[Federal Register Volume 76, Number 183 (Wednesday, September 21, 2011)]
[Rules and Regulations]
[Pages 58379-58393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-24179]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 76, No. 183 / Wednesday, September 21, 2011 /
Rules and Regulations
[[Page 58379]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 360
RIN 3064-AD59
Resolution Plans Required for Insured Depository Institutions
With $50 Billion or More in Total Assets
AGENCY: Federal Deposit Insurance Corporation (``FDIC'').
ACTION: Interim final rule.
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SUMMARY: The FDIC is adopting an interim final rule (``Rule''), with
request for comments, requiring an insured depository institution with
$50 billion or more in total assets to submit periodically to the FDIC
a contingent plan for the resolution of such institution in the event
of its failure (``Resolution Plan''). The Rule establishes the
requirements for submission and content of a Resolution Plan, as well
as procedures for review by the FDIC. The Rule requires a covered
insured depository institution (``CIDI'') to submit a Resolution Plan
that should enable the FDIC, as receiver, to resolve the institution
under Sections 11 and 13 of the Federal Deposit Insurance Act (``FDI
Act''), 12 U.S.C. 1821 and 1823, in a manner that ensures that
depositors receive access to their insured deposits within one business
day of the institution's failure (two business days if the failure
occurs on a day other than Friday), maximizes the net present value
return from the sale or disposition of its assets and minimizes the
amount of any loss to be realized by the institution's creditors. The
FDIC finds that there is good cause and it is in the public interest to
adopt the Rule. Resolution plans for large and complex insured
depository institutions are essential for their orderly and least-cost
resolution. The Rule is intended to address the continuing exposure of
the banking industry to the risks of insolvency of large and complex
insured depository institutions, an exposure that can be mitigated with
proper resolution planning. The Rule enables the FDIC to perform its
resolution functions most efficiently through extensive planning in
cooperation with the CIDI and to enhance its ability to evaluate
potential loss severity if an institution fails.
DATES: The Rule is effective January 1, 2012. Written comments on the
Rule must be received by the FDIC no later than November 21, 2011.
ADDRESSES: You may submit comments by any of the following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/federal. Follow instructions for Submitting comments on the Agency Web
Site.
E-mail: [email protected]. Include ``Resolution plans
required for insured depository institutions with $50 billion or more
in total assets'' in the subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m. (EST).
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal including any
personal information provided. Comments may be inspected and
photocopied in the FDIC Public Information Center, 3501 North Fairfax
Drive, Room E-I002, Arlington, VA 22226, between 9 a.m. and 5 p.m.
(EST) on business days. Paper copies of public comments may be ordered
from the Public Information Center by telephone at (877) 275-3342 or
(703) 562-2200.
FOR FURTHER INFORMATION CONTACT: Keith Ligon, Acting Associate
Director, Office of Complex Financial Institutions, International
Coordination Branch (202) 898-3686, or James Marino, Project Manager,
Division of Resolutions and Receiverships, (703) 516-5043, or Richard
T. Aboussie, Associate General Counsel, (703) 562-2452, David N. Wall,
Assistant General Counsel, (703) 562-2440, Mark A. Thompson, Counsel,
(703) 562-2529, Mark G. Flanigan, Counsel, (202) 898-7426, or Shane
Kiernan, Senior Attorney, (703) 562-2632.
SUPPLEMENTARY INFORMATION:
I. Background and Authority for the Rule
The FDIC is charged by Congress with the responsibility for
insuring the deposits of banks and thrifts in the United States, and
with serving as receiver of such institutions if they should fail. As
of December 31, 2010, the FDIC insured approximately $6.2 trillion in
deposits in more than 7,650 depository institutions. To evaluate
potential loss severity and to enable it to perform its resolution
functions most efficiently, the FDIC is requiring each insured
depository institution with $50 billion or more in total assets to
submit periodically to the FDIC a Resolution Plan. Currently, 37
insured depository institutions are covered by the Rule. Those
institutions held approximately $3.6 trillion in insured deposits or
nearly 60 percent of all insured deposits as of December 31, 2010.
In implementing the deposit insurance program and in efficiently
and effectively resolving failed depository institutions, the FDIC
strengthens the stability of, and helps maintain public confidence in,
the banking system in the United States. In its efforts to achieve this
objective and to implement its insurance and resolution functions, the
FDIC requires a comprehensive understanding of the organization,
operation and business practices of insured depository institutions in
the United States, with particular attention to the nation's largest
and most complex insured depository institutions.
