Notice of Proposed Rulemaking on Resolution Plans Required for Insured Depository Institutions with $100 Billion or More in Total Assets

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August 29, 2023

MEMORANDUM TO:

The Board of Directors

FROM:

James L. McGraw, Acting Director

Division of Complex Institution Supervision & Resolution

Maureen E. Sweeney, Director

Division of Resolutions and Receiverships

SUBJECT:

Proposed Amendments to 12 C.F.R. § 360.10 –

Notice of Proposed Rulemaking

I.

SUMMARY OF RECOMMENDATIONS:

This Memorandum concerns a notice of proposed rulemaking (“Proposal”) to amend and

restate the current resolution plan rule (“Rule”)1 promulgated by the Federal Deposit Insurance

Corporation (“FDIC”) under authority of the Federal Deposit Insurance Act (“FDI Act”). The

Rule currently requires insured depository institutions (“IDIs”) with $50 billion or more in total

assets (“CIDIs”) periodically to submit resolution plans (“Current Rule Plans”) to the FDIC. The

Proposal is intended to clarify and enhance submission requirements and reflect lessons learned

since the Rule was finalized in 2012. The Proposal includes the following proposed

modifications to the Rule: (1) creating two groups of CIDIs with different submission content

requirements; (2) adjusting required content including with respect to the resolution strategy, and

codifying certain aspects of previously-issued guidance and feedback; (3) establishing a clear,

two-prong standard by which resolution submissions will be assessed; (4) adjusting the

frequency of submissions to a two-year cycle, which will include engagement and capabilities

testing; and (5) introducing an “interim supplement” requiring certain key content elements to be

1 Codified at 12 C.F.R. § 360.10.

rtain aspects of previously-issued guidance and feedback; (3) establishing a clear,

two-prong standard by which resolution submissions will be assessed; (4) adjusting the

frequency of submissions to a two-year cycle, which will include engagement and capabilities

testing; and (5) introducing an “interim supplement” requiring certain key content elements to be

1 Codified at 12 C.F.R. § 360.10.

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provided by all CIDIs in the year between submissions to ensure the availability of updated

information.

Staff recommends that the Board of the FDIC (the “Board”) take the following actions:

A.

Approve the Notice of Proposed Rulemaking, attached to this Memorandum as

Attachment 2, and authorize its publication in the Federal Register for a comment period

ending on November 30, 2023.

B.

Authorize the General Counsel, or designee, and the Executive Secretary, or

designee, to make technical, non-substantive or conforming changes to the draft Federal Register

document to prepare it for publication.

II.

BACKGROUND

The Rule currently requires each CIDI periodically to submit a resolution plan that, in the

event of its failure, should enable the FDIC to resolve the CIDI under the FDI Act. The Rule is

intended to ensure that the FDIC has access to all of the material information it needs to resolve

efficiently a CIDI in the event of its failure.

Since issuing the Rule in 2012, the FDIC and CIDIs have been through multiple plan

submissions, and the FDIC has provided information to CIDIs to improve their submissions. In

2014, the FDIC issued publicly a Board-approved document that provided clarification,

guidance, and direction for the preparation of all subsequent submissions.2 In addition, following

each submission, the FDIC has issued feedback letters to CIDIs that included information about

the expected contents of the subsequent submission

as provided information to CIDIs to improve their submissions. In

2014, the FDIC issued publicly a Board-approved document that provided clarification,

guidance, and direction for the preparation of all subsequent submissions.2 In addition, following

each submission, the FDIC has issued feedback letters to CIDIs that included information about

the expected contents of the subsequent submission. During this period, the Board extended the

period for submissions on multiple occasions, reducing the frequency of submissions from the

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

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

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annual requirement provided in the Rule. Experience indicated that a one-year period was

insufficient for the FDIC to review the submissions and develop and disseminate feedback, and

for CIDIs to incorporate that feedback into subsequent submissions.

In 2018, the FDIC announced that the FDIC would be pausing the Current Rule Plan

submission requirement.3 The following spring, the Board formalized this moratorium

(“Moratorium”) on the Rule’s requirements for all CIDIs, pending completion of a new

rulemaking.4 At the time, the FDIC also published an advance notice of proposed rulemaking

(“ANPR”).5 Among other things, the ANPR requested comment on how to tailor and improve

the Rule, including whether requirements should be tiered based on size of the IDI or complexity

factors. It also requested comment on potential enhancement of engagement and capabilities

testing

g completion of a new

rulemaking.4 At the time, the FDIC also published an advance notice of proposed rulemaking

(“ANPR”).5 Among other things, the ANPR requested comment on how to tailor and improve

the Rule, including whether requirements should be tiered based on size of the IDI or complexity

factors. It also requested comment on potential enhancement of engagement and capabilities

testing.

In January 2021, the Board lifted the Moratorium on submissions for CIDIs with $100

billion or more in total assets.6

On July 25, 2021, the FDIC issued the Statement on Resolution Plans for Insured

Depository Institutions (“2021 Statement”), which described how the FDIC planned to

implement certain aspects of the Rule with respect to CIDIs with $100 billion or more in total

assets (“specified CIDIs”).7 Among other things, the 2021 Statement discussed certain content

3 See Keynote Remarks by Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation, to 2018 Annual

Conference of The Clearing House (TCH) and Bank Policy Institute (BPI (Nov. 28, 2018), available at

https://www.fdic.gov/news/speeches/2018/spnov2818.html.

4 See Board Resolution No. 085874 (Apr. 16, 2019); see also 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.

5 See 12 Fed. R. 16620 (Apr. 22, 2019).

6 See Board Resolution No. 086949 (Jan. 19, 2021).

7 See https://www.fdic.gov/resources/resolutions/resolution-authority/idi-statement-06-25-2021.pdf.

d. 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.

