Key Takeaways:
Federal regulators have approved the 2025 resolution plans for 8 of the largest and most complex U.S. banking organizations, finding no deficiencies in how the firms would be wound down in an orderly manner in the event of a failure. The joint approval from the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) removes a key regulatory overhang for the banks.
However, the decision was not unanimous. “I am abstaining from voting on the FDIC staff’s proposal regarding the resolution plans of the U.S. global systemically important banks (GSIBs) because I believe that there are fundamental issues with the current resolution planning processes that continue to be unaddressed,” Jonathan V. Gould, Acting Comptroller of the Currency, said in a statement on his abstention.
The resolution plans, often called “living wills,” are a mandate from the post-2008 Dodd-Frank Act, requiring systemically important banks to detail their strategy for an orderly resolution. The agencies assessed submissions from the eight U.S. GSIBs, including JPMorgan Chase and Wells Fargo, and 56 foreign banking organizations. Both the Fed and FDIC noted that previous issues identified in earlier submissions have been “satisfactorily addressed.”
The approval signals to investors that regulators are confident in the current crisis-preparedness of the nation's largest banks, which could lower their perceived risk profile. However, Gould’s dissent highlights a growing debate over the process itself, which he argues has expanded beyond its original legal mandate through the informal addition of requirements like “assurance frameworks” and “contingency strategies” in feedback letters.
In his statement, Gould argued that the resolution plan feedback process has become “seriously flawed and, in my opinion, extralegal.” He pointed to a gradual expansion of requirements that were not part of the original Section 165(d) rule.
According to Gould, the process has evolved from planning, to planning plus capabilities, and now to “planning plus capabilities plus assurance of capabilities.” He specifically referenced feedback letters from 2024 that introduced the expectation of an “assurance framework” with at least five distinct elements. Gould expressed concern that there is no guarantee that these requirements, added via feedback letters rather than formal rulemaking, will stop increasing. This creates a level of uncertainty for banks and questions the legal foundation of the review process.
This article is for informational purposes only and does not constitute investment advice.