To ensure that the FDIC can effectively carry out these core
responsibilities, the Rule requires a limited number of the largest
insured depository institutions to provide the FDIC with essential
information concerning their structure, operations, business practices,
financial responsibilities and risk exposures. The Rule requires these
institutions to develop and submit detailed plans demonstrating how
such insured depository institutions could be resolved in an orderly
and timely manner in the event of receivership. The Rule also makes a
critically important contribution to the FDIC's
[[Page 58380]]
implementation of its statutory receivership responsibilities by
providing the FDIC as receiver with the information it needs to make
orderly and cost-effective resolutions much more feasible. Based upon
its experience resolving failed insured depository institutions (and in
particular, large and complex insured depository institutions), the
FDIC has concluded that resolution plans for large and complex insured
depository institutions are essential for their orderly and least-cost
resolution and the development of such plans should begin promptly.
Since the recent financial crisis began in late 2008, financial
authorities throughout the world have recognized and agreed that
advance planning for the resolution of large, complex financial
institutions is critical to minimizing the disruption that a failure of
such an institution may have as well as the costs of its resolution. At
the 2009 Pittsburgh Summit, and in response to the crisis, the G20
Leaders called on the Financial Stability Board (``FSB'') to propose
possible measures to address the ``too big to fail'' and moral hazard
concerns associated with systemically important financial institutions.
Specifically, the G20 Leaders called for the development of
``internationally-consistent firm-specific contingency and resolution
plans.'' The FSB continues its efforts to develop the international
standards for contingency and resolution plans and to evaluate how to
improve the capacity of national authorities to implement orderly
resolutions of large and interconnected financial firms and
periodically reports its progress to the G20 Leaders.\1\
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\1\ See ``Progress in the Implementation of the G20
Recommendations for Strengthening Financial Stability'' Reports of
the Financial Stability Board to G20 Finance Ministers and Central
Bank Governors dated February 15, 2011, and April 10, 2011.
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The FSB's program has built on work undertaken by the Basel
Committee on Banking Supervision's Cross-border Bank Resolution Group,
co-chaired by the FDIC, since 2007. In its final Report and
Recommendations of the Cross-border Bank Resolution Group, issued on
March 18, 2010, the Basel Committee emphasized the importance of pre-
planning and the development of practical and credible plans to promote
resiliency in periods of severe financial distress and to facilitate a
rapid resolution should that be necessary. In its review of the
financial crisis, the Report found that one of the main lessons was
that the complexity and interconnectedness of large financial
conglomerates made crisis management and resolutions more difficult and
unpredictable.
Similarly, the FSB's Principles for Cross-Border Cooperation on
Crisis Management commit national authorities to ensure that firms
develop adequate contingency plans, including information regarding
group structure, and legal, financial and operational intra-group
dependencies; the interlinkages between the firms and financial system
(e.g., in markets and infrastructures) in each jurisdiction in which
they operate; and potential impediments to a coordinated solution
stemming from the legal frameworks and bank resolution procedures of
the countries in which the firm operates. The FSB Crisis Management
Working Group has recommended that supervisors ensure that firms are
capable of supplying in a timely fashion the information that may be
required by the authorities in managing a financial crisis. The FSB
recommendations strongly encourage firms to maintain contingency plans
and procedures for use in a resolution situation (e.g., factsheets that
could easily be used by insolvency practitioners), and to review them
regularly to ensure that they remain accurate and adequate. On July 19,
2011, the FSB issued a public consultation on proposed measures to
address systemic risk and moral hazard posed by systemically important
financial institutions, which includes proposed measures for improved
resolution planning by firms and authorities.\2\ The Rule supports and
complements these international efforts.
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\2\ See Financial Stability Board, ``Consultative Document:
Effective Resolution of Systemically Important Financial
Institutions--Recommendations and Timelines,'' 17 (July 19, 2011),
available at http://www.financialstabilityboard.org/publications/r_110719.pdf (``An adequate, credible [recovery and resolution plan]
should be required for any firm that is assessed by its home
authority to have a potential impact on financial stability.'')
Annex 5 of the Consultative Document sets out a comprehensive
proposed framework and content for such plans.