5 See 12 Fed. R. 16620 (Apr. 22, 2019).

6 See Board Resolution No. 086949 (Jan. 19, 2021).

7 See https://www.fdic.gov/resources/resolutions/resolution-authority/idi-statement-06-25-2021.pdf.

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requirements and anticipated content exemptions, and noted the expectation of a three-year

submission frequency.

Following issuance of the 2021 Statement, the FDIC notified the specified CIDIs of the

due dates for their next submissions. Twenty-one submissions were received on December 1,

2022; one was submitted on June 30, 2023; and plans for the U.S. global systemically important

banks are due on or before December 1, 2023.8

In recent months, the FDIC resolved Silicon Valley Bank (“SVB”), Signature Bank, and

First Republic Bank (“First Republic”). Initial IDI resolution plans had been received a few

months earlier for SVB and First Republic; Signature had not yet filed a plan. This was SVB’s

initial submission. First Republic had not submitted a plan since 2018, when it was a much

smaller bank.

In developing the proposed modifications, staff incorporated the FDIC’s more than a

decade of experience implementing the Rule, the guidance and feedback provided to CIDIs, the

Current Rule Plan content that has proven most useful to the FDIC in developing resolution

strategies, and lessons learned from the recent resolutions of SVB, Signature Bank, and First

Republic.

Part of the challenge in developing an approach to resolution planning arises from the

wide range of business models and structures among CIDIs. Staff’s development of resolution

strategies for CIDIs, including the assessment of options and trade-offs, benefits from the CIDI’s

knowledge of its own institution, understanding its relevant capabilities, and awareness of the

impediments to executing an orderly resolution of the CIDI

an approach to resolution planning arises from the

wide range of business models and structures among CIDIs. Staff’s development of resolution

strategies for CIDIs, including the assessment of options and trade-offs, benefits from the CIDI’s

knowledge of its own institution, understanding its relevant capabilities, and awareness of the

impediments to executing an orderly resolution of the CIDI. Across the different CIDI business

8 Two additional CIDIs, Northern Trust Company and First-Citizens Bank and Trust Company, have been notified

that they must submit resolution plans on or before December 1, 2024; staff expects that date will be adjusted to

align with the first group of submissions after the revised rule is finalized by appropriate notice consistent with the

amended rule.

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models and structures, there are a variety of factors that increase the challenges and complexity

of a CIDI’s resolution. For example, in general, CIDIs tend to have a more significant proportion

of uninsured deposits as compared to smaller banks, and high ratios of uninsured deposits

increase resolution challenges. SVB, Signature Bank, and First Republic each maintained a

deposit base that was largely uninsured.9

An IDI’s size also can significantly affect the resolution options available to the FDIC,

and be a marker for other resolution challenges, such as organizational complexity. In particular,

as IDIs increase in size, the likelihood of a timely sale to a single acquirer diminishes. While a

closing weekend sale of the whole institution may be an option in some cases, its availability

cannot be assumed given a CIDI’s significant size, complexity, and potential speed of failure.

This is particularly true for the largest CIDIs because the pool of potential acquirers for these

institutions is limited, and the complexity of any possible transaction is increased

rer diminishes. While a

closing weekend sale of the whole institution may be an option in some cases, its availability

cannot be assumed given a CIDI’s significant size, complexity, and potential speed of failure.

This is particularly true for the largest CIDIs because the pool of potential acquirers for these

institutions is limited, and the complexity of any possible transaction is increased. While there

may be a larger pool of potential acquiring institutions for CIDIs with below $100 billion in total

assets and a longer runway with robust pre-planning may improve the likelihood of a closing

weekend whole bank sale, some of these institutions engage in highly complex activities and

pose similar levels of operational complexity as those with over $100 billion in total assets. As

such, these activities must be identified and considered when contemplating resolution strategies.

In developing the Proposal, staff also considered proposed guidance for certain bank

holding companies that submit resolution plans pursuant to Title I of the Dodd-Frank Wall Street

Reform and Consumer Protection Act. Certain CIDIs are within the expected scope of that

guidance. Staff also took into account another notice of proposed rulemaking that would require

9 As of December 31, 2022, SVB reported 94 percent of its domestic deposits were uninsured; its total assets were

approximately $209 billion. Signature Bank reported 90 percent uninsured deposits and total assets of approximately

$110 billion. First Republic reported 68 percent uninsured deposits and total assets of approximately $213 billion.

9 As of December 31, 2022, SVB reported 94 percent of its domestic deposits were uninsured; its total assets were

approximately $209 billion. Signature Bank reported 90 percent uninsured deposits and total assets of approximately

$110 billion. First Republic reported 68 percent uninsured deposits and total assets of approximately $213 billion.

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the issuance of debt by certain bank holding companies and certain of their subsidiary IDIs.

CIDIs with at least $100 billion in total assets are expected to be in scope for that rulemaking.

Both of these other matters are expected to be presented for the Board’s consideration

contemporaneously with the Proposal.

III.

DISCUSSION

A.

Certain Key Aspects of the Proposal

1.

Creation of Two Filing Groups

The Proposal would retain the Rule’s applicability threshold of $50 billion or more in

total assets. It would divide CIDIs into two filing groups based on the average assets reported in

the institution’s four most recent Reports of Condition and Income. IDIs with $100 billion or

more in total assets would be “Group A CIDIs,” while IDIs with at least $50 billion but less than

$100 billion in total assets would constitute the “Group B CIDIs.” For Group B CIDIs, this

would be a notable change as the Moratorium has remained in place for these CIDIs.

Attachment 3 identifies the current Group A CIDIs and Group B CIDIs.

