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

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FDIC Financial Institution Letters › Final Rulemaking on Resolution Plans Required for Insured Depository Institutions with $100 Billion or More in Total Assets

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1 12 CFR 360.10. The 2012 rule was published as

an interim final rule with an effective date of

January 1, 2012, 76 FR 2011 (Sept. 11, 2011); the

2012 rule was effective April 1, 2012, 77 FR 3075

(Jan. 23, 2012).

2 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,

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: Final rule.

SUMMARY: The FDIC is adopting this

final rule to require the submission of

resolution plans by insured depository

institutions (IDIs) with $100 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

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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 resolution

plans 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 full 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 th

ed 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;

• Establish an enhanced credibility

standard for full resolution submissions

and clarify the process for review and

feedback to identify and address

weaknesses in full 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;

• Adjust the frequency of full

resolution submissions to a two-year

cycle for all CIDIs to accommodate

engagement and capabilities testing as

part of the resolution planning process,

and establish periodic interim

supplements containing specified

resolution submission content items;

and

• Codify certain aspects of guidance

and feedback previously issued to IDIs

subject to the 2012 rule.

II. Overview of Comments

The FDIC received 12 comment letters

to the proposal from banking

organizations, industry and trade groups

representing the banking and financial

services industry, a law firm, and

consumer groups.

The comments received generally

were responsive to questions posed by

the FDIC in the NPR. The majority of

commenters suggested changes to

reduce the costs of submission

preparation for filers, including by

adjusting the proposed submission

cycle, narrowing the proposed scope

and content requirements, and

enhancing alignment with relevant

resolution planning requirements of the

DFA rule

The comments received generally

were responsive to questions posed by

the FDIC in the NPR. The majority of

commenters suggested changes to

reduce the costs of submission

preparation for filers, including by

adjusting the proposed submission

cycle, narrowing the proposed scope

and content requirements, and

enhancing alignment with relevant

resolution planning requirements of the

DFA rule. Several commenters raised

concerns about the enhanced credibility

standard, and asked for greater clarity

on engagement and capability testing.

Three commenters offered broad

support for the proposed rule as written.

The comments received are summarized

below.

Scope of Rule

Most commenters agreed with the

overall scope of the rule. Two

commenters suggested creating a new

group of filers that would include only

firms with $100 billion to $250 billion

in total assets, and reducing

requirements for that new group, as

compared to the CIDIs with at least $250

billion in total assets. As for group B

CIDIs, several commenters noted the

content requirements of the

informational filings varied in a limited

manner from a full resolution plan and

asserted that the FDIC should more

significantly reduce the burden for

group B CIDIs with further tailoring or

elimination of requirements for group B

CIDIs. Two other commenters

recommended that group B CIDIs

should be subject to the same

requirements as group A CIDIs.

Several commenters addressed the

relationship between IDI resolution

plans and DFA resolution plans. Two

commenters supported changes to better

harmonize these resolution planning

efforts. One commenter suggested CIDIs

with parent banking organizations that

are biennial filers or triennial full filers

of DFA resolution plans should be

exempted from IDI resolution plan

requirements

IDIs.

Several commenters addressed the

relationship between IDI resolution

plans and DFA resolution plans. Two

commenters supported changes to better

harmonize these resolution planning

efforts. One commenter suggested CIDIs

with parent banking organizations that

are biennial filers or triennial full filers

of DFA resolution plans should be

exempted from IDI resolution plan

requirements. That commenter also

argued for streamlining requirements if

IDI resolution plans continue to be

required for CIDIs in addition to the

DFA resolution plans required of their

parent banking organizations. Regarding

consistency across these two programs,

two commenters emphasized the need

to use consistent definitions with regard

to IDI resolution plans and DFA

resolution plans, and cited the

definition of ‘‘material change’’ as an

example where there could be better

alignment. Another commenter

highlighted that the scope of the virtual

data room capabilities requirement

should be aligned with the equivalent

requirement for DFA resolution plans.

Additionally, two commenters

emphasized the importance of

consistency between credibility

determinations on DFA resolution plans

by the FDIC and FRB, and on IDI

resolution plans by the FDIC, as well as

any other feedback on common

elements of these two submissions.

Submission Cycle and Transition Period

Two commenters broadly supported

the cycle as proposed, while four argued

to reduce the frequency of full

resolution submissions. Commenters

arguing for a longer submission cycle

generally supported a three-year cycle,

which they noted would take into

account the cycle for certain DFA

resolution plans, allow for adequate

review and feedback by FDIC staff, and

provide time for CIDIs to incorporate

that feedback. However, one commenter

noted that a two-year cycle with no

interim supplements could be

appropriate for CIDIs whose parent

companies are biennial filers of DFA

resolution plans

hree-year cycle,

which they noted would take into

account the cycle for certain DFA

resolution plans, allow for adequate

review and feedback by FDIC staff, and

provide time for CIDIs to incorporate

that feedback. However, one commenter

noted that a two-year cycle with no

interim supplements could be

appropriate for CIDIs whose parent

companies are biennial filers of DFA

resolution plans. In terms of the dates of

submissions, one commenter suggested

July, while two others proposed

December.

With respect to the first full resolution

submissions or interim supplements

following the effective date of the final

rule, five commenters suggested a

period of 12 months or longer, rather

than the proposed 270-day period. In

particular, with respect to group B

CIDIs, commenters suggested a

transition period of 18 months, since

none of these CIDIs has submitted a

resolution plan under the 2012 rule

since implementation of the

moratorium.

Regarding the interim supplements,

three commenters recommended

narrowing the scope of information

required. Commenters recommended

reducing or eliminating requirements

for narrative or description, and to limit

the required content to information that

has materially changed. Another

commenter suggested that narrative

commentary in the interim supplement

should be limited to a summary of

material changes in the information

provided in the prior full resolution

submission. One commenter suggested

that interim supplements, like full

resolution submissions, should use data

as of the end of the prior year, rather

than the prior quarter.

Several commenters emphasized the

importance of the FDIC providing

meaningful feedback to CIDIs and

adequate time for that feedback to be

incorporated into subsequent

submissions, with one commenter

recommending feedback be provided at

least 12 months before the next

submission is due and two others noting

the need for the FDIC to build internal

capacity and capabilities to support this

Several commenters emphasized the

importance of the FDIC providing

meaningful feedback to CIDIs and

adequate time for that feedback to be

incorporated into subsequent

submissions, with one commenter

recommending feedback be provided at

least 12 months before the next

submission is due and two others noting

the need for the FDIC to build internal

capacity and capabilities to support this.

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Rule Requirements

Commenters generally supported the

FDIC’s focus on increasing optionality

available to it in preparing for

resolution. Four agreed that a bridge

bank may be helpful in this respect, to

provide more time to sell all or parts of

the institution, reduce reliance on

strategies involving a single buyer, and

expand the universe of potential

acquirers. Two commenters supported

the identified strategy requirement as

proposed, with one noting it would be

among the most critical pieces of

information in a resolution plan and

plans without this element would not

likely be credible or effective. Three

other commenters favored elimination

or modification of the scenario and

identified strategy requirement. One of

these commenters suggested that some

CIDIs with more than $100 billion but

less than $250 billion in total assets may

have less complex structures that make

an FDIC-arranged sale feasible. They

noted that, by requiring just one

identified strategy, the proposal restricts

CIDIs from presenting a full range of

options for resolution. Another

commenter argued that, based on the

lessons learned from recent failures, the

FDIC should be more focused on

maximizing the likelihood of a

resolution weekend sale, including by

emphasizing real-time capability for

IDIs to produce necessary information

for potential buyers

identified strategy, the proposal restricts

CIDIs from presenting a full range of

options for resolution. Another

commenter argued that, based on the

lessons learned from recent failures, the

FDIC should be more focused on

maximizing the likelihood of a

resolution weekend sale, including by

emphasizing real-time capability for

IDIs to produce necessary information

for potential buyers. A third commenter

expressed concern that the proposed

requirement for the identified strategy to

have ‘‘meaningful optionality’’ is too

vague.

Two commenters addressed aspects of

assumptions in the proposed failure

scenario, with one arguing against the

assumption that the CIDI’s parent

holding company enters bankruptcy,

and the other supporting the

assumption of continued Federal Home

Loan Bank lending to a bridge bank.

Regarding the proposed approach to

valuation to facilitate the FDIC’s

assessment of least-costly resolution

method, three commenters emphasized

the importance of valuation to

resolution planning and another

expressed support for replacing the

least-cost test requirement of the 2012

rule with the proposed valuation

requirement. Three commenters

suggested modifications to the

approach; specifically, these

commenters favored elimination of the

requirement for quantitative valuation

analysis. These commenters argued that

such analysis would be overly

burdensome, more expensive for CIDIs

that do not maintain in-house expertise,

and of little value to the FDIC in an

actual resolution scenario.

Engagement and Capabilities Testing

Commenters were generally

supportive of engagement and

capabilities testing. One commenter

suggested increasing the expected

frequency of engagement, while another

advocated for committing more

resources toward engagement and

capabilities testing while decreasing the

emphasis on full resolution submission

documentation

actual resolution scenario.

Engagement and Capabilities Testing

Commenters were generally

supportive of engagement and

capabilities testing. One commenter

suggested increasing the expected

frequency of engagement, while another

advocated for committing more

resources toward engagement and

capabilities testing while decreasing the

emphasis on full resolution submission

documentation. Four commenters

suggested that the FDIC should provide

advance notice of the timing for

engagement and capabilities testing, and

the process for the testing and feedback.

Two of these commenters indicated the

FDIC should provide CIDIs with a

comprehensive list of capabilities it

expects a CIDI to maintain, and

suggested this should be done through

a notice and comment period to enable

input from the industry. One of these

commenters also noted that CIDIs—

especially, group B CIDIs—will need

time to build, improve, and test

capabilities prior to undergoing

capabilities testing with the FDIC, and

suggested capabilities testing should not

occur during a CIDI’s initial submission

cycle under this Rule.

Credibility Standard

Two commenters expressed support

for the proposed enhancement of the

credibility standard. Three other

commenters recommended eliminating

the credibility determination, granting

CIDIs latitude on the standard’s

application, or foregoing any

enforcement action based on a

credibility determination. They argued

that the standard, particularly the first

prong, is subjective and susceptible to

being applied inconsistently over time.

Another commenter observed that any

credibility standard is necessarily

subjective.

Several commenters emphasized the

importance of a collaborative approach

to resolution planning, with one

emphasizing the role communications

can play to support this, including

related to the timing and scope of

capabilities testing

s subjective and susceptible to

being applied inconsistently over time.

Another commenter observed that any

credibility standard is necessarily

subjective.

Several commenters emphasized the

importance of a collaborative approach

to resolution planning, with one

emphasizing the role communications

can play to support this, including

related to the timing and scope of

capabilities testing. In addition, several

commenters expressed concerns about

any enforcement actions related to

engagement and capabilities testing,

with one commenter stressing that full

resolution submissions should only be

deemed non-credible due to

fundamental resolvability issues and not

because of issues with CIDIs’ resolution

capabilities that fall short.