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In addition, Section 165(d) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (the ``Dodd-Frank Act''), 12 U.S.C.
5365(d), adopted July 21, 2010, mandates that each covered company
periodically submit to the Board of Governors of the Federal Reserve
System (``FRB''), the Financial Stability Oversight Council, and the
FDIC the plan of such company for rapid and orderly resolution under
the Bankruptcy Code in the event of material financial distress or
failure (``DFA Resolution Plan''). This requirement applies to each
nonbank financial company subjected to supervision by the Federal
Reserve Board under Title I of the Dodd-Frank Act and each bank holding
company with assets of $50 billion or more, including foreign bank
holding companies with U.S. financial operations.
The Rule, originally proposed on May 17, 2010, is intended to
complement the resolution plan requirements of the Dodd-Frank Act. The
Rule requires each insured depository institution with $50 billion or
more in total assets to submit periodically to the FDIC a contingent
plan for the resolution by the FDIC, as receiver, of such institution
under the Federal Deposit Insurance Act (``FDI Act'') in the event of
the institution's failure. Currently, with the exception of three
thrifts covered by the Rule, holding companies of each insured
depository institution covered by the Rule are expected to file a DFA
Resolution Plan. While a DFA Resolution Plan will describe the plan to
resolve each parent holding company under the Bankruptcy Code, the Rule
is focused on planning the resolution of the subsidiary insured
depository institution, a resolution that will not be conducted under
the Bankruptcy Code, but rather will be conducted under the
receivership and liquidation provisions of the FDI Act.\3\ The Rule
sets forth the elements that are expected to be included in an insured
depository institution's Resolution Plan. The requirements for DFA
Resolution Plans are provided in FRB and FDIC regulations relating
thereto (``Section 165(d) rule'').\4\
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\3\ Sections 11 and 13 of the FDI Act, 12 U.S.C. 1821 and 1823.
\4\ See FRB and FDIC Notice of Proposed Rulemaking: Resolution
Plans and Credit Exposure Reports Required, 76 FR 22648 (April 22,
2011). The Final Rule regarding Resolution Plans under Section
165(d) of the Dodd-Frank Act is being issued concurrently with the
Rule.
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The FDI Act gives the FDIC broad authority to carry out its
statutory responsibilities, and to obtain the information required by
the Rule. The FDIC's roles as insurer and receiver require a distinct
focus on potential loss severities, default risks, complexities in
structure and operations, and other factors that impact risk to the
Deposit Insurance Fund and the ability of the FDIC to conduct an
orderly resolution. The authority to issue the Rule is provided by
Section 9(a) Tenth of the FDI Act, 12 U.S.C. 1819(a) Tenth, which
authorizes the FDIC to prescribe, by its Board of Directors, such rules
and regulations as it may deem necessary to carry out the provisions of
the FDI Act or of any other law that the FDIC is responsible for
administering or
[[Page 58381]]
enforcing. The FDIC also has authority to adopt regulations governing
the operations of its receiverships pursuant to Section 11(d)(1) of the
FDI Act. 12 U.S.C. 1821(d)(1). Collection of the information required
by the Rule is also supported by the FDIC's broad authority to conduct
examinations of depository institutions to determine the condition of
the IDI, including special examinations, 12 U.S.C 1820(b)(3).
II. The Notice of Proposed Rulemaking: Comment Summary
On May 17, 2010, the FDIC caused to be published in the Federal
Register a Notice of Proposed Rulemaking (``NPR'') requiring Special
Reporting, Analysis and Contingent Resolution Plans at Certain Large
Depository Institutions (the ``Proposed Rule'').\5\ The Proposed Rule
would have required each insured depository institution with greater
than $10 billion in total assets that is owned or controlled by a
holding company with more than $100 billion in total assets to submit
to the FDIC analysis, information, and contingent resolution plans that
address and demonstrate the insured depository institution's ability to
be separated from its parent structure, and to be wound down or
resolved in an orderly fashion.
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\5\ 75 FR 27464.