Under the Proposal, each filing group would be subject to distinct obligations. Group A

CIDIs would be required to submit complete resolution plans containing all content elements

described in the Proposal (“Proposed Rule Resolution Plans”), including two items discussed in

more detail below: (1) a resolution strategy appropriate for the CIDI’s orderly and efficient

resolution and (2) a demonstration of the capabilities necessary to produce valuations that the

FDIC could use to conduct the statutorily required least-cost analysis at the time of an actual

failure

ements

described in the Proposal (“Proposed Rule Resolution Plans”), including two items discussed in

more detail below: (1) a resolution strategy appropriate for the CIDI’s orderly and efficient

resolution and (2) a demonstration of the capabilities necessary to produce valuations that the

FDIC could use to conduct the statutorily required least-cost analysis at the time of an actual

failure. Group B CIDIs would be required to submit an “Informational Filing.” A resolution

strategy and valuation capabilities would not be required for Informational Filings.

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If the Proposal is adopted in a form that requires submissions from some or all Group B

CIDIs, staff would recommend that the Board lift the Moratorium in its entirety concurrently

with approving and adopting the final revised Rule.

2.

Enhancement of Engagement and Capabilities Testing

The Proposal would amend existing requirements to clarify the FDIC’s expectations

regarding engagement between the CIDIs and the FDIC and regarding capabilities testing, with

the objective of enhancing the usefulness of both exercises to the FDIC’s resolution planning.

Staff has found that engagement with a CIDI helps improve staff’s understanding of the

resolution submission’s content and challenges the FDIC may face in resolving the CIDI.

Engagement may also help staff evaluate the current feasibility of implementing a resolution

strategy tailored to the particular CIDI. Capabilities testing would enable the FDIC to confirm

that the CIDI has the capabilities described in a submission and enhance the FDIC’s

understanding of how those capabilities may apply across a range of failure scenarios and

strategic options that the FDIC might undertake in an actual failure. Enhanced engagement and

capabilities testing could also supplement information contained in the submission, thereby

creating knowledge that staff could use to develop more effective resolution strategies for the

particular CIDI or for CIDIs generally

of how those capabilities may apply across a range of failure scenarios and

strategic options that the FDIC might undertake in an actual failure. Enhanced engagement and

capabilities testing could also supplement information contained in the submission, thereby

creating knowledge that staff could use to develop more effective resolution strategies for the

particular CIDI or for CIDIs generally.

For engagement, the Proposal would require the CIDI to provide the FDIC such

information and access to CIDI personnel that the FDIC determines are relevant to any provision

of the Rule. This requirement to engage is similar to the current Rule requirement but establishes

more clearly that such information and personnel access would be at the discretion of the FDIC

and would not be limited as it currently is to information and personnel access “necessary to

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assess the credibility of the resolution plan and the ability of the CIDI to implement the

resolution plan.”10

For capabilities testing, under the Proposal, the FDIC could require a CIDI to

demonstrate that it can perform the capabilities described, or required to be described, in a

submission. This would include the CIDI’s ability to provide the information, data, and analysis

underlying the submission, similar to the current requirement in the Rule. The Proposal would

clarify, however, that capabilities testing may require a CIDI to demonstrate any capability

described in the submission or required under the Rule.

3.

Enforcement

The Proposal is also intended to bolster the enforceability of the Rule. Previously, the

FDIC issued guidance for the Rule, the most recent of which is the 2021 Statement, which

superseded all prior guidance. Guidance in any form does not have the force of law and,

therefore, is not enforceable.11 Incorporating into the Rule expectations that have been suggested

in guidance would align FDIC expectations for submissions with an enforceable regulatory

requirement

e. Previously, the

FDIC issued guidance for the Rule, the most recent of which is the 2021 Statement, which

superseded all prior guidance. Guidance in any form does not have the force of law and,

therefore, is not enforceable.11 Incorporating into the Rule expectations that have been suggested

in guidance would align FDIC expectations for submissions with an enforceable regulatory

requirement.

In addition, the Proposal clarifies that if a CIDI fails to resubmit within the prescribed

timeline or if a resubmitted submission fails to adequately address identified weaknesses, the

CIDI could be subject to enforcement action. Lastly, the Proposal clarifies that any violation of

the Rule may, at the FDIC’s discretion, subject a CIDI to enforcement action under section 8 of

the FDI Act, including backup enforcement action pursuant to section 8(t). While the provision

10 12 C.F.R. § 360.10(d)(1).

11 See Statement Clarifying the Role of Supervisory Guidance, 12 C.F.R. § 302, Appendix A (Mar. 2, 2021).

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would add language, it would not constitute a substantive change and would not add to the

FDIC’s existing enforcement authority or power.

4.

Selection of Suitable Submission Cycle

As noted above, experience has shown that an annual submission cycle provides

insufficient time for its component steps of plan development, submission, review, and the

provision of feedback. At the same time, recent experience has underscored the need for timely

information, particularly where the runway to resolution is short. The Proposal balances these

concerns by requiring a comprehensive submission – a Resolution Plan for Group A CIDIs or an

Informational Filing for Group B CIDIs – and an interim supplement on a two-year cycle, rather

than the annual cycle in the Rule or the three-year cycle expectation communicated in the 2021

Statement

timely

information, particularly where the runway to resolution is short. The Proposal balances these

concerns by requiring a comprehensive submission – a Resolution Plan for Group A CIDIs or an

Informational Filing for Group B CIDIs – and an interim supplement on a two-year cycle, rather

than the annual cycle in the Rule or the three-year cycle expectation communicated in the 2021

Statement. Key information would be updated by the interim supplement that would be required

on the one-year anniversary of a CIDI’s most recent comprehensive submission and would be

composed of a limited subset of the content items required in those submissions. Attachment 4

compares the proposed content requirements applicable to each type of filing.