Expected Effects

One commenter indicated that the

proposal would substantially add to the

time and resources required to prepare

IDI resolution plans. Another two

commenters argued that the analysis of

the compliance burden understates the

true cost of the burden. A fourth

commenter suggested that the estimated

time required to develop an IDI full

resolution submission is not

unreasonable and the cost of

compliance would pale in comparison

to the costs of potential bank failures

and banking crises.

III. Final Rule

The FDIC considered all comments

received and has adopted certain

changes to the proposed rule as

discussed below. In addition, the FDIC

made certain technical, non-substantive

changes throughout, including

corrections to paragraph numbering and

grammar, improving word choice for

readability, and eliminating

redundancy.

A. Scope and Purpose

The scope and purpose of the final

rule are substantively unchanged from

the proposal

d and has adopted certain

changes to the proposed rule as

discussed below. In addition, the FDIC

made certain technical, non-substantive

changes throughout, including

corrections to paragraph numbering and

grammar, improving word choice for

readability, and eliminating

redundancy.

A. Scope and Purpose

The scope and purpose of the final

rule are substantively unchanged from

the proposal. This rule is intended to

ensure that each group A CIDI develops

a credible strategy to facilitate the

FDIC’s resolution of the institution

across a range of possible scenarios and,

with respect to each group A CIDI and

each group B CIDI, that the FDIC has

access to all of the material information

and analysis it needs to efficiently

resolve the CIDI in the event of its

failure.

Consistent with the 2012 rule and the

proposal, the final rule applies to all

IDIs with at least $50 billion in total

assets based upon the average total

assets reported over the previous four

quarters. Like the proposal, the final

rule will differentiate the requirements

pertaining to group A CIDIs and group

B CIDIs. Each group A CIDI is required

to periodically submit a resolution plan

to the FDIC, including an identified

strategy for its resolution under the

specified failure scenario. Each group B

CIDI is required to periodically submit

an informational filing to the FDIC that

would consist of certain informational

content, but would not be required to

include an identified strategy or to

develop capabilities necessary to

produce valuations needed to support

least-cost test analysis.

Comments received by the FDIC

included letters from two commenters

who recommended that group B CIDIs

should file resolution plans with no

distinction between group A CIDIs and

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produce valuations needed to support

least-cost test analysis.

Comments received by the FDIC

included letters from two commenters

who recommended that group B CIDIs

should file resolution plans with no

distinction between group A CIDIs and

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13 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.

14 See, e.g., 84 FR 59230 (Nov. 1, 2019) (codified

at 12 CFR parts 3, 50, 217, 249, 324, 329).

group B CIDIs. Two other comment

letters suggested that group A CIDIs

should consist only of CIDIs with at

least $250 billion in total assets and that

there should be further tiering of

requirements for CIDIs between $100–

250 billion in total assets and those

between $50–$100 billion in total assets.

One commenter recommended that

group B CIDIs not be required to make

any full resolution submissions.

The FDIC has retained the distinction

between group A CIDIs and group B

CIDIs, and the requirement that group B

CIDIs provide informational filings. The

FDIC believes that the approach taken

for group B CIDIs 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

Act 13 and other rulemakings as a basis

for assessing a banking organization’s

financial stability and safety and

soundness risks,14 is an appropriate

threshold to distinguish full resolution

submission requirements for group A

CIDIs and group B CIDIs, and is retained

in the final rule

the group A CIDIs. The

threshold of $100 billion in total assets,

which is also used in the Dodd-Frank

Act 13 and other rulemakings as a basis

for assessing a banking organization’s

financial stability and safety and

soundness risks,14 is an appropriate

threshold to distinguish full resolution

submission requirements for group A

CIDIs and group B CIDIs, and is retained

in the final rule.

While all group A CIDIs have the

same requirements for submission of

full resolution plans, in response to

comments discussed further below, the

group A CIDIs are further divided into

two filing categories: triennial and

biennial filers. While most group A

CIDIs will file on a triennial cycle under

the final rule, those CIDIs that are part

of the largest and most systemic and

interconnected U.S. banking

organizations—those affiliated with U.S.

GSIBs—will file biennially.

The FDIC considered comments

proposing specific changes to the

content of informational filings for

group B CIDIs, which are addressed

below.

B. Definitions

The proposal included definitions of

terms used in the proposed rule, which

are included without change in the final

rule, except as noted below.

Several comments were received with

respect to certain defined terms. Two

commenters emphasized the importance

of consistency in the definitions of

equivalent terms between the proposed

rule and the DFA rule, and ‘‘core

business line’’ and ‘‘material change’’

were cited as specific examples.

Additionally, two comment letters

argued that the proposed definition of

‘‘material change’’ was overly inclusive

and used in a manner that might result

in triggering the notice requirements

contained in the proposal upon

relatively minor events, noting a

narrower approach to events triggering

such a notice in the DFA rule.

Accordingly, the definitions for ‘‘core

business lines’’ and ‘‘material change’’

are revised in the final rule to be more

consistent with similar concepts in the

DFA rule

lusive

and used in a manner that might result

in triggering the notice requirements

contained in the proposal upon

relatively minor events, noting a

narrower approach to events triggering

such a notice in the DFA rule.

Accordingly, the definitions for ‘‘core

business lines’’ and ‘‘material change’’

are revised in the final rule to be more

consistent with similar concepts in the

DFA rule. The definition of ‘‘core

business lines’’ is revised to conform

more closely to the DFA rule. The

definition covers the CIDI’s business

lines whose failure would result in a

material loss of the CIDI’s revenue,

profit, or franchise value.

The definition of ‘‘material change’’ is

revised to combine concepts from the

definition in the proposed rule and from

the definition in the DFA rule. As

discussed in the preamble to the

proposed rule, in administering the

2012 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 use an approach

similar to the DFA rule, while

improving clarity as to how to apply the

concept in the context of this rule.

Given differences in the purpose and

scope of the two rules, the final rule

focuses on changes that are important

for CIDIs. Thus, the definition of

material change in the final rule focuses

on events that relate to the requirements

of the rule, such as changes to overall

deposit structure, identification or de-

identification of a franchise component,

and acquisition or disposition of a

material asset portfolio, among other

things. The usage of the term ‘‘material

change’’ was modified as well, to be

more consistent with the approach

taken under the DFA rule

al rule focuses

on events that relate to the requirements

of the rule, such as changes to overall

deposit structure, identification or de-

identification of a franchise component,

and acquisition or disposition of a

material asset portfolio, among other

things. The usage of the term ‘‘material

change’’ was modified as well, to be

more consistent with the approach

taken under the DFA rule. As discussed

below, the final rule uses the phrase

‘‘extraordinary event,’’ borrowed from

the DFA rule, in the context of the

notice requirement instead of the term

‘‘material change.’’

One commenter noted that the

proposed definition of ‘‘material entity’’

is over-inclusive, which might be

inconsistent with the goal of focusing on

the material aspects of the organization,

and noted that this approach diverges

from the approach taken in the DFA

rule. The FDIC agrees with the comment

that including all entities that are

material to franchise components may

result in relatively insignificant entities

being captured within the definition.

Accordingly, the reference to franchise

components is omitted from the

definition in the final rule. However,

including all IDIs as material entities,

regardless of size, is important for

FDIC’s resolution planning, as it is

likely that all may enter resolution

under the FDI Act, due to statutory

cross-guarantees. No change is being

made to the inclusion of all IDIs as

material entities.

In the definition of ‘‘franchise

component,’’ the term ‘‘asset pool’’ was

replaced by the term ‘‘material asset

portfolio’’ to utilize a defined term from

the rule. A similar change was made to

the definition of ‘‘multiple acquirer

exit’’ in using the defined term

‘‘material asset portfolios’’ instead of

‘‘asset portfolios.’’

Throughout the final rule, the term

‘‘resolution submission’’ was replaced

by the term ‘‘full resolution submission’’

and the term ‘‘BDI’’ was replaced by the

term ‘‘bridge depository institution’’ for

clarity

m from

the rule. A similar change was made to

the definition of ‘‘multiple acquirer

exit’’ in using the defined term

‘‘material asset portfolios’’ instead of

‘‘asset portfolios.’’

Throughout the final rule, the term

‘‘resolution submission’’ was replaced

by the term ‘‘full resolution submission’’

and the term ‘‘BDI’’ was replaced by the

term ‘‘bridge depository institution’’ for

clarity.

The definitions of ‘‘group A CIDI’’ and

‘‘group B CIDI’’ were revised to be more

consistent with the approach used in

the DFA rule for determining filing

groups.

The definition of United States was

revised to be consistent with the

definition under the FDI Act.

New defined terms were added for

clarity, including ‘‘PCS service

provider,’’ ‘‘DIF,’’ ‘‘biennial filer,’’ and

‘‘triennial filer.’’

C. Full Resolution Submissions

Required

Biennial Filers and Triennial Filers

Under the proposal, each CIDI would

have been required to provide a full

resolution submission to the FDIC every

two years. The FDIC would have

retained the discretion to alter the

submission dates upon written notice to

the CIDI. An interim supplement would

have been required in any year in which

the CIDI is not required to file a full

resolution submission.

Four commenters recommended a

three-year submission cycle consistent

with the Statement. Commenters

supporting the three-year cycle

emphasized the importance of receiving

timely feedback and having sufficient

time to incorporate improvements in the

full resolution submissions with each

cycle. These commenters also cited an

increased cost in more frequent filings.

Commenters flagged the importance of

the coordination of filing resolution

submissions, submission review, and

engagement and capabilities testing, as

well as filing interim supplements over

the course of the cycle. Two

commenters supported the proposed

biennial submission

full resolution submissions with each

cycle. These commenters also cited an

increased cost in more frequent filings.

Commenters flagged the importance of

the coordination of filing resolution

submissions, submission review, and

engagement and capabilities testing, as

well as filing interim supplements over

the course of the cycle. Two

commenters supported the proposed

biennial submission. One commenter

recommended that if the FDIC were to

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move to a triennial submission cycle for

most CIDIs, the biennial cycle should be

retained for the CIDI affiliates of U.S.

GSIBs, which are biennial filers under

the DFA rule. The commenter suggested

that this approach would be more

efficient for the U.S. GSIBs and for the

FDIC, as interim supplements would not

be necessary because either a DFA

resolution plan or a resolution plan

under this rule would be submitted in

alternating years.

The final rule adopts the

recommended three-year submission

cycle for most CIDIs. The FDIC agrees

with commenters that timely and

fulsome feedback for each CIDI is an

important priority, and ensuring time

for engagement and capabilities testing

between full resolution submissions is

of significant value. In addition, the

FDIC expects that key components of

the full resolution submission will

remain relatively constant over a three-

year cycle, including the identified

strategy for group A CIDIs. Important

information that is more likely to

change over that period will be updated

annually through the interim

supplement

testing

between full resolution submissions is

of significant value. In addition, the

FDIC expects that key components of

the full resolution submission will

remain relatively constant over a three-

year cycle, including the identified

strategy for group A CIDIs. Important

information that is more likely to

change over that period will be updated

annually through the interim

supplement. In addition, the FDIC will

receive notices of extraordinary events

that will provide information of

significant changes at the CIDI, such as

through merger and acquisition or

divestiture, and the FDIC would be in a

position to request additional

information if needed.