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The NPR solicited public comment on all aspects of the Proposed
Rule. The comment period ended on July 16, 2010, and eight comments
were received. Most of the commenters suggested that the FDIC withdraw,
or delay the implementation of, the Proposed Rule in anticipation of
Section 165(d) of the Dodd-Frank Act, which was signed into law on July
21, 2010, as well as ongoing international efforts related to
contingent resolution planning. Commenters were concerned that the
FDIC's separate rulemaking would result in significant additional
costs, duplicated efforts and excessive burdens on covered
institutions. Commenters felt that the FDIC should coordinate with
other regulators, both domestically and internationally. Some
commenters felt that the resolution plan requirements of the Dodd-Frank
Act would be sufficient and there was no need for the preparation a
specific resolution plan by an insured depository institution owned by
a bank holding company that was required to prepare a resolution plan
under the Dodd-Frank Act.
In response to the comments related to passage of the Dodd-Frank
Act, the FDIC delayed issuance of the Rule until such time as the FRB
and the FDIC issued separate rulemaking implementing Section 165(d) and
setting forth the resolution plan requirements in detail. During this
period, the FDIC sought to make the two rules complementary and avoid
duplication of costs, efforts and burdens on the covered institutions.
In that regard, the Resolution Plan required by the Rule is different
from the DFA Resolution Plan the insured depository institution's
holding company is required to prepare under Section 165(d). The Rule
requires a plan to resolve the insured depository institution under the
FDI Act with the FDIC acting as receiver. The Section 165(d) rule
requires the covered company to submit a plan for it to be resolved in
an orderly manner under the Bankruptcy Code. The Rule is focused on
ensuring depositors receive access to their insured deposits rapidly,
minimizing the costs to the Deposit Insurance Fund and maximizing
recovery for creditors in the resolution of insured depository
institutions. The Section 165(d) rule is focused on minimizing systemic
risk in the resolution of the covered company in order to protect the
financial stability of the United States while maximizing recovery for
creditors. To avoid duplication in the production of information, the
Rule specifically provides that the CIDI may incorporate data and other
information from its holding company's DFA Resolution Plan. The FDIC
requests comments on additional steps that can be taken to allow a CIDI
to integrate the resolution planning that takes place under the Rule
with its holding company's DFA Resolution Plan.
Several commenters felt the informational requirements of the
Proposed Rule were unclear and requested clarification or made
suggestions for improvement. Some commenters suggested that the FDIC
provide a template for the Resolution Plan. In response to these
comments, the Rule provides more detailed descriptions of the elements
and the elements were reorganized so that the Rule lists each element
that must be included in the Resolution Plan. While each CIDI may
organize its plan in a manner that it feels best communicates the
requested information, the list of elements was prepared in an order
that the FDIC felt would work well for the plans of most institutions.
Several commenters were concerned that the Proposed Rule favored
resolution over recovery and was biased in favor of separation of the
insured depository institution from the parent organization rather than
looking to maintain enterprise value. By issuing the Rule, the FDIC
does not intend to substitute resolution planning for recovery
planning. Both are very important and serve complementary purposes. The
Rule, however, focuses on resolution planning.
One commenter suggested that the FDIC take a risk-based approach to
the plan requirements, i.e., the scope and timing of the requirements
and degree of planning and reporting should not be as high for well-
managed and well-capitalized institutions. Another commenter suggested
an exemption for institutions that are not interconnected with
affiliates in operations and contracts. Several commenters requested
that multiple insured depository institutions within a holding company
group be permitted to file a single plan. Several commenters requested
clarification of the Proposed Rule's application to an institution
owned by foreign parent. In light of these concerns, as well as to
align the Rule more closely with the Section 165(d) rule with respect
to institutional groups filing plans, the FDIC raised the minimum asset
size for a CIDI from $10 billion to $50 billion and eliminated the
requirement that the CIDI be owned or controlled by a holding company
with $100 billion in assets or more. This change means that insured
depository institutions between $10 billion and $50 billion in total
assets do not need to file Resolution Plans. The FDIC believes that
change reduces the burden of the Rule on certain multiple bank holding
companies because their insured depository institutions with assets
under $50 billion will not need to file plans under the Rule. While
this change means that some insured depository institutions not
previously covered are now required to file Resolution Plans, the FDIC
felt that obtaining Resolution Plans under the Rule from such
institutions would be consistent with its desire to coordinate the
efforts under the Rule with the Section 165(d) planning process and
would also assist the FDIC in meeting its objectives and goals in
issuing the Rule.\6\
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\6\ Three of the newly covered institutions currently will not
be covered by DFA Resolution Plans because their holding companies
are thrift holding companies, not bank holding companies.