In addition, under the Proposal, the FDIC would retain the authority to set and change the

submission dates, including to shorten or lengthen the period between submissions. The

preamble explains that the FDIC expects to provide timely notice of a different schedule that

accommodates sufficient time for preparation of the submission; historically, the FDIC has

provided advance notice of any such change at least one year before the submission due date.

Staff believes that this amount of notice would provide ample time for a CIDI to develop its

submission under ordinary circumstances, and that, under appropriate conditions, this timeline

could be accelerated.

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B.

Other Aspects of the Proposal

The Proposal includes the following additional proposed modifications to the Rule as

interpreted by prior guidance.

1.

Credibility

The Proposal contains credibility criteria that would update and clarify the objectives and

standards of review under the Rule, which would in turn facilitate the FDIC’s ability to

determine the credibility of a submission. The Proposal sets out a two-prong approach to

credibility

s the following additional proposed modifications to the Rule as

interpreted by prior guidance.

1.

Credibility

The Proposal contains credibility criteria that would update and clarify the objectives and

standards of review under the Rule, which would in turn facilitate the FDIC’s ability to

determine the credibility of a submission. The Proposal sets out a two-prong approach to

credibility. The first prong applies only to an “identified strategy” and therefore, as discussed

below, applies only to the Proposed Rule Resolution Plans to be submitted by Group A CIDIs.

Prong one provides that a submission is not credible if its identified strategy 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 CIDI in resolution, and address potential risks of

adverse effects on U.S. economic conditions or financial stability.

The second prong applies to the submissions of both Group A CIDIs and Group B CIDIs.

Under this prong, a submission is not credible if the information and analysis in it are not

supported with observable and verifiable capabilities and data, and reasonable projections, or if

the CIDI fails to comply in any material respect with the requirements of the Proposal. This

second prong is similar to the standard of review under the current Rule, which provides that a

Current Rule Plan is credible “if its strategies for resolving the CIDI, and the detailed

information required by this section, are well-founded and based on information and data related

to the CIDI that are observable or otherwise verifiable and employ reasonable projections from

current and historical conditions within the broader financial markets.”12 Staff believes that the

12 12 C.F.R. § 360.10(c)(4)(i).

CIDI, and the detailed

information required by this section, are well-founded and based on information and data related

to the CIDI that are observable or otherwise verifiable and employ reasonable projections from

current and historical conditions within the broader financial markets.”12 Staff believes that the

12 12 C.F.R. § 360.10(c)(4)(i).

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proposed change to the credibility standard is appropriate and will be helpful to CIDIs in the

development of their submissions as it more clearly sets forth the expectation with respect to the

identified strategy, the supporting information and analysis, and the required capabilities.

2.

Strategy

The content requirements under the current Rule include several “strategy”

components.13 Over the years, these provisions have been a source of confusion that the FDIC

has addressed on multiple occasions through guidance and feedback. In considering prior

submissions that have been most useful to the FDIC, staff concluded that certain strategic

approaches to resolution, while feasible under certain circumstances, did not provide the depth of

information and the optionality that best supports the FDIC in the resolution of a CIDI. This is

particularly true because a future failure scenario likely will be materially different than the one

developed for the resolution plan submission. Building on this experience, the Proposal would

require each Group A CIDI to provide an “identified strategy” that the FDIC could implement to

effect the Group A CIDI’s resolution. This requirement includes the development of a strategy

that must describe the resolution from the point of failure through sale or disposition of the

CIDI’s franchise and must meet the first prong of the credibility standard

n this experience, the Proposal would

require each Group A CIDI to provide an “identified strategy” that the FDIC could implement to

effect the Group A CIDI’s resolution. This requirement includes the development of a strategy

that must describe the resolution from the point of failure through sale or disposition of the

CIDI’s franchise and must meet the first prong of the credibility standard. The Proposal would

establish as the default identified strategy one that would provide for the establishment and

stabilization of a BDI and an exit strategy from the BDI, such as a multiple acquirer exit; an

orderly wind down of certain business lines and asset sales; or 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 (“BDI Strategy”). While

13 See 12 C.F.R. § 360.10(c)(2)(vi) & (vii).

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recognizing that this approach may not be taken in all circumstances, the BDI Strategy provides

information and analysis that would support this option if needed.

At the same time, the FDIC recognizes that for some firms an alternative strategy, such as

a payout and liquidation of the bank or transferring some but not all business lines and assets to a

BDI and liquidating others in a receivership, may be more appropriate for the businesses and

organizational structure of a particular Group A CIDI. The Proposal would permit the use of an

identified strategy other than the BDI Strategy if the alternative strategy meets certain specified

criteria.14 The Proposal would require any strategy to include meaningful optionality for

execution across a range of scenarios. Under the Proposal, however, a CIDI would not be

permitted to use as its identified strategy a closing weekend sale of the franchise to one or more

acquirers

se of an

identified strategy other than the BDI Strategy if the alternative strategy meets certain specified

criteria.14 The Proposal would require any strategy to include meaningful optionality for

execution across a range of scenarios. Under the Proposal, however, a CIDI would not be

permitted to use as its identified strategy a closing weekend sale of the franchise to one or more

acquirers. While such a transaction poses the least execution risk for the FDIC, and is often the

least disruptive and most efficient, it may not be available, particularly for the largest CIDIs of

$100 billion or more in total assets, and particularly where the runway for contingency planning

for resolution is short. The development of this strategy is less useful to the FDIC in the event

that option is not available, as it does not provide the robust information, capabilities and

analysis to allow for development and execution of alternative strategies.