With respect to the CIDI affiliates of

U.S. GSIBs, the FDIC agrees with the

commenter that a full resolution

submission cycle that is complimentary

with the DFA resolution plan cycle will

improve efficiency, and will ensure

timeliness of content needed for

contingency planning for an FDI Act

resolution. The biennial filing is

appropriate for these CIDIs, which are

part of the largest and most systemic

and interconnected U.S. banking

organizations. Accordingly, the final

rule establishes a two-year cycle for

CIDIs that are affiliates of U.S. GSIBs.

Consistent with the proposal, the FDIC

retains the discretion to change filing

dates for any CIDI.

The FDIC received several comments

with respect to the preferred submission

date. One commenter suggested July 1,

while two commenters recommended

December dates. One of these

commenters suggested that CIDIs with

parent banking organizations that are

triennial filers of DFA resolution plans

should submit full resolution

submissions under this rule in

December of the same year in which the

DFA resolution plan is filed. The final

rule does not specify a calendar date for

submissions, to retain flexibility over

the life of the rule

December dates. One of these

commenters suggested that CIDIs with

parent banking organizations that are

triennial filers of DFA resolution plans

should submit full resolution

submissions under this rule in

December of the same year in which the

DFA resolution plan is filed. The final

rule does not specify a calendar date for

submissions, to retain flexibility over

the life of the rule. While July 1, January

1, and December 1 dates have been used

in the past, the most suitable dates may

be different for different cohorts of CIDIs

and may change over time. The FDIC

considers the annual cadence for

information required by this rule to be

provided by most CIDIs, including those

with parent banking organizations that

are triennial filers of DFA resolution

plans—whether via full resolution

submissions or interim supplements—to

be appropriate from a resolution

planning workflow perspective for both

the FDIC and CIDIs. The FDIC also

expects to establish a regular cadence of

review, testing, and engagement across

two cohorts of group B CIDIs, and may

establish different calendar dates for

submissions by those group B CIDI

cohorts.

With respect to the first full resolution

submissions or interim supplements

following the effective date of the final

rule, five commenters suggested a

period of 12 months or longer, rather

than the proposed 270-day period. In

particular, with respect to group B

CIDIs, commenters suggested a

transition period of 18 months, since

none of these CIDIs have submitted a

resolution plan under the 2012 rule

since implementation of the

moratorium.

The FDIC will notify CIDIs of the date

when their first full resolution

submissions or interim supplements are

due under the final rule. Consistent

with the proposal, for group A CIDIs,

that date will be at least 270 days from

the effective date of the rule

f 18 months, since

none of these CIDIs have submitted a

resolution plan under the 2012 rule

since implementation of the

moratorium.

The FDIC will notify CIDIs of the date

when their first full resolution

submissions or interim supplements are

due under the final rule. Consistent

with the proposal, for group A CIDIs,

that date will be at least 270 days from

the effective date of the rule. The FDIC

believes that 270 days following the

effective date is sufficient time for group

A CIDIs to prepare a resolution plan or

interim supplement that conforms to the

final rule. This timing reflects the

urgency of resolution planning for these

largest CIDIs, and supports the

establishment of a regular cadence of

full resolution submissions and interim

supplements across three cohorts of

group A CIDIs for purposes of full

resolution submission review,

horizontal capabilities testing, and firm-

specific engagement. The text of the

final rule will be publicly available

following action by the FDIC Board of

Directors, and will be published in the

Federal Register well before the

effective date, giving CIDIs notice of the

final rule’s requirements.

For group B CIDIs, the initial

submission due dates will be at least

one year from the effective date of the

final rule. This is appropriate because

the group B CIDIs are generally new to

the resolution planning process—or

have not filed for an extended period

due to the moratorium—and because the

resolution challenges associated with

the group B CIDIs are somewhat

reduced.

Full Resolution Submissions by New

CIDIs

Consistent with the proposal, the final

rule indicates that an IDI that becomes

a CIDI after the effective date of the final

rule is required to provide its initial full

resolution submission on or before the

date specified in writing by the FDIC,

which will be no earlier than 270 days

after the IDI became a CIDI

oup B CIDIs are somewhat

reduced.

Full Resolution Submissions by New

CIDIs

Consistent with the proposal, the final

rule indicates that an IDI that becomes

a CIDI after the effective date of the final

rule is required to provide its initial full

resolution submission on or before the

date specified in writing by the FDIC,

which will be no earlier than 270 days

after the IDI became a CIDI. As these

firms are aware of such transition well

in advance, 270 days after the change of

status is an appropriate length of time

to submit a new full resolution

submission. As IDIs grow, whether

through merger or business strategy or

otherwise, it is important that the FDIC

receive prompt and timely information

for resolution planning. The 270-day

period balances the urgency of

resolution readiness against the time

needed for a new CIDI to complete a

thorough and responsive full resolution

submission.

The final rule adds language to

address submissions subsequent to a

CIDI transitioning between groups. A

CIDI that transitions from group B to

group A or from group A to group B,

will file a full resolution submission or

interim supplement, as applicable,

pursuant to the requirements relevant to

its new filing group on or before the

date that its next full resolution

submission or interim supplement is

due, unless it receives written notice of

a different date from the FDIC.

The final rule contains language

changes from the proposal for clarity

and consistency by providing for full

resolution submissions on or before the

submission date, rather than on the

submission date, for the biennial filers,

the triennial filers, and the new filers.

This is consistent with similar language

in the DFA rule

ss it receives written notice of

a different date from the FDIC.

The final rule contains language

changes from the proposal for clarity

and consistency by providing for full

resolution submissions on or before the

submission date, rather than on the

submission date, for the biennial filers,

the triennial filers, and the new filers.

This is consistent with similar language

in the DFA rule.

Notice of Extraordinary Event

The proposal would have required

that a CIDI provide the FDIC with a

notice and explanation of a material

change no later than 45 days after

certain events included in the proposed

definition of ‘‘material change.’’ The

proposal also would have allowed for an

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 full

resolution submission.

Commenters suggested that the

definition of material change was too

broad and would give rise to notices

that were not likely to significantly

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impact the full resolution submission.

Commenters suggested consideration of

the approach taken in the DFA rule,

which requires notice of a more limited

set of ‘‘extraordinary events.’’ The FDIC

considered those comments and

adopted the concept of an

‘‘extraordinary event’’ as the basis for

the 45-day notice, rather than a

‘‘material change.’’ The term ‘‘material

change’’ remains in the final rule, but is

no longer part of the notice requirement.

This is similar to the approach taken for

DFA resolution plans, with appropriate

adjustments for the differences in the

two rules

DIC

considered those comments and

adopted the concept of an

‘‘extraordinary event’’ as the basis for

the 45-day notice, rather than a

‘‘material change.’’ The term ‘‘material

change’’ remains in the final rule, but is

no longer part of the notice requirement.

This is similar to the approach taken for

DFA resolution plans, with appropriate

adjustments for the differences in the

two rules. The FDIC expects that this

approach will provide a focus on the

events that are significant enough to

warrant a notice, such as a merger,

acquisition or disposition of assets, or

fundamental change to the CIDI’s

organizational structure, core business

lines, size, or complexity. The final rule

retains the requirement of the notice

within 45 days of the event, and the

exemption from the requirement if the

event occurs within 90 days of the date

by which the next full resolution

submission is due. The impact of the

extraordinary event on resolution would

be discussed in the discussion of

material changes in the next

submission, whether a full resolution

submission or the interim supplement,

and the FDIC would be in a position to

request additional information if

needed. A CIDI is not exempt from the

requirement if the event occurs within

90 days of the date by which the next

interim supplement is due because of

the more limited content required in an

interim supplement.

Approval by the CIDI Board of Directors

The final rule adopts without change

the requirement that a CIDI’s board of

directors approve the full resolution

submission, and that this approval be

noted in the board’s minutes. For an

insured branch, the final rule allows a

submission to be approved by a delegee

acting under the express authority of the

board, and requires such delegation of

authority to be noted in the board’s

minutes. No comments were received

on this proposed provision. This

requirement does not apply to an

interim supplement

ubmission, and that this approval be

noted in the board’s minutes. For an

insured branch, the final rule allows a

submission to be approved by a delegee

acting under the express authority of the

board, and requires such delegation of

authority to be noted in the board’s

minutes. No comments were received

on this proposed provision. This

requirement does not apply to an

interim supplement.

Incorporation From Other Sources

The proposal would have allowed the

CIDI to incorporate certain information

or analysis without seeking the

authorization required under 12 CFR

part 309 for disclosure of FDIC

confidential information. The proposed

rule included certain proposed

requirements about the format and

process for incorporation of information

from other sources and would have

required certification that the

information or analysis remains

accurate in all respects that are material

to the CIDI’s full resolution submission.

The FDIC received no comments on this

proposed provision and there were no

substantive changes. However, the final

rule has been modified from the

proposal for consistency and clarity to

state that a CIDI may incorporate

information from other sources into its

interim supplement and the

‘‘confidential section’’ of the full

resolution submission and to allow

information from a regulatory filing of a

CIDI affiliate without seeking a separate

waiver.

D. Content of the Full Resolution

Submissions for CIDIs

The proposal would have required

each group A CIDI to submit a

resolution plan that includes all content

specified in § 360.10(d) of the proposed

rule. The proposal would have required

each group B CIDI to provide an

informational filing, which would not

include all of the content of a resolution

plan. As proposed, the informational

filing would not include the executive

summary, identified strategy and failure

scenario, or valuation to support least-

cost test analysis content elements that

are applicable to group A CIDI

resolution plans

e proposal would have required

each group B CIDI to provide an

informational filing, which would not

include all of the content of a resolution

plan. As proposed, the informational

filing would not include the executive

summary, identified strategy and failure

scenario, or valuation to support least-

cost test analysis content elements that

are applicable to group A CIDI

resolution plans.

The FDIC received comments related

to the content elements that would

apply to an informational filing. Two

commenters suggested that the

requirement to describe franchise

components be reduced or removed for

group B CIDIs, because, the commenters

argued, the proposed franchise

component content element included

information similar to resolution

planning that should not be required in

an informational filing. While the FDIC

continues to believe that the

identification of franchise components

is critical for resolution preparation,

particularly in situations where a whole

bank sale may be difficult to achieve,

the FDIC also agrees that some proposed

aspects of the franchise components

content element may inadvertently

require discussion of resolution strategy

by group B CIDIs. Accordingly, in

response to these comments, the final

rule exempts group B CIDIs from

reporting the portions of the franchise

component content element relating to

marketing process and capabilities, key

assumptions underpinning each

divestiture, and obstacles to execution.

All other proposed subparts of the

franchise component content element

are required for group B CIDIs in the

final rule.

Commenters also recommended the

reduction, removal, or amendment of

several other content elements for

informational filings

nent content element relating to

marketing process and capabilities, key

assumptions underpinning each

divestiture, and obstacles to execution.

All other proposed subparts of the

franchise component content element

are required for group B CIDIs in the

final rule.

Commenters also recommended the

reduction, removal, or amendment of

several other content elements for

informational filings. Some commenters

generally suggested changes to content

elements that they viewed as requiring

information that they did not believe to

be as relevant or applicable for group B

CIDIs as for group A CIDIs or to be

available from other sources aside from

the group B CIDIs, while one commenter

was generally supportive of the

proposed content element requirements.