Nevertheless, the FDIC believes that the $50 billion asset threshold
used in the Dodd-Frank Act is also an appropriate threshold to apply
to these thrifts to enable the FDIC to meet its objectives and goals
in issuing the Rule.
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A few commenters believed that much of the information requested
was already provided to other regulatory agencies and that the FDIC
should reduce the informational requirements by leveraging existing
reporting. One
[[Page 58382]]
commenter felt that the Proposed Rule should only request information
that had not been previously submitted by the institution or its parent
to one of the bank regulatory agencies. In addition, one commenter
suggested that, with respect to funding and liquidity requirements, the
FDIC leverage the funding and liquidity planning that the institutions
were doing to comply with the Interagency Policy Statement on Funding
and Liquidity Risk Management, which was effective May 21, 2010.
Several commenters felt that the burden of the informational
requirements could be significantly reduced by using materiality
standards or thresholds in the Proposed Rule. Similarly, one commenter
suggested that information on subsidiaries be limited to key operating
subsidiaries. To address many of these concerns, materiality thresholds
have been incorporated in several provisions of the Rule. In addition,
an institution may incorporate information provided in its DFA
Resolution Plan. The FDIC invites comments on additional ways that the
informational requirements can be revised to reduce the burden on the
covered institutions.
Several commenters were concerned that the Proposed Rule would
require ongoing reporting of day-to-day operational and fiscal
challenges. One commenter suggested requiring the reporting of material
events only when the event related to fulfillment of, or had an impact
on, the Resolution Plan. In response to these comments, the FDIC
clarified in the Rule when and how material events should be addressed.
A number of commenters had questions related to the proposed gap
analysis. Requests were made to clarify the purpose and effect of the
gap analysis. Requests were made that the Proposed Rule state that the
gap analysis is intended for planning purposes only and does not
require reorganizing the institution's operations. In light of these
comments, the term ``gap analysis'' is not used in the Rule and the
analysis sought is requested in different ways. To the extent, however,
that a plan identifies obstacles to the CIDI's resolution that have a
bearing on potential loss severity, such as the inability to make quick
deposit insurance determinations and depositor payments or the
inability to provide sufficient information on qualified financial
contracts to allow the FDIC to make timely and correct determinations
on these contracts in the event of failure, the FDIC does expect the
plans also to provide strategies that could be taken to remove those
obstacles or mitigate the effects thereof.
Several commenters were concerned about the provision in the
Proposed Rule requiring the production of audited financial statements.
These commenters sought clarification that the FDIC did not intend to
require institutions to prepare additional audited financial statements
for subsidiaries not already preparing such statements. In light of
these comments, the Rule reflects that the FDIC is not requiring
institutions to prepare additional audited financial statements for
subsidiaries not already preparing such statements.
A number of commenters read the Proposed Rule provisions regarding
the confidentiality of information submitted as suggesting that
confidentiality would only be afforded to information which, if
disclosed, would endanger the institution's safety and soundness. These
commenters suggested that such a standard for obtaining confidentiality
for material submitted was incorrect and should be revised to reflect
requirements of existing law. Furthermore, commenters felt that, in all
cases, the resolution plan and related analysis and information
submitted should be treated as confidential supervisory or examination
information exempt from public disclosure. Given the comments on
confidentiality, the confidentiality provision has been revised to
provide that the Resolution Plan be divided into a public section and a
confidential section. In addition, the Rule provides that, to the
extent permitted by law, the information comprising the confidential
section of a Resolution Plan will be treated as confidential.
Commenters also believed the Proposed Rule's requirement that the
insured depository institution's board of directors attest that a
resolution plan is accurate and the information is current is
inconsistent with corporate governance principles regarding the board's
role and imposes too great a burden on the institution's board. The
commenters suggested that the final rule simply require the
institution's board to approve the resolution plan. The Rule requires a
Resolution Plan to be approved by the CIDI's board of directors and
requires that a Resolution Plan include certain specified information
about the CIDI's corporate governance structure and processes.