The Proposal does not require that the Group B CIDIs provide an identified strategy. The

relatively smaller size of Group B CIDIs expands the pool of possible purchasers and increases

the likelihood of a sale of the franchise as a whole. Typically, an acquiring institution is the same

size or greater than the failing IDI. For assets that are not sold to an assuming institution, most

asset classes would not have a protracted sales timeline based on market absorption rate (daily

trading volume or total market capital). Moreover, private capital for certain asset classes are

14 The Proposal would not permit any identified strategy to be based upon the sale of substantially all assets and

liabilities over closing weekend.

ost

asset classes would not have a protracted sales timeline based on market absorption rate (daily

trading volume or total market capital). Moreover, private capital for certain asset classes are

14 The Proposal would not permit any identified strategy to be based upon the sale of substantially all assets and

liabilities over closing weekend.

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more likely to be raised and would not require significant financing. Overall, Group B CIDIs

should experience fewer limitations on market absorption or acquisition size given the overall

size of the balance sheet, and would be less likely to require a longer term BDI to facilitate a

multiple acquirer exit. For Group B CIDIs, the focus of the Informational Filing will support

such a resolution, and the development of an identified strategy will be less important.

3.

Failure Scenario

Staff has observed through years of reviewing Current Rule Plans that assumptions about

the condition of the CIDI when it fails determine to a large extent the usefulness of a resolution

strategy across a range of scenarios. Accordingly, the Proposal would add detail to the Rule

concerning the failure scenario. Specifically, the Proposal would require the identified strategy to

be based on a failure scenario that demonstrates that the CIDI is experiencing material financial

distress. The Proposal also provides detail about conditions that must be assumed. The Proposal

would retain the current Rule requirement for an identified strategy, as interpreted by the 2021

Statement, concerning the macroeconomic conditions at the time of failure15 and add the

required assumption that the CIDI’s U.S. parent company is in resolution

he CIDI is experiencing material financial

distress. The Proposal also provides detail about conditions that must be assumed. The Proposal

would retain the current Rule requirement for an identified strategy, as interpreted by the 2021

Statement, concerning the macroeconomic conditions at the time of failure15 and add the

required assumption that the CIDI’s U.S. parent company is in resolution. In addition, because

the likely failure scenarios for each CIDI may differ due to divergent business models, balance

sheets, and risks, the Proposal includes flexibility for the FDIC to develop specific failure

scenario assumptions, with respect to macroeconomic conditions or the precipitating cause of

failure, for individual CIDIs, for specific cohorts of Group A CIDIs, or for all Group A CIDIs in

future submissions.

15 An identified strategy must assume that failure occurs under severely adverse economic conditions, as developed

by the Board of Governors of the Federal Reserve System pursuant to 12 U.S.C. § 5365(i)(1)(B).

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4.

Valuation Capabilities that Facilitate the Least-Cost Test

The Rule requires a Current Rule Plan to “describe how the strategies for the separation

of the CIDI and its subsidiaries from its parent company’s organization and sale or disposition of

deposit franchise, core business lines and major assets can be demonstrated to be the least costly

to the Deposit Insurance Fund of all possible methods for resolving the CIDI.”16 Over the years,

CIDIs have struggled to understand and meet this requirement

be how the strategies for the separation

of the CIDI and its subsidiaries from its parent company’s organization and sale or disposition of

deposit franchise, core business lines and major assets can be demonstrated to be the least costly

to the Deposit Insurance Fund of all possible methods for resolving the CIDI.”16 Over the years,

CIDIs have struggled to understand and meet this requirement. Staff has concluded that the

requirement has failed to meet its potential for informing the FDIC’s resolution planning and, if

needed, resolution implementation.17 Accordingly, the Proposal would replace this provision

with the requirement that a Group A CIDI demonstrate the capabilities necessary to produce

valuations that the FDIC can use to conduct the statutorily required least-cost analysis at the time

of an actual failure.18 To demonstrate these valuation capabilities, a Group A CIDI would be

required to describe its valuation process in its submission and provide as an appendix a

valuation analysis that includes a range of quantitative estimates of value. Under the Proposal,

the FDIC would require valuations that would support the evaluation of a range of possible

resolution options, including the impact on value if not all deposits were transferred to a BDI or

acquirer, and the impact on value in a multiple acquirer exit as compared to a sale of the

institution as a whole. While these capabilities would be evaluated under the second prong of the

credibility standard under the Proposal, the FDIC would not make a credibility determination as

to the identified strategy based on the valuation information provided in response to this

requirement.

16 12 C.F.R. § 360.10(c)(2)(vii).

17 The FDIC has not expected Current Rule Plans to include this information since 2017.

18 See 12 U.S.C. § 1823(c)(4).

ty standard under the Proposal, the FDIC would not make a credibility determination as

to the identified strategy based on the valuation information provided in response to this

requirement.

16 12 C.F.R. § 360.10(c)(2)(vii).

17 The FDIC has not expected Current Rule Plans to include this information since 2017.

18 See 12 U.S.C. § 1823(c)(4).

15

The valuation capabilities requirement described above would not apply to

Group B CIDIs. As the Group B CIDIs are not required to provide an identified strategy based

upon a failure scenario, the informational filings submitted by the Group B CIDIs will not

include the scenario analysis necessary to the demonstration of valuation capabilities as required

in the Proposal.

5.