After reviewing these comments, the

proposed content element requirements,

the availability of the information for

the proposed content elements, and the

FDIC’s resolution practices and

experience, the FDIC has determined

that all other informational filing

content elements should be maintained

as proposed. The content elements will

provide critical information at a level of

detail necessary for resolution planning

and execution that, in the FDIC’s

estimation and experience, is not

available in sufficient detail from other

sources to meet the FDIC’s needs in the

resolution context.

Under the final rule, a full resolution

submission, whether a resolution plan

for a group A CIDI, or an informational

filing for a group B CIDI, must include

a discussion of any material changes

from the prior full resolution

submission or interim supplement or an

affirmation that no material change has

occurred, and a discussion of changes to

the CIDI’s previous full resolution

submission resulting from any change in

law or regulation, guidance, or feedback

from the FDIC

oup A CIDI, or an informational

filing for a group B CIDI, must include

a discussion of any material changes

from the prior full resolution

submission or interim supplement or an

affirmation that no material change has

occurred, and a discussion of changes to

the CIDI’s previous full resolution

submission resulting from any change in

law or regulation, guidance, or feedback

from the FDIC. This requirement was

proposed as part of the executive

summary of the resolution plans

submitted by the group A CIDIs, and

while the group B CIDIs do not need to

include an executive summary as part of

their informational filings, the final rule

requires that the information filing

include a similar discussion of changes

since the prior submission. As

discussed above, the definition of

material change has been modified in

the final rule in response to comments,

providing additional context to this

requirement.

The FDIC considered all comments

related to the specific requirements of

the content elements described in

§ 360.10(d) of the proposed rule and

discusses these content elements below.

Identified Strategy

The proposal would have required

each group A CIDI to provide an

identified strategy, which describes the

resolution from the point of failure

through the sale or disposition of the

group A CIDI’s franchise (including all

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dentified Strategy

The proposal would have required

each group A CIDI to provide an

identified strategy, which describes the

resolution from the point of failure

through the sale or disposition of the

group A CIDI’s franchise (including all

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15 This task could be accomplished through a

Deposit Insurance National Bank established by the

FDIC pursuant to 12 U.S.C. 1821(m).

of its core business lines and all other

business segments, branches, and assets

that constitute the CIDI and its

businesses as a whole) in a manner that

meets the credibility standard. The

proposal would have established the

bridge bank approach as the default

identified strategy, and indicated that a

bridge bank strategy must provide for

the establishment and stabilization of a

bridge bank and an exit strategy from

the bridge bank.

Recognizing that the bridge bank

approach may not be optimal for all

group A CIDIs, the proposal would have

permitted a different identified strategy

if that different strategy best addressed

the first prong of the credibility criteria,

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.

However, the proposed rule would not

have permitted the identified strategy to

be based upon the sale of substantially

all assets and liabilities over closing

weekend. The proposal would have

required that any identified strategy

include meaningful optionality for

execution across a range of failure

scenarios.

Two commenters recommended

eliminating the requirement of a failure

scenario-based identified strategy in any

resolution plan

ted the identified strategy to

be based upon the sale of substantially

all assets and liabilities over closing

weekend. The proposal would have

required that any identified strategy

include meaningful optionality for

execution across a range of failure

scenarios.

Two commenters recommended

eliminating the requirement of a failure

scenario-based identified strategy in any

resolution plan. In addition, one

comment letter suggested that this

requirement should be based on factors

other than size, such as whether more

than 90 percent of the total consolidated

assets are within the CIDI, the extent of

cross-border activity, or the IDI’s role as

a financial utility or agent bank. Two

commenters supported the proposed

scope of the requirement; one

commenter suggested that it should

apply to group B CIDIs as well.

Two commenters supported the

identified strategy requirement as

proposed, with one noting it would be

among the most critical pieces of

information in a resolution plan and

plans without this element would not

likely be credible or effective. Three

other commenters favored elimination

or modification of the failure scenario

and identified strategy requirement.

Several commenters supported the

proposed rule’s emphasis on a bridge

bank approach as the default identified

strategy. Two commenters

recommended including a whole bank

sale as a permitted identified strategy

for group A CIDIs, suggesting that it is

a possible option even for large banks,

and its use may minimize losses to the

DIF and other creditors.

The FDIC considered the comments

and concludes that there are certainly

factors other than size that impact

challenges in resolution and availability

and likelihood of a closing weekend sale

as a strategic option, however, the FDIC

considers that size alone may present

significant challenges and make a

closing weekend sale less likely

e may minimize losses to the

DIF and other creditors.

The FDIC considered the comments

and concludes that there are certainly

factors other than size that impact

challenges in resolution and availability

and likelihood of a closing weekend sale

as a strategic option, however, the FDIC

considers that size alone may present

significant challenges and make a

closing weekend sale less likely. While

the FDIC will consider any feasible bid

for the sale of the IDI franchise over

closing weekend or as promptly as

possible post-failure, it cannot rely on

that option, and must have available

other strategic options. As explained in

the preamble to the proposal, the

proposed requirements related to the

identified strategy and failure scenario

are intended to provide the FDIC with

a strategic option that is adaptable

under a wide range of potential

scenarios, as the actual scenario is likely

to be materially different from any

hypothetical scenario construct.

Further, the development of an

identified strategy that takes into

account a group A CIDI’s organization,

structure, business lines, and other

characteristics provides significant

insight into the obstacles that the FDIC

might face in resolving the CIDI and

possible mitigating actions that may be

available to address those obstacles.

Accordingly, the final rule retains the

requirement that group A CIDIs develop

an identified strategy based on a failure

scenario.

In addition, the final rule adopts the

approach taken in the proposal with

respect to the strategic options to be

considered in each group A CIDI’s

identified strategy. The strategic option

that the FDIC considers most useful for

the group A CIDIs across the widest

range of failure scenarios is the

establishment of a bridge bank that can

continue the operations of the CIDI

ure

scenario.

In addition, the final rule adopts the

approach taken in the proposal with

respect to the strategic options to be

considered in each group A CIDI’s

identified strategy. The strategic option

that the FDIC considers most useful for

the group A CIDIs across the widest

range of failure scenarios is the

establishment of a bridge bank that can

continue the operations of the CIDI.

Generally, a bridge bank approach will

support the preservation of franchise

value and will also 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 final rule establishes

the bridge bank approach as the default

identified strategy. A bridge bank

strategy must provide for the

establishment and stabilization of a

bridge bank and an exit strategy from

the bridge bank, 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. If a multiple acquirer exit is

included as part of the identified

strategy, it may be appropriate for the

resolution plan to address the time

required for that exit option and any

restructuring or other actions needed to

address obstacles to separability of

divestiture options. If the identified

strategy assumes the sale of franchise

components or a multiple acquirer exit,

the resolution plan should take into

account all issues surrounding the

CIDI’s ability to sell in market

conditions present in the applicable

economic condition at the time of sale

ption and any

restructuring or other actions needed to

address obstacles to separability of

divestiture options. If the identified

strategy assumes the sale of franchise

components or a multiple acquirer exit,

the resolution plan should take into

account all issues surrounding the

CIDI’s ability to sell in market

conditions present in the applicable

economic condition at the time of sale.

Consistent with the proposed rule, in

addressing the establishment of the

bridge bank, the final rule does not

require that a resolution plan

demonstrate that the identified strategy

is the least-costly to the DIF of all

available strategies; in particular, the

resolution plan is not required to

demonstrate that the identified strategy

would be less costly to the DIF than

liquidation. Similarly, the resolution

plan is not required to include analysis

discussing whether the conditions for

chartering the bridge bank would be

satisfied. Rather, each group A CIDI is

required to support its estimation that

the identified strategy in the resolution

plan maximizes value and minimizes

losses to the creditors of the group A

CIDI. While commenters noted that this

necessarily would be subjective and

depend on a variety of factors, the CIDI’s

assessment of this item will be helpful

to the FDIC in making its own

assessment in the event of a failure. The

valuation analysis discussed below

supports the FDIC’s ability to evaluate

the strategy’s impact on value and its

potential costs to the DIF across a range

of options.

Recognizing that the bridge bank

approach may not be optimal for all

group A CIDIs, consistent with the

proposal, the final rule permits a

different identified strategy if it best

addresses the first prong of the

credibility standard (discussed in

credibility criteria 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

p A CIDIs, consistent with the

proposal, the final rule permits a

different identified strategy if it best

addresses the first prong of the

credibility standard (discussed in

credibility criteria 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. Also consistent

with the proposal, an alternative

identified strategy under the final rule

could include transferring some but not

all business lines and assets to a bridge

bank and liquidating others in a

receivership. For some group A CIDIs, a

payment of insured deposits 15 and

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liquidation of all business lines and

assets in receivership may be the most

appropriate identified strategy.

Consistent with the proposed rule, the

final rule requires any identified

strategy to include meaningful

optionality for execution across a range

of scenarios and provide the

information and analysis to inform

decisions and support optionality for

the FDIC in undertaking a resolution of

the CIDI following its material financial

distress and failure. One commenter

stated that meaningful optionality is a

vague and difficult standard. As

explained in the preamble to the

proposal, 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

ptionality is a

vague and difficult standard. As

explained in the preamble to the

proposal, 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.

The final rule retains the expectation of

meaningful optionality as proposed.

Failure Scenario

The proposal would have required the

identified strategy to be based on a

failure scenario that demonstrates that

the CIDI is experiencing material

financial distress. The proposed rule

would have required the failure scenario

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.

The proposal noted that, while the

immediate cause of failure may be based

on liquidity shortfalls, the failure

scenario also must consider the

likelihood of the depletion of capital

and losses in the assets of the CIDI,

which may include embedded losses

that may not have been recognized by

the CIDI for financial reporting

purposes. The FDIC has learned that a

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

f capital

and losses in the assets of the CIDI,

which may include embedded losses

that may not have been recognized by

the CIDI for financial reporting

purposes. The FDIC has learned that a

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

and the nature of the CIDI. These

proposed provisions remain

substantively unchanged in the final

rule.

Under the proposal, the failure

scenario would have been required to

assume that the U.S. parent holding

company is in bankruptcy and is

consistent with the approach taken in

DFA resolution plans. One commenter

objected to the assumption that the

parent is in bankruptcy, stating that this

assumption is not appropriate for all

firm structures and may overlook

potential sources of value in resolution

and limit the information available to

the FDIC. While the FDIC appreciates

that the CIDI’s parent and parent

affiliates may not be in bankruptcy in all

cases, experience shows that a bank

failure frequently occurs with

bankruptcy of the parent and parent

affiliates. For that reason, an

understanding of the impact of such a

failure scenario on the resolution of the

CIDI is important for the FDIC to

prepare for that possibility and the FDIC

believes that this baseline assumption is

useful and appropriate. The full

resolution submissions will contain

information to support an evaluation of

outcomes in the event that a

coordinated, group-wide approach is

feasible

ason, an

understanding of the impact of such a

failure scenario on the resolution of the

CIDI is important for the FDIC to

prepare for that possibility and the FDIC

believes that this baseline assumption is

useful and appropriate. The full

resolution submissions will contain

information to support an evaluation of

outcomes in the event that a

coordinated, group-wide approach is

feasible. For instance, consistent with

the proposal, the final rule requires

information on financial and

operational interconnections between

the IDI and the parent and parent

affiliates that will be helpful to the FDIC

in considering options should this

baseline assumption prove not to be the

case in an actual resolution scenario.

