Federal Reserve Board Issues Guidance To Help Banks Develop Resolution Plans

The Federal Reserve Board has issued final guidance to help certain large banks further develop their resolution plans.

Resolution plans, also known as living wills, describe a bank's strategy to achieve an orderly resolution under bankruptcy in the event of material financial distress or failure.

The guidance applies to domestic and foreign banks with more than $250 billion in total assets, and addresses the specific characteristics of and risks posed by this group of banks.

The guidance is organized around key areas of potential vulnerability, such as capital, liquidity and operational capabilities that could be needed in resolution.

Distinct from the guidance in place for larger and more complex banks, this guidance provides expectations for both single point-of-entry and multiple point-of-entry resolution strategies, which are different strategies banks have adopted for their orderly resolution.

The guidance recognizes that the preferred resolution outcome for foreign banks is often a home country-led resolution and guides foreign banks on how to address the global resolution plan in their U.S. plan.

The final guidance is similar to the proposed guidance from August 2023 and was developed jointly with the Federal Deposit Insurance Corporation, and it is now final following both agencies' approval.

The resolution plan submission deadline for the applicable banks has also been extended from March 31, 2025, to October 1, 2025.

The purpose of the extension is to provide reasonable time for banks to consider the final guidance as they develop their plan submissions.