Approach to Capabilities

Group A CIDIs must demonstrate the capabilities with respect to valuations, as described

above. In addition, the Proposal would require all CIDIs to be able to demonstrate that they have

the capabilities necessary to support the information and analysis provided in the submission,

and that the capabilities necessary to ensure continuity of critical services and that franchise

components are separable and marketable. To facilitate the marketing of franchise components,

the Proposal specifically asks that the submission describe the CIDI’s current capabilities and

processes to provide access to or establish a virtual data room promptly in the run-up to or upon

failure of the bank. This approach more clearly and directly addresses the expectation that the

strategy and analysis in the submissions be actionable. The current Rule contains references to

certain necessary capabilities but the Rule does not require CIDIs to demonstrate the existence of

specific capabilities in their submissions.

6

ish a virtual data room promptly in the run-up to or upon

failure of the bank. This approach more clearly and directly addresses the expectation that the

strategy and analysis in the submissions be actionable. The current Rule contains references to

certain necessary capabilities but the Rule does not require CIDIs to demonstrate the existence of

specific capabilities in their submissions.

6.

Content Requirements

In an effort to collect information that would more effectively prepare the FDIC to

resolve a CIDI and to facilitate all CIDIs having key resolvability capabilities, the Proposal

would make several additional changes to the information a CIDI must provide in its submission.

16

Many of the proposed content requirement modifications are familiar to CIDIs as the

FDIC previously issued them as interpretive guidance.19 Their incorporation into the Rule would

codify that guidance. These content requirements include information about franchise

components, key personnel, and communications capabilities.

The Proposal would add detail or expand upon certain content elements that have been

required in the Rule or articulated in past feedback as guidance, in addition to those described

above. In particular, the Proposal would require more detailed information about the

organizational structure of the firm and any cross-border activities. The Proposal incorporates

and builds upon past guidance, including in addressing the identification of franchise

components and requiring identification of those that currently are separable and can be

marketed in a timely manner, to provide optionality in resolution and to support a potential

multiple acquirer resolution strategy. The Proposal includes a requirement for focused and

specific information on material asset portfolios, which is important where the resolution of the

firm in the event of failure may include marketing asset portfolios either in coordination with the

sale of the franchise or separately out of the receivership

nality in resolution and to support a potential

multiple acquirer resolution strategy. The Proposal includes a requirement for focused and

specific information on material asset portfolios, which is important where the resolution of the

firm in the event of failure may include marketing asset portfolios either in coordination with the

sale of the franchise or separately out of the receivership. Additional detail would be required

with respect to the overall deposit structure, including mapping deposits to lines of business.

While the Proposal would not require the submissions to address systemic risk, which was

exempted for all submissions pursuant to the 2021 Statement, the Proposal would substitute a

more focused requirement for firm-specific information related to the potential economic effects

of resolution of the CIDI, such as market share in a particular region or business segment or a

significant level of bank-to-bank activity.

19 If the Proposal is adopted as a final rule, all previously-issued guidance, including the 2021 Statement, would be

superseded by the final Rule.

17

In addition, the Proposal would require all CIDIs to include in their submissions

information about digital services and electronic platforms that CIDIs offer to depositors to

support banking transactions for business customers. The Proposal addresses the fact that digital

services and electronic platforms and related services provided to retail and commercial

customers have proliferated dramatically since the Rule was adopted. This information will

enhance the FDIC‘s understanding of the value of these services, their impact on customer

relationships, and the potential challenges to continuing or winding down those services in

resolution.

The Proposal would also eliminate certain information currently required by the Rule that

is expected to be exempted for all specified CIDIs pursuant to the 2021 Statement

dopted. This information will

enhance the FDIC‘s understanding of the value of these services, their impact on customer

relationships, and the potential challenges to continuing or winding down those services in

resolution.

The Proposal would also eliminate certain information currently required by the Rule that

is expected to be exempted for all specified CIDIs pursuant to the 2021 Statement. For example,

the Proposal would eliminate the requirements for information regarding major counterparties

and disaster recovery or other backup plans. However, most of the content requirements that

were expected to be exempted for all CIDIs pursuant to the 2021 Statement would instead

continue to be required in the Proposal. FDIC staff decided to maintain these content

requirements because recent events have shown this content to be useful in resolution planning.

The Proposal would also eliminate the Rule’s process requiring the FDIC to either

acknowledge the acceptance of a submission or to return the submission if the FDIC determines

that it is incomplete.20 Staff recommends deleting these provisions because they have not proven

to be useful.

C.

Proposed Transition Period

The preamble of the Proposal provides information about certain aspects of the transition

from the current Rule to an amended Rule, consistent with staff’s recommended approach. The

20 See 12 C.F.R. § 360.10(c)(4)(ii)-(iv).

0 Staff recommends deleting these provisions because they have not proven

to be useful.

C.

Proposed Transition Period

The preamble of the Proposal provides information about certain aspects of the transition

from the current Rule to an amended Rule, consistent with staff’s recommended approach. The

20 See 12 C.F.R. § 360.10(c)(4)(ii)-(iv).

18

Director of the Division of Complex Institution Supervision and Resolution, acting under

delegated authority, has directed certain Group A CIDIs to submit their next Current Rule Plans

in December 2023, December 2024 or December 2025. The preamble advises that Group A

CIDIs be required to submit Current Rule Plans as previously directed unless they receive

written notice of an extension. The 2023 Current Rule Plans must be evaluated under the current

Rule. Nevertheless, the preamble indicates that feedback on those submissions will focus on

Rule provisions that would remain relevant under the Rule as amended if the Proposal is adopted

as a final rule (“Amended Rule”). The preamble also states that the FDIC does not anticipate

conducting engagement and capabilities testing on 2023 Current Rule Plans. Finally, the

preamble indicates that staff expects to offer meetings to the CIDIs to discuss the FDIC’s

expectations for submissions under the Amended Rule and to respond to their questions.