For these reasons, the FDIC has made no

change with respect to this assumption

in the final rule.

The FDIC made a clarifying change to

the failure scenario by deleting the

references to discount window

borrowing before or in resolution. While

assumptions regarding discount

window borrowing are included in the

scenarios described in prior DFA

resolution plan guidance, these

considerations are less important to the

FDI Act resolution scenario because of

the availability of the DIF for temporary

liquidity in resolution. The preamble to

the proposed rule noted that the

identified strategy may assume

continuation of Federal Home Loan

Bank (FHLB) advances as well as the

availability of short-term liquidity

advances from the DIF to meet

temporary liquidity needs in resolution,

if the identified strategy provides for

timely repayment of those funds, an

assumption that was supported by one

commenter. As the scenario specifically

permits the use of DIF liquidity in

resolution, provided that the identified

strategy may not assume use of the DIF

to avoid losses to creditors of the bridge

bank, and may assume the availability

of FHLB or other sources of liquidity on

applicable terms, it is less significant

whether the bridge bank borrows from

the discount window

pported by one

commenter. As the scenario specifically

permits the use of DIF liquidity in

resolution, provided that the identified

strategy may not assume use of the DIF

to avoid losses to creditors of the bridge

bank, and may assume the availability

of FHLB or other sources of liquidity on

applicable terms, it is less significant

whether the bridge bank borrows from

the discount window. To the extent that

the CIDI assumes that DIF funding is

used during the resolution by a bridge

bank, it must demonstrate the capacity

for such borrowing on a fully secured

basis and must demonstrate a source of

timely repayment.

In addition, the final rule retains the

proposal without change to allow

flexibility for the FDIC to devise specific

failure scenario assumptions with

respect to macroeconomic conditions or

the precipitating cause of failure. One

commenter stated that the FDIC should

provide any changes to failure scenario

assumptions at least 12 months before a

full resolution submission is due. The

FDIC will endeavor to provide a group

A CIDI notice of additional or

alternative parameters for the failure

scenario at least one year before the

applicable full resolution submission is

due. Other comments suggesting that

changes to the scenario must be public

and apply equally to all group A CIDIs

were not adopted. The FDIC has learned

in past plan reviews and resolution

experience that the path to failure is

different for different firms and may

depend on the particular business

structure of an individual CIDI or cohort

of CIDIs. Accordingly, the FDIC believes

that it is appropriate to retain options

for flexibility and confidentiality in the

development of scenarios.

Executive Summary

The proposed rule would have

required a group A CIDI to include an

executive summary describing the key

elements of its identified strategy

may

depend on the particular business

structure of an individual CIDI or cohort

of CIDIs. Accordingly, the FDIC believes

that it is appropriate to retain options

for flexibility and confidentiality in the

development of scenarios.

Executive Summary

The proposed rule would have

required a group A CIDI to include an

executive summary describing the key

elements of its identified strategy. It also

would have required 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 have

required 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.

This provision of the final rule is

adopted as proposed. As discussed

above, the definition of material change

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has been refined from the definition in

the proposal.

Organizational Structure: Legal Entities;

Core Business Lines; and Branches

The proposal would have required a

full resolution submission to describe

the CIDI’s domestic and foreign branch

organization and to provide addresses

and asset size. The proposed rule would

have also required the CIDI to identify

and describe the core business lines of

the CIDI, the parent company, and

parent company affiliates

tructure: Legal Entities;

Core Business Lines; and Branches

The proposal would have required a

full resolution submission to describe

the CIDI’s domestic and foreign branch

organization and to provide addresses

and asset size. The proposed rule would

have also required the CIDI to identify

and describe the core business lines of

the CIDI, the parent company, and

parent company affiliates. The proposed

rule would have introduced the

requirement to identify all regulated

subsidiaries, as this information will

assist the FDIC in identifying entities

with capital, liquidity, and other

requirements, and in assessing these

entities’ regulatory requirements when

it is resolving a CIDI using a bridge

bank. The proposed rule would have

modified the mapping requirements to

require that core business lines be

mapped to material entities, franchise

components, and regulated subsidiaries,

to improve the utility of mapping and

support the analysis of franchise

components. One commenter objected

to the level of informational detail

required for regulated subsidiaries, and

recommended that the final rule limit

the requirements to material entities, as

defined, or limit the information

required with respect to regulated

entities to a list of these subsidiaries and

their respective jurisdictions, regulators,

and asset sizes. The definition of

‘‘regulated subsidiaries’’ includes

registered brokers and dealers,

registered investment advisors,

registered investment companies,

insurance companies, futures

commission merchants and other

entities regulated by the Commodity

Futures Trading Commission, and other,

similar regulated entities. These entities,

even if relatively small in asset size or

income, present complexity in

resolution, and it is important to the

FDIC to understand their role in the

banking organization and the capital

and liquidity impacts of these entities if

they are maintained by a bridge bank.

Accordingly, the final rule adopts this

requirement as proposed

sion, and other,

similar regulated entities. These entities,

even if relatively small in asset size or

income, present complexity in

resolution, and it is important to the

FDIC to understand their role in the

banking organization and the capital

and liquidity impacts of these entities if

they are maintained by a bridge bank.

Accordingly, the final rule adopts this

requirement as proposed.

The proposed rule would have

required the full resolution submission

to 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, to support

and inform the FDIC’s analysis of the

impact of breakup of the CIDI from its

parent company and parent company

affiliates. This requirement is retained

in the final rule.

Methodology for Material Entity

Designation

The proposed rule would have

required each CIDI to describe its

methodology for identifying material

entities, to afford each CIDI the

flexibility to develop a methodology

that is appropriate to the nature, size,

complexity, and scope of its operations.

The final rule adopts this proposed

requirement without change.

Separation From Parent; Potential

Barriers or Material Obstacles to Orderly

Resolution

The proposed requirements with

respect to 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,

are adopted without substantive change.

The final rule, consistent with the

proposal, requires that a full 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

and the parent company affiliates have

filed for bankruptcy or are in resolution

under another insolvency regime

structure,

are adopted without substantive change.

The final rule, consistent with the

proposal, requires that a full 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

and the parent company affiliates have

filed for bankruptcy or are in resolution

under another insolvency regime. It also

requires addressing the impact on the

bridge bank’s value if the CIDI were

separated from the parent company’s

organization. These requirements are

intended to focus on whether the CIDI,

and therefore a bridge bank, can be a

viable stand-alone entity from the point

of view of economic value and viability

of business lines.

Consistent with the proposed rule, the

final rule requires identification of

potential barriers or other material

obstacles to an orderly resolution, the

identification of how such barriers or

obstacles could pose risks to a group A

CIDI’s identified strategy, and the

identification of inter-connections and

inter-dependencies that may hinder the

timely and effective resolution of the

CIDI. For clarification, the final rule

qualifies the potential barriers or other

material obstacles to an orderly

resolution as those that may occur upon

the CIDI’s separation from the parent

company’s organization. Like the

proposal, the final rule also provides for

the CIDI to identify any remediation

steps or mitigating responses necessary

to eliminate or minimize these barriers

or obstacles.

Overall Deposit Activities

Consistent with the proposal, the final

rule requires a full resolution

submission to include important

information about deposit activities.

One comment letter suggested that

instead of requiring this information,

the rule should focus on ensuring that

the CIDI has the capabilities to provide

the necessary information timely. The

FDIC agrees that the capabilities to

provide this information on a current

basis would be important in resolution

full resolution

submission to include important

information about deposit activities.

One comment letter suggested that

instead of requiring this information,

the rule should focus on ensuring that

the CIDI has the capabilities to provide

the necessary information timely. The

FDIC agrees that the capabilities to

provide this information on a current

basis would be important in resolution.

The CIDIs’ provision of the information

required would be one way to

demonstrate these capabilities. This

information would give the FDIC a

baseline view of the deposit activities of

each CIDI and assist the FDIC in

contingency planning activities for a

potential failure of the CIDI, recognizing

that updates would be needed in an

actual resolution event.

The final rule adopts the proposed

requirements with respect to deposit

activities, which include information

about insured and uninsured deposits.

While the proposal would have required

information on commercial deposits by

business line and unique aspects of the

deposit base or underlying systems, the

final rule provides clarification of that

particular aspect of the requirement.

The final rule specifies that the

requirement is to identify ‘‘particular

deposit concentrations,’’ in addition to

other aspects of the deposit base or

underlying systems that may increase

complexity in resolution. The final rule

retains the proposed requirement to

describe how types or groups of

deposits are related to a core business

line, business segment, or franchise

component and how they are identified

in the CIDI’s systems or records. As

discussed in the preamble to the

proposed rule, 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

deposits are related to a core business

line, business segment, or franchise

component and how they are identified

in the CIDI’s systems or records. As

discussed in the preamble to the

proposed rule, 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. Similarly, in a multiple

acquirer exit, which may involve

regional breakup of the CIDI or a

breakup of its business lines, it will be

important to understand how to identify

the deposits that would relate to the

various divestiture options in such a

breakup.

Consistent with the proposal, the final

rule requires a discussion of foreign

deposits and identification of deposits

dually payable in the U.S. The final rule

also adopts the proposed requirements

with respect to information about

deposit sweep arrangements with

affiliates and unaffiliated parties and the

contracts governing those arrangements.

The final rule clarifies the proposal by

stating that the FDIC needs information

about the CIDI’s reporting capabilities to

generate accurate and timely contact

information for omnibus, deposit sweep,

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and pass-through accounts. The FDIC

intends this clarification to be a non-

substantive change.

The final rule adopts the proposed

requirements with respect to

identification of key depositors, which

are defined 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 business segments. Each key

depositor must be identified by name,

business segment, and amount of

deposit, and the CIDI must identify

other services it provides to that

depositor

pect to

identification of key depositors, which

are defined 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 business segments. Each key

depositor must be identified by name,

business segment, and amount of

deposit, and the CIDI must identify

other services it provides to that

depositor. One commenter stated that

the required information regarding

deposit activities should be narrowed,

but the commenter did not propose an

alternative approach. The FDIC asked

for feedback on the approach to

identification of key depositors but did

not receive feedback. Rather than

providing for a prescriptive approach,

the final rule simply requires a

description of the approach used by the

CIDI in identifying its key depositors.

While in some cases providing

information on the top 10 or 20 percent

of deposits may be the best approach, in

others it may be the top 50 or 400

depositors, or it may be that the nature

of the relationship is a crucial

identifying feature. Key depositors

should include those depositors that the

CIDI monitors most closely and may

want to engage with in a stress event.

Critical Services

The final rule adopts the proposed

requirements with respect to critical

services without substantive change.