A number of commenters questioned the regulatory burden analysis
and felt that the estimated time to respond was significantly below the
time that would be actually required to respond. In addition, most
commenters felt that six months was too short a time to prepare the
initial Resolution Plan. Several suggested allowing institutions to
obtain extensions for good cause. Given these comments, the FDIC
reevaluated its estimates of the regulatory burden and made adjustments
thereto. The initial filings will be staggered. This change provides
most CIDIs with much more time to prepare their initial Resolution
Plans. In order to reduce the burden on CIDIs by allowing them to
utilize information and data compiled for their parent company's DFA
Resolution Plan, the groupings and timing of the filings are the same
as the groupings and timing of filings to be utilized for DFA
Resolution Plans. The order utilized also allows the FDIC to focus on
the most complex or largest institutions first. The Rule requires the
first filing group, which consists of each CIDI whose parent company,
as of the effective date of the Rule, had $250 billion or more in total
nonbank assets (or in the case of a parent company that is a foreign-
based company, such company's total U.S. nonbank assets), to file their
initial Resolution Plans on July 1, 2012. The Rule requires the second
filing group, which consists of each CIDI not included in the first
group whose parent company, as of the effective date of the Rule, had
$100 billion or more in total nonbank assets (or, in the case of a
parent company that is a foreign-based company, such company's total
U.S. nonbank assets) to file their initial Resolution Plans on or
before July 1, 2013. The Rule requires the third filing group, which
consists of the remaining CIDIs, to file their initial Resolution Plans
on or before December 31, 2013. The Rule also provides that, on a case-
by-case basis, the FDIC may change a CIDI's scheduled filing date and
extend the implementation and updating time frames of the Rule.
Several commenters felt that enforcement action should not be taken
except in very limited situations where noncompliance was willful and
continuous. The commenters felt that termination of insurance was too
draconian a remedy to use except in extraordinary circumstances.
Several commenters requested that an appeals process be provided in the
Proposed Rule as well as a clarification of what standards will be used
to evaluate compliance with the Proposed Rule. The FDIC intends to use
its enforcement powers only in appropriate circumstances. The Rule now
provides for a multi-step review process that affords the covered
institutions the opportunity to correct deficiencies in their
Resolution Plans before the FDIC would use its enforcement powers. The
[[Page 58383]]
FDIC desires to work closely with CIDIs in the development of their
Resolution Plans and is dedicating staff for that purpose. The FDIC
expects the review process to evolve as CIDIs gain more experience in
preparing their Resolution Plans. The FDIC recognizes that Resolution
Plans will vary by company and, in its evaluation of plans, will take
into account variances among companies in their core business lines,
critical operations, domestic and foreign operations, capital
structure, risk, legal structure, complexity, financial activities
(including the financial activities of their subsidiaries), size and
other relevant factors. Because each Resolution Plan is expected to be
unique, the FDIC encourages CIDIs to ask questions and, if so desired,
to arrange a meeting with the FDIC. There is no expectation by the FDIC
that initial Resolution Plans will be found to be deficient, but rather
the initial Resolution Plans will provide the foundation for developing
more robust annual Resolution Plans. The Rule also allows the FDIC to
extend deadlines on its own initiative or upon request.
As noted above, the FDIC made a number of revisions to the Proposed
Rule as a result of the comments received. The FDIC believes that
additional comments would be helpful in refining certain aspects of the
Rule and therefore is issuing the Rule as an interim final rule, with
request for comments. This action will avoid a delay in the
implementation of the important resolution planning process, while
allowing the FDIC to solicit and obtain additional comments that may
serve as the basis for further clarification of the requirements of the
Rule, if necessary.
III. Section-by-Section Analysis of the Rule
Definitions. Section 360.10(b) defines certain terms, including
``core business lines,'' ``critical services,'' ``covered insured
depository institution,'' ``parent company,'' ``parent company
affiliate'' and ``material entity,'' which are key definitions in the
Rule.
``Core business lines'' means those business lines of the CIDI,
including associated operations, services, functions and support that,
in the view of the CIDI, upon failure would result in a material loss
of revenue, profit, or franchise value. The core business lines of the
CIDI are valuable assets of the CIDI. The Resolution Plan should
provide a strategy for the sale of the core business lines. The Section
165(d) rule contains a similar definition but, for the Section 165(d)
rule the core business lines are determined from the perspective of the
covered company rather than the CIDI. For example, the CIDI may be
providing services to its holding company, such as payment services,
that support a business line of its holding company, such as a
brokerage service, that is not a core business line of the CIDI. In
such example, payment services may be identified as a core business
line of the CIDI, while its holding company identifies brokerage
services as a business line in its DFA Resolution Plan.