Going forward, staff recommends that approximately half of the Group A CIDIs submit

their first Proposed Rule Resolution Plans on a date specified by the FDIC that would be at least

270 days from the effective date of the Amended Rule, with the other half submitting their first

Proposed Rule Resolution Plans the following year. The preamble describes this proposed

approach and also advises that any Group A CIDI that is in the second cohort would be expected

to provide an interim supplement on or before the date the first cohort is required to submit

Proposed Rule Resolution Plans

from the effective date of the Amended Rule, with the other half submitting their first

Proposed Rule Resolution Plans the following year. The preamble describes this proposed

approach and also advises that any Group A CIDI that is in the second cohort would be expected

to provide an interim supplement on or before the date the first cohort is required to submit

Proposed Rule Resolution Plans. This time period is consistent with the Rule’s provision for a

270 day minimum plan preparation period for an IDI’s first submission after it becomes a

CIDI.21

In addition, the preamble indicates, consistent with staff’s recommendation, that all

Group B CIDIs would be required to submit their first Informational Filings on a date specified

21 See 12 CFR § 360.10(c)(ii).

19

by the FDIC that would be at least 270 days from the effective date of the Amended Rule. Staff

believes that this would provide adequate time for Group B CIDIs to develop their submissions,

taking into consideration that most Group B CIDIs have never made a submission under the

current Rule and no Group B CIDI has submitted a Current Rule Plan more recently than 2018.

D.

Expected Effects; Paperwork Reduction Act

The preamble analyzes the expected effects of the Proposal and considers requirements

under several statutes, including the Paperwork Reduction Act. For purposes of the expected

effects and Paperwork Reduction Act, the proposed changes are evaluated against the FDIC’s

most recent burden estimate for the Rule, which was conducted in December 2021.22 At that

time, the FDIC was implementing the Rule as contemplated in the 2021 Statement.

The Proposal would increase estimated compliance costs for all CIDIs as compared to

compliance costs as of December 2021

the expected

effects and Paperwork Reduction Act, the proposed changes are evaluated against the FDIC’s

most recent burden estimate for the Rule, which was conducted in December 2021.22 At that

time, the FDIC was implementing the Rule as contemplated in the 2021 Statement.

The Proposal would increase estimated compliance costs for all CIDIs as compared to

compliance costs as of December 2021. The estimated costs associated with recordkeeping,

reporting, and disclosure requirements are calculated based on the number of hours per billion

dollars in assets (“HPBA”).23 The estimated increases are as follows:

22 Resolution Plans Required for IDIs Over $50 Billion,

https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202111-3064-003.

23 This approach reflects the view that the greater a CIDI’s total assets, the more hours it will need to spend to satisfy

requirements under the Proposal.

20

Type of CIDI

Hours per billion in assets

in December 2021

Hours per billion in assets

under Proposal

Group A CIDI affiliated

with a U.S. GSIB – Proposed

Rule Resolution Plan

57.6

72

Group A CIDI not affiliated

with a U.S. GSIB – Proposed

Rule Resolution Plan24

48

72

Group B CIDI –

Informational Filing25

0

67

All CIDIs – Interim

Supplement

0

24

The Proposal would increase regulatory compliance costs for Group A CIDIs due to three

factors: (1) the proposed changes to submission content and to engagement and capabilities

testing, including requiring certain content that the 2021 Statement indicated would be exempted

for all or some of these CIDIs; (2) the proposed increase in submission frequency; and (3) the

new interim supplement requirement. The Proposal would increase regulatory compliance costs

for Group B CIDIs because, at the time of the most recent burden estimates, the Moratorium was

in effect and exempted all IDIs with less than $100 billion in total assets from the Rule’s

submission requirements

or all or some of these CIDIs; (2) the proposed increase in submission frequency; and (3) the

new interim supplement requirement. The Proposal would increase regulatory compliance costs

for Group B CIDIs because, at the time of the most recent burden estimates, the Moratorium was

in effect and exempted all IDIs with less than $100 billion in total assets from the Rule’s

submission requirements. As discussed above, implementation of the Proposal in its final form

would need to be accompanied by a separate action by the Board lifting the Moratorium for

Group B CIDIs, thereby requiring them to resume submissions. The expected HPBA regulatory

compliance costs for Group B CIDIs under the Proposal would be less than those for

24 This table does not reflect the added burden that would be imposed on a Group A CIDI that is a first-time filer.

25 As of December 2021—the time of the FDIC’s most recent burden estimate—the 2018 moratorium was still in

effect, so IDIs with less than $100 billion in total assets (which includes IDIs that would be Group B CIDIs under

the proposed rule) were not required to comply with the Rule.

21

Group A CIDIs as the Group B CIDIs’ Informational Filings would have fewer content

requirements than the Group A CIDIs’ Proposed Rule Resolution Plans.

Staff does not believe that the net additional costs that would be incurred as a result of the

changed requirements in the Proposal would have an adverse impact on banking activities such

as originating and servicing loans, processing payments, or various financial market activities in

which these IDIs may be involved, as the costs are low compared to the size of the institutions

affected by the Proposal. The preamble includes this statement.

IV.

CONCLUSION:

Staff recommends that the Board:

A.

Approve the attached Notice of Proposed Rulemaking and authorize its

publication in the Federal Register for a comment period ending November 30, 2023.

B

cial market activities in

which these IDIs may be involved, as the costs are low compared to the size of the institutions

affected by the Proposal. The preamble includes this statement.

IV.

CONCLUSION:

Staff recommends that the Board:

A.

Approve the attached Notice of Proposed Rulemaking and authorize its

publication in the Federal Register for a comment period ending November 30, 2023.

B.

Authorize the General Counsel, or designee, and the Executive Secretary, or

designee, to make minor changes to the draft Federal Register document to prepare it for

publication.