This includes the requirement that the

CIDI be able to demonstrate capabilities

necessary to ensure continuity of critical

services in resolution. Under the final

rule, full resolution submissions are

required to identify critical services and

critical services support and include an

explanation of the criteria by which

critical services are identified in order

to clarify for the FDIC the CIDI’s

approach to this content element

IDI be able to demonstrate capabilities

necessary to ensure continuity of critical

services in resolution. Under the final

rule, full resolution submissions are

required to identify critical services and

critical services support and include an

explanation of the criteria by which

critical services are identified in order

to clarify for the FDIC the CIDI’s

approach to this content element. The

final rule requires the identification of

critical services and critical services

support 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

full resolution submission must map

critical services support to legal entities

that provide those services directly or

indirectly through third parties. In

addition, a full resolution submission

must map critical services to the

material entities, core business lines,

and franchise components supported by

those critical services. It also must

include information about the critical

services and critical services support

that may be at risk of interruption if the

CIDI fails and the process the CIDI used

to make that determination. The full

resolution submission must also discuss

potential obstacles to maintaining

critical services that could occur in the

event of the CIDI’s failure and steps that

could be taken to remediate or

otherwise mitigate the risk of

interruption, describe the CIDI’s

approach for continuing critical services

in the event of the CIDI’s failure, and

provide information about the contracts

governing the provision of these

services. Consistent with the proposal,

the final rule requires a CIDI to provide

information about its process for

collecting and monitoring the contracts

governing critical services and critical

services support

, describe the CIDI’s

approach for continuing critical services

in the event of the CIDI’s failure, and

provide information about the contracts

governing the provision of these

services. Consistent with the proposal,

the final rule requires a CIDI to provide

information about its process for

collecting and monitoring the contracts

governing critical services and critical

services support. As noted in the

preamble to the proposed rule,

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 with valuable information

when seeking to understand a CIDI’s

operations and business relationships.

Key Personnel

The final rule adopts without change

the proposed requirements with respect

to key personnel, including that a CIDI

must identify key personnel and

describe its methodology for identifying

key personnel, and must furnish

information regarding the identification

of employee benefit programs provided

to key personnel and any applicable

collective bargaining agreements or

similar arrangements. Key personnel are

defined broadly in the rule, and should

include 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 significant to the FDIC’s resolution of

the CIDI. Key personnel should include

personnel that hold or maintain

necessary licenses or permits for

domestic or foreign operations at the

CIDI or have been designated as key

personnel to domestic or foreign

authorities. Consistent with the

proposal, the final rule requires a CIDI

to provide a recommended approach for

retaining key personnel during its

resolution that, for example, may

specify retention bonuses and other

retention incentives

r maintain

necessary licenses or permits for

domestic or foreign operations at the

CIDI or have been designated as key

personnel to domestic or foreign

authorities. Consistent with the

proposal, the final rule requires a CIDI

to provide a recommended approach for

retaining key personnel during its

resolution that, for example, may

specify retention bonuses and other

retention incentives. This approach

should consider and address employees

most at risk for leaving the CIDI

promptly upon a failure event.

Franchise Components

The proposal included certain

requirements with respect to the

identification of franchise components

and related capabilities. Under the

proposal, a franchise component was

defined as a business segment, regional

branch network, major asset or asset

pool, or other key component of the IDI

franchise that could be separated and

sold or divested.

In response to comments, the final

rule makes certain adjustments to the

requirements with respect to franchise

components. The proposed rule

included the requirement that a CIDI

must be able to demonstrate the

capabilities to ensure that franchise

components are separable and

marketable in resolution. The final rule

eliminates the word separable from this

definition. Instead of referring to

separability as a required capability of a

CIDI, the emphasis of the final rule is on

the identification of franchise

components that are, in their current

circumstances, separable. The final rule

retains the requirement that a CIDI must

be able to demonstrate the capabilities

necessary to market the franchise

components.

In addition, the final rule makes an

express reference to the IDI franchise in

this sentence to make clear that this

capability also must support the

marketing of the IDI franchise as a

whole or in conjunction with the

marketing of its franchise components

rule

retains the requirement that a CIDI must

be able to demonstrate the capabilities

necessary to market the franchise

components.

In addition, the final rule makes an

express reference to the IDI franchise in

this sentence to make clear that this

capability also must support the

marketing of the IDI franchise as a

whole or in conjunction with the

marketing of its franchise components.

Although the final rule does not permit

a closing weekend sale as the identified

strategy for the reasons discussed above,

a sale of the IDI franchise, whether over

closing weekend or following a bridge

bank period, is an important option in

resolution. It is therefore essential that

CIDIs maintain the capabilities

necessary to support marketing of their

IDI franchises as well as their franchise

components.

The proposal included the

requirement that the full resolution

submission identify franchise

components that are currently separable

and marketable in a timely manner. The

proposed rule received one comment

with respect to this requirement. The

commenter stated that there should not

be a specified timing requirement for

the sale of franchise components and

that the imposition of a time period,

especially a short one, such as 60 or 90

days, would not be appropriate or

realistic. In particular, the commenter

stated that it would not work for

multiple acquirer exit strategies, which

require months to execute.

The final rule retains the proposed

definition of the term ‘‘franchise

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would not be appropriate or

realistic. In particular, the commenter

stated that it would not work for

multiple acquirer exit strategies, which

require months to execute.

The final rule retains the proposed

definition of the term ‘‘franchise

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16 Guidance for section 165(d) Resolution Plan

Submissions by Domestic Covered Companies

applicable to the Eight Largest, Complex U.S.

Banking Organizations, 84 FR 1438 (Feb. 4, 2019).

component’’ as discussed above and

retains text of the proposed rule with

respect to identification of franchise

components that are currently separable

and are marketable in a timely manner.

The intent is to identify franchise

components that can be marketed and

sold in their current state, i.e., without

significant obstacles or the need for

restructuring. This will enhance

optionality for the FDIC, creating the

potential for marketing of the IDI

franchise as a whole as quickly as

possible following the failure of the

CIDI. Thus, the phrase ‘‘timely manner’’

is retained. Although the FDIC did not

propose and is not now including a

specific time requirement, ‘‘timely’’

marketing capabilities should be

measured in days or weeks, not months.

The FDIC notes that the adopted

approach to separability and

marketability of franchise components

is distinguishable from the proposed

approach taken with respect to the

identification of divestiture options to

support a multiple acquirer exit from a

bridge bank. The multiple acquirer exit

is a possible element of an identified

strategy, a requirement that applies only

to group A CIDIs. Such an exit option

may require restructuring and

divestiture options that present greater

obstacles and that may require a longer

period than for a sale of the franchise

components

ion of divestiture options to

support a multiple acquirer exit from a

bridge bank. The multiple acquirer exit

is a possible element of an identified

strategy, a requirement that applies only

to group A CIDIs. Such an exit option

may require restructuring and

divestiture options that present greater

obstacles and that may require a longer

period than for a sale of the franchise

components. For example, an identified

franchise component might be a broker-

dealer or mortgage servicing subsidiary

within the bank chain, or a material

asset portfolio, that is readily separable

from the IDI and can be marketed as an

option at the time of failure. On the

other hand, divestiture options may be

the result of a regional breakup of the

CIDI or a breakup of business lines that

require significant restructuring in order

to market the regional or business line

segments separately.

The proposed rule would have

required franchise components

identified in a full resolution

submission to be sufficient to

implement the identified strategy (for

group A CIDIs) and to provide

meaningful optionality across a range of

scenarios if the preferred approach is

not available. The requirement to

provide meaningful optionality across a

range of scenarios is deleted from this

paragraph as superfluous. That

expectation is subsumed in the first

prong of the credibility standard

applicable to group A CIDIs, which is

discussed above.

Consistent with the proposed rule, the

final rule sets forth basic informational

elements required for each franchise

component, including identification of

responsible senior management and

provision of metrics depicting each

franchise component’s size and

significance. Useful metrics may

include total revenue, net income,

percentage market share, and, if

applicable and available, total assets

and liabilities

osed rule, the

final rule sets forth basic informational

elements required for each franchise

component, including identification of

responsible senior management and

provision of metrics depicting each

franchise component’s size and

significance. Useful metrics may

include total revenue, net income,

percentage market share, and, if

applicable and available, total assets

and liabilities. The full resolution

submission must also include a

description of the key assumptions for

each franchise component divestiture

and all significant impediments and

obstacles to execution of a franchise

component divestiture, including legal,

regulatory, cross-border, or operational

challenges.

The final rule retains these paragraphs

as proposed. The final rule makes no

change to the proposed requirement that

a full resolution submission must

include a description of the CIDI’s

capabilities and processes to initiate

marketing of the franchise component

and provide a description of necessary

actions and a timeline for the divestiture

supported by a description of the key

underlying assumptions. The final rule

also adopts the requirement in the

proposal that the CIDI describe the

process it would use to identify

prospective bidders for its 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 supports that effort. In

addition to describing the process for

identification of prospective bidders,

identifying those prospective bidders,

either specifically or by industry or

category, would also be helpful.

The final rule incorporates the

proposed requirements with respect to a

virtual data room (VDR), which, among

other things, must include information

sufficient to permit a bidder to provide

an initial bid on the IDI franchise or the

CIDI’s franchise components

rospective bidders,

identifying those prospective bidders,

either specifically or by industry or

category, would also be helpful.

The final rule incorporates the

proposed requirements with respect to a

virtual data room (VDR), which, among

other things, must include information

sufficient to permit a bidder to provide

an initial bid on the IDI franchise or the

CIDI’s franchise components. One

commenter stated that the VDR

requirements should be aligned with the

DFA rule expectations regarding due

diligence rooms. The comment also

stated that the FDIC should not require

ongoing maintenance of a VDR and not

establish a timeframe for setting up the

VDR because time requirements may

vary across CIDIs. It also stated that the

FDIC should note that the list of VDR

elements is merely indicative.

The VDR requirements in the final

rule are consistent with the expectations

in the U.S. GSIB guidance 16 issued in

connection with the DFA rule that

would apply to any divestiture option

identified in a DFA resolution plan,

which could include any subsidiary or

component of the firm’s global

organization. Reflecting the different

focus of this rule, it provides more

detail than the U.S. GSIB guidance

about the informational elements that

would be appropriate for a VDR to be

utilized in the sale of the IDI franchise

and the CIDI’s franchise components.

The final rule, like the proposal, does

not require the ongoing maintenance of

a VDR; rather it is focused on the

capabilities to establish a VDR in a

timely manner.

The final rule is unchanged from the

proposal with respect to the length of

time during which a VDR must be able

to be populated, in that it does not

provide a prescriptive time. However,

the capabilities should support a very

short time frame to stand up a VDR and

not rely upon a stabilized bridge bank

to extend the time available to do so

bilities to establish a VDR in a

timely manner.

The final rule is unchanged from the

proposal with respect to the length of

time during which a VDR must be able

to be populated, in that it does not

provide a prescriptive time. However,

the capabilities should support a very

short time frame to stand up a VDR and

not rely upon a stabilized bridge bank

to extend the time available to do so.

The final rule requires 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 list of content elements to be

included in the VDR is indicative and

not comprehensive; the specific

information and data that would be

appropriate and sufficiently detailed to

support prompt and competitive bids

will 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. The

final rule was modified from the

proposal to make clear that certain of

the listed data elements may not apply

in some cases, such as for the sale of a

franchise component that is a material

asset portfolio

I 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. The

final rule was modified from the

proposal to make clear that certain of

the listed data elements may not apply

in some cases, such as for the sale of a

franchise component that is a material

asset portfolio.

