Banking and Finance Law Daily Domestic resolution plans pass scrutiny, foreign banks receive guidance
Friday, March 24, 2017

Domestic resolution plans pass scrutiny, foreign banks receive guidance

By Lisa M. Goolik, J.D.

The Federal Deposit Insurance Corporation and Federal Reserve Board have completed their evaluation of the 2015 resolution plans submitted by 16 domestic banks and separately issued guidance to four foreign banks. Of the 16 domestic banks, the agencies did not find that any of the resolution plans were not credible or would not facilitate an orderly resolution, they announced. However, the agencies did identify shortcomings in Northern Trust Corporation's resolution plan, which must be addressed in the firm's 2017 plan, due by December 31.

The domestic banks evaluated were: Ally Financial Inc.American Express CompanyBB&T CorporationCapital One Financial CorporationComerica IncorporatedDiscover Financial ServicesFifth Third BancorpHuntington Bancshares IncorporatedKeyCorpM&T Bank CorporationNorthern Trust CorporationThe PNC Financial Services Group, Inc.Regions Financial CorporationSunTrust Banks, Inc.U.S. Bancorp, and Zions Bancorporation.

Northern Trust. Northern Trust’s shortcomings were related to its operation of a U.K.-based bank subsidiary and several foreign branches. According to the letter, in August 2015, the agencies informed Northern Trust that "[t]he 2015 Plan must explain how [adverse ring fencing actions by foreign authorities] would affect the capital and liquidity of material entities and how material entities will maintain sufficient capital and liquidity to continue to meet their operational needs." The agencies identified three areas of weakness in the plan: (1) the plan does not describe the intraday funding flows between material entities in resolution; (2) it does not fully address risks associated with cross-border funding flows; and (3) it does not provide financial projections for four of the bank’s material entities.

Guidance for foreign banks. The guidance issued to the four foreign firms—Barclays PLCCredit SuisseDeutsche Bank AG, and UBS AG—is intended to help them improve their resolution plans and to reflect the significant restructuring that they have undertaken to form intermediate holding companies. The guidance is organized around a number of key vulnerabilities, such as capital, liquidity, and governance mechanisms. The agencies provided the firms with a one-year extension—their next resolution plans are now due on July 1, 2018.

Companies: Ally Financial Inc.; American Express Company; Barclays PLC; BB&T Corporation; Capital One Financial Corporation; Comerica Incorporated; Credit Suisse; Discover Financial Services; Deutsche Bank AG; Fifth Third Bancorp; Huntington Bancshares Incorporated; KeyCorp; M&T Bank Corporation; Northern Trust Corporation; The PNC Financial Services Group, Inc.; Regions Financial Corporation; SunTrust Banks, Inc.; UBS AG; U.S. Bancorp; Zions Bancorporation

MainStory: TopStory BankingOperations DoddFrankAct FederalReserveSystem FinancialStability

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