``Covered insured depository institution'' means an insured
depository institution with $50 billion or more in total assets, as
determined based upon the average of the institution's four most recent
Reports of Condition and Income or Thrift Financial Reports, as
applicable to the insured depository institution.
``Critical Services'' means services and operations of the CIDI,
such as servicing, information technology support and operations, human
resources and personnel that are necessary to continue the day-to-day
operation of the CIDI. The Resolution Plan should provide for the
continuation and funding of critical services. For clarity and to avoid
confusion, the term ``critical services'' differs substantially from
the term ``critical operations'' as used in the Section 165(d) rule.
The term ``critical operations'' is used to designate operations of a
covered company the discontinuation of which would pose a threat to the
financial stability of the United States. In contrast, the term
``critical services'' is used in the Rule to mean those functions that
must be kept operational during the resolution process to allow the
receiver to conduct the resolution in an orderly and efficient manner.
``Parent company'' means the company that controls, directly or
indirectly, an insured depository institution. In a multi-tiered
holding company structure, parent company means the top-tier of the
multi-tiered holding company only.
``Parent company affiliate'' means any affiliate of the parent
company other than the CIDI and subsidiaries of the CIDI. The term is
used in identifying the exposures or reliance that the CIDI has on
entities in its affiliated group that are not owned or otherwise
controlled by the CIDI. In a multi-tier holding company structure, the
term includes all holding companies of the CIDI (except the top-tier
holding company) and their affiliates (other than the top-tier holding
company, the CIDI and subsidiaries of the CIDI).
``Material entity'' means a company that is significant to the
activities of a critical service or core business line. For example,
the legal entity utilized by the CIDI as the contracting entity for a
core business line would be a material entity. Also, a subsidiary of
the CIDI that provides a critical service would be a material entity.
Resolution Plans to be submitted by the CIDI to the FDIC. Pursuant
to Section 360.10(c), the initial filings will be staggered to
correspond to the schedule of filings by parent companies under the
Section 165(d) rule. This schedule also allows the FDIC to focus on the
most complex or largest institutions first. The Rule requires the first
filing group, which consists of each CIDI whose parent company, as of
the effective date of the Rule, had $250 billion or more in total
nonbank assets (or in the case of a parent company that is a foreign-
based company, such company's total U.S. nonbank assets), to file their
initial Resolution Plans on July 1, 2012. The Rule requires the second
filing group, which consists of each CIDI not included in the first
group whose parent company, as of the effective date of the Rule, had
$100 billion or more in total nonbank assets (or, in the case of a
parent company that is a foreign-based company, such company's total
U.S. nonbank assets) to file their initial Resolution Plans on or
before July 1, 2013. The Rule requires the third filing group, which
consists of the remaining CIDIs, to file their initial Resolution Plans
on or before December 31, 2013. The Rule also provides that, on a case-
by-case basis, the FDIC may extend, upon request, the implementation
and updating time frames of the Rule.
After the initial resolution plan is submitted, each CIDI is
required to submit a new Resolution Plan annually on or before the
anniversary date of the date for the submission of its initial plan. An
insured depository institution that becomes a CIDI after the effective
date of the Rule shall submit its initial resolution plan no later than
July 1 of the following calendar year.
A CIDI is required to file a notice no later than 45 days after any
event, occurrence, change in conditions or circumstances or change
which results in, or could reasonably be foreseen to have, a material
effect on the Resolution Plan of the CIDI. The FDIC desires a notice
only when an event results in, or could reasonably be foreseen to have,
a material effect on the Resolution Plan of the CIDI such that the
Resolution Plan would be ineffective or require material amendment to
be effective. A notice is not required if an event does not result in,
or could not reasonably be foreseen
[[Page 58384]]
to have, a material effect on the Resolution Plan of the CIDI. In
regard to what constitutes a material effect on the Resolution Plan,
the effect on the Resolution Plan should be of such significance as to
render the Resolution Plan ineffective, in whole or in part, until an
update is made to the plan. A notice should describe the event,
describe any material effects that the event may have on the Resolution
Plan and summarize the changes that are required in the Resolution
Plan.
Incorporation of data and other information from a Dodd-Frank Act
resolution plan. The CIDI may incorporate data and other information
from a DFA Resolution Plan filed by its parent company.