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Finally, to effect a timely sale of a

failed IDI, the FDIC must have access to

and control of data in a VDR.

Historically, the FDIC has established a

VDR controlled by the FDIC and

migrated the information into that VDR.

As in the proposal, the final rule

requires the full resolution submission

to include information with respect to

access protocols and requirements for

the FDIC to use the VDR to carry out the

sale of the IDI franchise or the CIDI’s

franchise components. It also must

include a description 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 VDR, in a suitable

format and file structure.

Because many of the CIDIs have a

broker-dealer subsidiary or parent

company affiliate, the final rule also

includes, without change, the proposed

provision specifically addressing VDR

content related to a broker-dealer. It is

not the intent of that provision,

however, to exclude or limit

information related to other non-

banking activities such as insurance or

asset management

tructure.

Because many of the CIDIs have a

broker-dealer subsidiary or parent

company affiliate, the final rule also

includes, without change, the proposed

provision specifically addressing VDR

content related to a broker-dealer. It is

not the intent of that provision,

however, to exclude or limit

information related to other non-

banking activities such as insurance or

asset management.

Material Asset Portfolios

The proposed rule would have

required CIDIs to include information

about ‘‘asset portfolios,’’ including how

the assets within the portfolio are

valued and recorded in the CIDI’s

records. As proposed, a CIDI would

have been required to identify and

discuss impediments to the sale of each

material asset portfolio and to provide a

timeline for each material asset

portfolio’s disposition. A commenter

noted that the concept of ‘‘material asset

portfolios’’ appears to be included in the

definition franchise components and

therefore, a separate requirement

regarding material asset portfolios is

redundant and unnecessary. The final

rule retains the proposed requirement

and exclusively utilizes the defined

term ‘‘material asset portfolios.’’ With

respect to the definition of franchise

components, the final rule utilizes the

term ‘‘material asset portfolio’’ instead

of ‘‘asset pool’’ for clarity and

consistency. While a material asset

portfolio may be identified as a

franchise component, this paragraph

requires identification of material asset

portfolios whether or not they meet the

definition of a franchise component and

are identified as such in the full

resolution submission. However, where

there is overlap with material asset

portfolios that are franchise

components, the information can be

provided once and cross-referenced, if

appropriate

as a

franchise component, this paragraph

requires identification of material asset

portfolios whether or not they meet the

definition of a franchise component and

are identified as such in the full

resolution submission. However, where

there is overlap with material asset

portfolios that are franchise

components, the information can be

provided once and cross-referenced, if

appropriate.

Valuation To Facilitate FDIC’s

Assessment of Least-Costly Resolution

Method

As explained in the preamble to the

proposal, the requirement that each

group A CIDI must provide valuation

analysis and develop the related

capabilities would support the FDIC’s

analysis in conducting valuations in any

actual failure scenario, even where there

are no bid prices available to establish

value. The proposed rule would have

required group A CIDIs to demonstrate

the capabilities necessary to produce

valuations that support the FDIC’s

analysis to determine whether a

resolution strategy would be the least

costly to the DIF in the event of failure.

To demonstrate valuation capabilities,

the proposed rule would have required

a group A CIDI 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.

The proposed valuation analysis

required that a group A CIDI provide a

narrative description of how it values its

franchise components and the CIDI as a

whole. It also required qualitative and

quantitative valuation analysis

assuming both an all-deposits bridge

bank and the transfer of insured

deposits only to the bridge bank. In all

cases, the proposed rule required that

the resolution plan describe the CIDI’s

approach to gathering information

needed to support its analysis and its

ability to produce updated and timely

valuation information.

The FDIC received several comments

to the proposal with respect to the

proposed requirements for valuation

analysis

transfer of insured

deposits only to the bridge bank. In all

cases, the proposed rule required that

the resolution plan describe the CIDI’s

approach to gathering information

needed to support its analysis and its

ability to produce updated and timely

valuation information.

The FDIC received several comments

to the proposal with respect to the

proposed requirements for valuation

analysis. Several commenters

emphasized the importance of valuation

to resolution planning. Three

commenters supported the replacement

of least-cost analysis with a valuation

capabilities requirement, but disagreed

with the proposed approach to

quantitative analysis. One commenter

argued that assumptions regarding

depositor and potential acquirer

behavior would be ‘‘inherently

subjective and likely to add little-to-no

value to the FDIC.’’ This commenter

also stated that the quantitative analysis

is not well adapted to CIDIs that lack

experience with mergers and

acquisitions or large mergers and

acquisitions teams, and would require

retention of third parties.

The FDIC considered commenters’

concerns regarding the requirement for

quantitative analyses. The final rule

partially retains the requirement for

quantitative analysis, with some

modifications. There is significant value

in a group A CIDI demonstrating that it

has the capability to value its deposit

franchise, as well as the individual

franchise components. The proposed

valuation content requirements are not

underpinned by an expectation that the

resulting ranges of value will accurately

anticipate sale proceeds actually

received from a disposition at some

undetermined future point

e is significant value

in a group A CIDI demonstrating that it

has the capability to value its deposit

franchise, as well as the individual

franchise components. The proposed

valuation content requirements are not

underpinned by an expectation that the

resulting ranges of value will accurately

anticipate sale proceeds actually

received from a disposition at some

undetermined future point. Instead, the

utility of CIDIs’ valuation analysis is in

understanding the methodologies CIDIs

determine to be appropriate for

estimating the value of their franchise

components and the CIDI as a whole,

and the degree to which CIDIs would be

able to furnish the information and

analysis necessary for the FDIC to

conduct its statutorily-required analyses

in an actual resolution scenario.

The evaluation of valuation analyses

under the second prong of the

credibility standard reflects a

recognition of the inherent necessity for

application of judgment in the analyses

(e.g., selection of appropriate valuation

approaches, assignment of weights to

the various approaches). As required by

the standard, the CIDI’s judgment

should be supported by observable and

verifiable capabilities and data, as well

as reasonable projections. Thus, the

FDIC will not evaluate the analysis on

the basis of a specific threshold or

metric or the specific choices made

regarding valuation approaches and

methodology, but rather on the

comprehensiveness of the analysis, the

supportability of the data and

capabilities required to conduct the

analysis, the reasonableness of the

CIDI’s assumptions and selected

approaches, and the group A CIDI’s

ability to refresh the analyses in a timely

manner. The FDIC does not require or

expect valuation analysis to be

completed by a third-party expert;

rather the analysis should be based

upon the group A CIDI’s understanding

of the nature of its business and its

relationships with its depositors

is, the reasonableness of the

CIDI’s assumptions and selected

approaches, and the group A CIDI’s

ability to refresh the analyses in a timely

manner. The FDIC does not require or

expect valuation analysis to be

completed by a third-party expert;

rather the analysis should be based

upon the group A CIDI’s understanding

of the nature of its business and its

relationships with its depositors.

In response to comments, the final

rule eliminates the requirement that

valuation estimates reflect the ‘‘net

present value of proceeds estimated to

be received’’ in a sale of the IDI

franchise as a whole or under a sum-of-

the-parts analysis. This change

recognizes that, while the required

valuation analysis will result in a range

of reasonable values, the actual

proceeds realized in a given transaction

will depend on, among other things, the

facts and circumstances surrounding the

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17 See generally 12 CFR part 371.

actual failure and the time for marketing

and executing the transaction.

In addition, in response to comments,

the final rule modifies the proposed

requirements to reflect a shift toward

qualitative analysis only for

§ 360.10(d)(12)(ii)(B), eliminating the

quantitative analysis relating to the

impact on value in the event that losses

are imposed on uninsured depositors in

connection with the resolution strategy

adopted.

The presence of unsecured debt on

the balance sheet of the failed IDI serves

to protect deposits in resolution, and

increase the likelihood that an all-

deposits bridge bank will meet the

requirements of the least-cost test

quantitative analysis relating to the

impact on value in the event that losses

are imposed on uninsured depositors in

connection with the resolution strategy

adopted.

The presence of unsecured debt on

the balance sheet of the failed IDI serves

to protect deposits in resolution, and

increase the likelihood that an all-

deposits bridge bank will meet the

requirements of the least-cost test.

However, even with the benefits of long-

term debt positioned at the CIDI at the

time of its failure, it cannot be assured

that an all-deposits bridge bank will

meet the requirements of the least-cost

test in every case. Thus, the final rule,

like the proposal, also requires analysis

of the impact on value where only

insured deposits are passed to the

bridge bank. This analysis will assist the

FDIC in understanding the impact on

value in an insured-only bridge bank,

which will assist in weighing whether

that outcome is less costly than other

available resolution options. While the

proposal required quantitative as well as

qualitative analysis in this area, in

response to comments, the final rule

requires a group A CIDI to provide only

qualitative analysis of the impact on

franchise value that may result from not

transferring uninsured deposits to the

bridge depository institution. The

quantitative analysis provided with

respect to an all-deposits bridge bank,

together with robust qualitative analysis

with respect to an insured-only bridge

bank, will support the FDIC’s least-cost

determination under both scenarios.

This qualitative analysis must include a

description of options to mitigate that

impact, such as an advance dividend

payment to depositors, reflecting

different levels of loss. As clarified in

the final rule, such a qualitative analysis

should reflect reasonable assumptions

of customer behavior based upon the

group A CIDI’s overall depositor profile

and the provision of overall lending and

other services to such depositors

de a

description of options to mitigate that

impact, such as an advance dividend

payment to depositors, reflecting

different levels of loss. As clarified in

the final rule, such a qualitative analysis

should reflect reasonable assumptions

of customer behavior based upon the

group A CIDI’s overall depositor profile

and the provision of overall lending and

other services to such depositors. For

example, insight into the holistic client

relationships, including the lending,

fee-based, and deposit-based businesses

would provide insight into the value

impact.

Off-Balance Sheet Exposures

The final rule incorporates the

proposed requirement that a full

resolution submission include a

description of any material off-balance-

sheet exposures, including unfunded

commitments, guarantees, and

contractual obligations, and that it map

those exposures to franchise

components, core business lines, and

material asset portfolios.

Qualified Financial Contracts

The final rule includes the proposed

requirements for information on

qualified financial contracts (QFCs),

which are intended to support and

enhance information that may be

provided under the FDIC’s QFC

recordkeeping rule, and would be useful

in the event that the CIDI were not

subject to the requirements of the QFC

recordkeeping rule at the time of its

failure.17 The focus of the information

required is on the relationship of QFCs

to the CIDI’s core business lines and

franchise components, and how these

transactions are integrated with the

CIDI’s business activities and with other

services provided to customers.

Consistent with the proposal, the final

rule also requires CIDIs to provide

information about their booking models

for risk, and how the CIDI uses QFCs to

manage hedging or liquidity needs. This

information will help the FDIC to make

decisions with respect to transferring

QFCs to a bridge bank, and to better

understand the impact of any decision

not to transfer certain QFCs

to customers.

Consistent with the proposal, the final

rule also requires CIDIs to provide

information about their booking models

for risk, and how the CIDI uses QFCs to

manage hedging or liquidity needs. This

information will help the FDIC to make

decisions with respect to transferring

QFCs to a bridge bank, and to better

understand the impact of any decision

not to transfer certain QFCs. The final

rule also includes certain revisions to

the language of this paragraph, which

are intended as clarifying changes.

