is no acquirer for a transaction that meets the least-cost requirement, the establishment of a BDI may be necessary, either to facilitate a whole-bank sale or a range of other exit options.

A group B CIDI is a very large institution, and resolving such an institution will pose significant challenges. In order to be able to complete a sale at closing, the FDIC would need much of the same information regarding the group B CIDI and its operations as the FDIC is seeking regarding group A CIDIs. However, the FDIC wishes to better balance the burden on group B CIDIs and proposes exempting informational filings from including the following informational elements: Identified strategy (proposed § 360.10(d)(1)), Failure scenario (proposed § 360.10(d)(2)), Executive summary (proposed § 360.10(d)(3)), and Valuation to facilitate FDIC's assessment of least-costly resolution method (proposed § 360.10(d)(12)). The FDIC believes exempting these informational elements from group B CIDIs' informational filings strikes the right balance between providing the FDIC with information needed to facilitate resolution planning efforts and calibrating the compliance burden. Furthermore, the engagement provision of the proposed rule would provide the FDIC with an avenue to establish ongoing dialogue with institutions regarding the informational filing's content, including how the information may be considered when vetting potential resolution strategies.

The FDIC invites comments on all aspects of the proposed informational filing requirements for group B CIDIs. In particular, the FDIC asks the following questions on specific aspects of the proposal:

(50) Do commenters believe there are any proposed information requirements for group B CIDIs that should not be included in the proposed requirements for informational filings? If so, please explain which proposed information requirements should not be included for group B CIDIs and why the information requirements should not be included for group B CIDIs.

(51) Do commenters believe that any information requirements that are not proposed for group B CIDIs should be included in the proposed information requirements? If so, please explain what those information requirements are and why the information requirements should be included for group B CIDIs.

(52) Do commenters believe that the informational requirements relevant to group B CIDIs constitute information that those CIDIs regularly use as part of business-as-usual operations? If not, what specific informational requirements would be burdensome to group B CIDIs to produce?

(53) Do commenters believe that there are any barriers that would prevent group B CIDIs from complying with one or more of the proposed information requirements? If so, please explain why the barriers would prevent group B CIDIs from complying with one or more proposed information requirements and suggest any alternative approaches that would facilitate compliance.

e. Interim Supplement

The FDIC is proposing a new requirement for CIDIs to submit limited interim supplements in the years that a CIDI is not required to provide a resolution submission. This interim supplement is intended to provide current and accurate information regarding a limited subset of the resolution submission content items, focusing on those informational elements where more current information is especially useful, and where updating and producing that information can be accomplished with limited burden year over year. While the purpose of the interim supplement is to update and supplement information, the FDIC is proposing to require complete information for each content item in each interim supplement regardless of whether the information has changed from the CIDI's previous resolution submission for ease of access in the event of a CIDI failure. This interim supplement requirement is separate and distinct from the proposed requirements related to notice of material change under proposed paragraph (c)(4) or engagement and capabilities testing under proposed paragraph (g) and would not in any way limit those requirements.

Under proposed paragraph (e)(1), each CIDI would be required to submit an interim supplement to the FDIC on the one-year anniversary (or the first business day after the one-year anniversary if the anniversary falls on a non-business day) of the CIDI's most recent resolution submission, as determined by the proposed resolution submission timing requirements under proposed paragraph (c), unless the CIDI receives written notice from the FDIC establishing a different interim supplement submission date. No interim supplement would be required in a year in which a CIDI makes a timely resolution submission. The FDIC notes that the discussion of transition below in section III.E.8 describes the expectation that CIDIs that are not in the first cohort of CIDIs to file a resolution submission under amended § 360.10 would be required to supplement and update their most recent resolution submission under the cur

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