CONCUR:

__________________

Harrel M. Pettway

General Counsel

Date

CONTACTS:

CISR:

Patrick Bittner; Aaron Wishart; Brian O’Keefe; Elizabeth Falloon;

Kent Bergey

DRR:

Audra Cast; Shawn Khani; Varanessa Marshall; Leslie Sulenta

Legal:

Celia Van Gorder; Angus Tarpley; Ben DeMaria; Dena Kessler;

Francesca Muratori; Esther Rabin; Greg Wach

22

ATTACHMENTS:

Attachment 1: Draft Board Resolution

Attachment 2: Notice of Proposed Rulemaking, Including Preamble

Attachment 3: Chart of CIDI Groups

Attachment 4: Comparison of Group A CIDI Submissions, Group B CIDI Submissions

and Interim Supplements

Attachment 3

Chart of CIDI Groups26

Group A CIDIs

*estimated assets following completion of recent mergers and acquisitions

26 Data as of 3/31/2023.

Total Assets

(4Q AVG, $000s)

1

JPMORGAN CHASE BANK, N.A.

OCC

3,289,826,000

2

BANK OF AMERICA, N.A.

OCC

2,446,180,500

3

CITIBANK, N.A.

OCC

1,730,770,250

4

WELLS FARGO BANK, N.A.

OCC

1,707,503,750

5

U.S. BANK N.A.*

OCC

700,671,699

6

PNC BANK, N.A.

OCC

549,090,745

7

TRUIST BANK

FDIC

544,332,500

8

GOLDMAN SACHS BANK USA

FR

498,394,250

9

CAPITAL ONE, N.A.

OCC

425,747,461

10

TD BANK, N.A.

OCC

396,899,813

11

CHARLES SCHWAB BANK, SSB

FR

366,151,000

12

THE BANK OF NEW YORK MELLON

FR

343,964,250

13

STATE STREET BANK AND TRUST

COMPANY

FR

295,383,250

14

CITIZENS BANK, N.A

ANK, N.A.

OCC

1,707,503,750

5

U.S. BANK N.A.*

OCC

700,671,699

6

PNC BANK, N.A.

OCC

549,090,745

7

TRUIST BANK

FDIC

544,332,500

8

GOLDMAN SACHS BANK USA

FR

498,394,250

9

CAPITAL ONE, N.A.

OCC

425,747,461

10

TD BANK, N.A.

OCC

396,899,813

11

CHARLES SCHWAB BANK, SSB

FR

366,151,000

12

THE BANK OF NEW YORK MELLON

FR

343,964,250

13

STATE STREET BANK AND TRUST

COMPANY

FR

295,383,250

14

CITIZENS BANK, N.A.

OCC

224,842,002

15

FIRST CITIZENS BANK & TRUST COMPANY*

FDIC

207,113,382

16

FIFTH THIRD BANK, N.A.

OCC

205,926,465

17

MORGAN STANLEY PRIVATE BANK, N.A.

OCC

200,040,500

18

MORGAN STANLEY BANK, N.A.

OCC

197,268,500

19

MANUFACTURERS AND TRADERS TRUST

COMPANY

FR

200,990,176

20

KEYBANK N.A.

OCC

188,792,756

21

THE HUNTINGTON NATIONAL BANK

OCC

182,073,119

22

ALLY BANK

FR

180,700,500

23

HSBC BANK USA, N.A.

OCC

165,654,561

24

BMO HARRIS BANK N.A.

OCC

192,612,413

25

THE NORTHERN TRUST COMPANY

FR

155,435,676

26

REGIONS BANK

FR

155,981,000

27

AMERICAN EXPRESS NATIONAL BANK

OCC

151,544,587

28

FLAGSTAR BANK, N.A.*

OCC

123,306,433

29

UBS BANK USA

FDIC

118,303,336

30

DISCOVER BANK

FDIC

123,350,410

31

USAA FEDERAL SAVINGS BANK

OCC

111,706,000

INSTITUTION NAME

PFR

Attachment 3

2

Group B CIDIs

#CIBC crossed the threshold into Group B as of 3/31/23

Institution Name

PFR

Total Assets

(4Q Avg, $000)

1

SANTANDAR BANK, N.A.

OCC

98,689,404

2

SYNCHRONY BANK

OCC

93,609,750

3

CITY NATIONAL BANK

OCC

93,681,513

4

COMERICA BANK

FED

87,013,500

5

ZIONS BANCORPORATION, N.A.

OCC

88,594,231

6

FIRST HORIZON BANK

FED

80,984,733

7

WEBSTER BANK, N.A

into Group B as of 3/31/23

Institution Name

PFR

Total Assets

(4Q Avg, $000)

1

SANTANDAR BANK, N.A.

OCC

98,689,404

2

SYNCHRONY BANK

OCC

93,609,750

3

CITY NATIONAL BANK

OCC

93,681,513

4

COMERICA BANK

FED

87,013,500

5

ZIONS BANCORPORATION, N.A.

OCC

88,594,231

6

FIRST HORIZON BANK

FED

80,984,733

7

WEBSTER BANK, N.A.

OCC

70,594,669

8

WESTERN ALLIANCE BANK

FED

68,436,988

9

EAST WEST BANK

FED

64,060,191

11

SYNOVOUS BANK

FED

59,295,822

10

VALLEY NATIONAL BANK

OCC

58,031,681

12

BANCO POPULAR DE PUERTO RICO

FED

57,875,000

13

UMPQUA BANK

FDIC

53,985,895

14

FROST BANK

FED

52,272,816

15

CIBC BANK USA#

FDIC

50,224,642

Attachment 4

Comparison of Group A CIDI Submissions, Group B CIDI Submissions and

Interim Supplements