Unconsolidated Balance Sheet; Material

Entity and Regulated Subsidiary

Financial Statements

The final rule adopts the proposed

requirement that a CIDI must provide an

unconsolidated balance sheet and

consolidating schedules for all material

entities and regulated subsidiaries that

are subject to consolidation with the

CIDI. The final rule also adopts the

provision permitting CIDIs to aggregate

on the consolidating schedule amounts

attributed to entities that are not

material entities or regulated

subsidiaries. The final rule includes

clarifying changes intended to more

clearly state that all of the requirements

apply to regulated subsidiaries as well

as material entities. Consistent with the

proposal, the final rule requires audited

financial statements where they are

available.

Payment, Clearing, and Settlement

Services

The final rule adopts, with clarifying

changes, the proposed requirement that

a full resolution submission provide

information regarding each payment,

clearing, and settlement (PCS) provider

with which it has a direct relationship.

The text was revised to make clear that

payment, clearing, and settlement

systems include services provided by

financial market utilities and agent

banks, and makes ‘‘PCS service

provider’’ a new defined term.

Consistent with the proposal,

information is required for PCS service

providers that are critical services or

critical services support

with which it has a direct relationship.

The text was revised to make clear that

payment, clearing, and settlement

systems include services provided by

financial market utilities and agent

banks, and makes ‘‘PCS service

provider’’ a new defined term.

Consistent with the proposal,

information is required for PCS service

providers that are critical services or

critical services support. Also consistent

with the proposal, the final rule requires

CIDIs to map PCS service providers to

legal entities, core business lines, and

franchise components, and to describe

the services provided by these systems,

including the value and volume of

activities on a per-provider basis.

The final rule also adopts the

proposed requirement for a full

resolution submission to describe PCS

services provided by a CIDI and that are

material in terms of revenue to or value

of any franchise component or core

business line of the CIDI.

Capital Structure; Funding Sources

The final rule adopts, with clarifying

changes, the proposed requirements

with respect to capital structure and

funding sources. Two comments were

supportive of the proposed approach.

The final rule requires that a full

resolution submission describe the

current processes used to identify the

funding, liquidity, and capital needs of

and resources available to each CIDI

subsidiary or foreign branch that is a

material entity, and to describe the

CIDI’s capabilities to project and report

its near-term funding and liquidity

needs. It requires that the full resolution

submission identify the composition of

liabilities of the CIDI, as a clarification

of the proposed requirement to describe

them, and specifies the requisite

information to be provided with respect

to those liabilities

nch that is a

material entity, and to describe the

CIDI’s capabilities to project and report

its near-term funding and liquidity

needs. It requires that the full resolution

submission identify the composition of

liabilities of the CIDI, as a clarification

of the proposed requirement to describe

them, and specifies the requisite

information to be provided with respect

to those liabilities. The final rule also

requires a CIDI to identify material

funding relationships and material

inter-affiliate exposures between the

CIDI and its subsidiaries or foreign

branches that are material entities,

instead of the proposed requirement to

describe them. These changes are

intended to clarify that the full

resolution submission is expected to

include quantitative information for

these areas, and are complementary to

the expectation that the interim

supplement will not include any

additional narrative apart from the

description of material changes as

described in § 360.10(e)(2)(i) and (ii).

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Parent and Parent Company Affiliate

Funding, Transactions, Accounts,

Exposures, and Concentrations

The final rule adopts, with clarifying

changes, the proposed requirements

with respect to parent and parent

company affiliate funding, transactions,

accounts, exposures, and

concentrations. The final rule requires

that a CIDI’s full resolution submission

must identify material affiliate funding

relationships and material inter-affiliate

exposures that the CIDI or its

subsidiaries have with the parent

company or any parent company

affiliate, instead of the proposed

requirement to describe them

company affiliate funding, transactions,

accounts, exposures, and

concentrations. The final rule requires

that a CIDI’s full resolution submission

must identify material affiliate funding

relationships and material inter-affiliate

exposures that the CIDI or its

subsidiaries have with the parent

company or any parent company

affiliate, instead of the proposed

requirement to describe them. Similar to

above, this clarifying language is

intended to make clear that the full

resolution submission is expected to

include quantitative information and is

complementary to the expectation that

the interim supplement will not include

any additional narrative apart from the

description of material changes as

described in § 360.10(e)(2)(i) and (ii).

The full resolution submission must

identify the nature and extent to which

the parent company or any parent

company affiliate serves as a source of

funding to the CIDI and CIDI

subsidiaries. The final rule requires that

the submission include the terms of any

contractual arrangements, including any

capital maintenance agreements, the

location of related assets, funds or

deposits, and the mechanisms for such

inter-affiliate transfers, revised to

include funds transferred from parent

company affiliates.

Economic Effects of Resolution

The proposed rule would have

required CIDIs to identify their activities

that are material to a particular

geographic area or region of the United

States, a particular business sector or

product line, or other financial

institutions. It also would have required

the full resolution submission to

describe the potential disruptive impact

of the termination of such activities on

the geographic area, region, business

sector, industry, or product line, or to

the U.S. financial industry.

The FDIC received several comments

to the proposed approach with respect

to the requirement that the full

resolution submission describe

disruptive impacts in resolution

full resolution submission to

describe the potential disruptive impact

of the termination of such activities on

the geographic area, region, business

sector, industry, or product line, or to

the U.S. financial industry.

The FDIC received several comments

to the proposed approach with respect

to the requirement that the full

resolution submission describe

disruptive impacts in resolution.

Commenters objected to the proposed

approach, arguing that it would require

‘‘speculative’’ assessment of impacts on

third parties, that the information may

be better available to supervisors with a

wider vantage point on impacts, and

that the proposal is too broad and vague

and should be more clearly defined. The

FDIC agrees that the assessment of the

potential disruptive impacts on third

parties may be difficult and possibly

speculative, and would have limited

value. Accordingly, the final rule

eliminates that requirement and

substitutes a narrower requirement: that

the full resolution submission discuss

whether the identified services or

functions are readily substitutable by

other providers and other mitigants to

the potential impact of the termination

of those activities in the event of failure

of the CIDI.

The CIDIs are the nation’s largest

banks, and the FDIC will seek to resolve

a CIDI in a way that minimizes the

disruptive impact of the resolution to

the extent possible. It is therefore

important that the FDIC is aware of the

activities of the CIDI that are most likely

to have significant disruptive effects if

terminated in resolution, such as where

a CIDI provides a unique function or is

a dominant provider of a particular

service. While the CIDI may not be able

to fully measure or assess those impacts,

a CIDI will be able to identify areas

where it has a large market share of a

particular business segment or

geographic region, or where it provides

significant services to other financial

institutions, such as agent or

correspondent banking services

unique function or is

a dominant provider of a particular

service. While the CIDI may not be able

to fully measure or assess those impacts,

a CIDI will be able to identify areas

where it has a large market share of a

particular business segment or

geographic region, or where it provides

significant services to other financial

institutions, such as agent or

correspondent banking services. A

description of the impact of cessation of

these services or functions, and

information regarding whether there are

other providers with the capacity to

readily substitute for the activities of the

CIDI or other mitigants to the impact of

termination of these services are

important to understanding the

potential impacts and mitigating actions

that may be useful in the FDIC’s

resolution planning.

Non-Deposit Claims

The final rule adopts without change

the proposed requirement that a CIDI’s

full resolution submission identify and

describe its capabilities to identify the

non-depositor unsecured creditors of

the CIDI and its subsidiaries that are

material entities. Consistent with the

proposal, the final rule also requires 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. While related

to the requirements in § 360.10(d)(17)

addressing capital structure and funding

sources, the requirements in this

paragraph are intended to provide

information specifically helpful to the

claims process, and would be in

addition to the description of liabilities

provided in § 360.10(d)(17).

Cross-Border Elements

The final rule adopts with certain

changes the proposed requirements with

respect to cross-border elements in a full

resolution submission. The FDIC

received one comment on this proposed

element, which supported the inclusion

of the element as proposed

ful to the

claims process, and would be in

addition to the description of liabilities

provided in § 360.10(d)(17).

Cross-Border Elements

The final rule adopts with certain

changes the proposed requirements with

respect to cross-border elements in a full

resolution submission. The FDIC

received one comment on this proposed

element, which supported the inclusion

of the element as proposed. Consistent

with the proposal, the final rule requires

a full resolution submission to 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 to

revenue or operations of the CIDI, that

information should be included. Entities

with no meaningful function or

contribution to the CIDI’s operations,

such as single purpose real estate

holding companies, may be excluded.

Consistent with the proposal, the final

rule also requires that a full 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 retention or

termination of personnel and adding in

the final rule, transfer or continuation of

licenses or authorizations. Further, the

final rule adds an express requirement

that the full resolution submission must

identify all authorities with regulatory

or supervisory authority over cross-

border operations. This information will

assist the FDIC in coordinating with the

requisite authorities in resolution

ion of personnel and adding in

the final rule, transfer or continuation of

licenses or authorizations. Further, the

final rule adds an express requirement

that the full resolution submission must

identify all authorities with regulatory

or supervisory authority over cross-

border operations. This information will

assist the FDIC in coordinating with the

requisite authorities in resolution.

Management Information Systems;

Software Licenses; Intellectual Property

The final rule adopts without

substantive change the proposed

requirement that each CIDI’s full

resolution submission identify and

describe each key management

information system and application, and

identify any core business line that uses

it, and the key personnel needed to

support and operate it. In the final rule,

the term key personnel is used here

instead of ‘‘personnel by title and legal

entity employer.’’ Each full resolution

submission also is required to identify

each system’s and application’s use and

function, which core business lines use

it, and its physical location, if any, as

well as any related third-party contracts

or service-level agreements, any related

software or systems licenses, and any

other related intellectual property.

Consistent with the proposal, the final

rule also requires a full resolution

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y, as

well as any related third-party contracts

or service-level agreements, any related

software or systems licenses, and any

other related intellectual property.

Consistent with the proposal, the final

rule also requires a full resolution

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56636

Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations

submission to specifically identify key

systems or applications that the CIDI or

its subsidiary does not own or license

directly from the provider and to

discuss how to maintain access to the

system or application when the CIDI is

in resolution. Like the proposal, the

final rule requires a description of the

capabilities of the CIDI’s processes and

systems to collect, maintain, and

produce the information and other data

underlying the full resolution

submission; identification of all relevant

systems and applications; and a

description of how the information is

managed and maintained. For example,

the full resolution submission must

describe whether 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 final rule also

provides for the CIDI to describe any

deficiencies, gaps, or weaknesses in

these capabilities and the actions the

CIDI intends to take to address promptly

any such deficiencies, gaps, or

weaknesses, and the time frame for

implementing these actions.

Digital Services and Electronic

Platforms

The proposal included a new content

element for inclusion in each CIDI’s full

resolution submission regarding digital

services provided by a CIDI to its

customers and the electronic platforms

that support these systems

tends to take to address promptly

any such deficiencies, gaps, or

weaknesses, and the time frame for

implementing these actions.

Digital Services and Electronic

Platforms

The proposal included a new content

element for inclusion in each CIDI’s full

resolution submission

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.