3 Banking Groups Back FDIC Resolution Plan Cuts; ICBA Says They Go Too Far
The Bank Policy Institute ("BPI"), the American Bankers Association ("ABA"), and the Financial Services Forum expressed support for an FDIC proposal to streamline resolution planning requirements for covered insured depository institutions ("CIDIs") by raising the applicability threshold and reducing content requirements; the Independent Community Bankers of America ("ICBA") backed the higher threshold but said the rest of the proposal cuts too deep.
The proposal would amend 12 CFR 360.10 to (i) raise the asset threshold for applicability from $50 billion to $100 billion and index it to inflation, (ii) remove hypothetical resolution-related analysis, formal credibility determinations, capabilities testing, board approval, and the annual interim supplement, and (iii) eliminate the public section.
In separate comment letters, BPI, ABA, and the Forum backed the effort to create a workable resolution framework. BPI and ICBA welcomed the higher threshold, which BPI said would improve tailoring and stop smaller institutions from becoming subject to the rule solely due to inflation; BPI also said streamlined content requirements would remove provisions demanding heavy preparation time for little value to the FDIC in an actual resolution.
On the other hand, ICBA said the proposal would overcorrect by stripping out the elements that make resolution planning worthwhile. It urged the FDIC to retain resolution strategies, credibility assessments, targeted capabilities testing, board approval, and the public section covered institutions must file, and warned that a three-year cycle with no interim filings would leave the agency with stale information in a crisis.
BPI, ABA, and the Forum urged the FDIC to fix overlap with Title I of the Dodd-Frank Act before finalizing the rule. BPI argued that bank subsidiaries of Title I plan filers should be exempt from CIDI requirements, whether the parent uses a single-point-of-entry ("SPOE") strategy, in which only the holding company enters resolution and the bank stays open, or a multiple-point-of-entry strategy. ABA and the Forum made the argument for SPOE filers specifically. The Forum said the proposal's content requirements assume a scenario in which the bank fails and the FDIC resolves it, which SPOE filers' plans are designed to avoid.
Separately, the Forum urged the FDIC to let existing Title I virtual data room capabilities earn SPOE filers the full resolution readiness adjustment proposed in the agency's companion assessments rulemaking. The Forum said the adjustment's data access component, which would require granting the FDIC entry to internal systems and service providers, yields nothing the agency cannot already obtain and raises cybersecurity and confidentiality risks. BPI added that some proposed content additions are overbroad or unclear and urged the FDIC to focus the rule on information it actually needs to resolve a failed bank.