Content of the Resolution Plan. Section 360.10(c)(2) requires each
CIDI to submit a Resolution Plan that should enable the FDIC to resolve
the CIDI in the event of its insolvency under the FDI Act in a manner
that ensures that depositors receive access to their insured deposits
within one business day of the institution's failure (two business days
if the failure occurs on a day other than Friday), maximizes the net
present value return from the sale or disposition of its assets and
minimizes the amount of any loss realized by the creditors in the
resolution in accordance with Sections 11 and 13 of the FDI Act, 12
U.S.C. 1821 and 1823, and specifies the minimum content of the
Resolution Plan. The Resolution Plan strategies should take into
account that failure of the CIDI may occur under the baseline, adverse
and severely adverse economic conditions developed by the FRB pursuant
to 12 U.S.C. 5365(i)(1)(B); provided, however, a CIDI may submit its
initial Resolution Plan assuming the baseline conditions only, or, if a
baseline scenario is not then available, a reasonable substitute
developed by the CIDI.
The Resolution Plan should include an executive summary that
summarizes the key elements of the CIDI's strategic plan for resolution
under the FDI Act in the event of its insolvency. After the CIDI files
its initial plan, each annual Resolution Plan should also describe
material events, such as acquisitions, sales, litigation and
operational changes, since the most recently filed plan that may have a
material effect on the plan, material changes to the CIDI's Resolution
Plan from its most recently filed plan, and any actions taken by the
CIDI since filing of the previous plan to improve the effectiveness of
its Resolution Plan or remediate or otherwise mitigate any material
weaknesses or impediments to the effective and timely execution of the
Resolution Plan.
The Resolution Plan should provide the CIDI's, parent company's,
and affiliates' legal and functional structures and identify core
business lines. A mapping of core business lines, including material
asset holdings and liabilities related thereto, to material entities
should be provided that identifies which legal entities are utilized in
the conduct of such business line. The Resolution Plan should include a
discussion of the CIDI's overall deposit activities including, among
other things, unique aspects of the deposit base or underlying systems
that may create operational complexity for the FDIC, result in
extraordinary resolution expenses in the event of failure and a
description of the branch organization, both domestic and foreign. Key
personnel tasked with managing core business lines and deposit
activities and the CIDI's branch organization should be identified.
The Resolution Plan should identify critical services and providers
of critical services. A mapping of critical services to material
entities and core business lines should be provided that identifies
which legal entities are providing the critical services and which
business lines are utilizing the critical services. The Resolution Plan
should describe the CIDI's strategy for continuing critical services in
the event of the CIDI's failure. When critical services are provided by
the parent company or a parent company affiliate, the Resolution Plan
should describe the CIDI's strategy for continuing critical services in
the event of the parent company's or parent company affiliate's
failure. The ability of each parent company affiliate providing
critical services to function on a stand-alone basis in the event of
the parent company's failure should be assessed.
The Resolution Plan should identify the elements or aspects of the
parent company's organizational structure, the interconnectedness of
its legal entities, the structure of legal or contractual arrangements,
or its overall business operations that would, in the event the CIDI
were placed in receivership, diminish the CIDI's franchise value,
obstruct its continued business operations or increase the operational
complexity to the FDIC of resolution of the CIDI.
The Resolution Plan should provide a strategy to unwind or separate
the CIDI and its subsidiaries from the organizational structure of its
parent company in a cost-effective and timely fashion. The Resolution
Plan should also describe remediation or mitigating steps that can be
taken to eliminate or mitigate obstacles to such separation.
The Resolution Plan should provide a strategy for the sale or
disposition of the deposit franchise, including branches, core business
lines and major assets of the CIDI in a manner that ensures that
depositors receive access to their insured deposits within one business
day of the institution's failure (two business days if the failure
occurs on a day other than Friday), maximizes the net present value
return from the sale or disposition of such assets and minimizes the
amount of any loss realized in the resolution of cases. The Resolution
Plan should also describe how the strategies for the separation of the
CIDI and its subsidiaries from its parent company's organization and
sale or disposition of deposit franchise, core business lines and major
assets can be demonstrated to be the least costly to the Deposit
Insurance Fund of all possible methods for resolving the CIDI as
required by Section 13(c)(4)(A) of the FDI Act, 12 U.S.C.
1823(c)(4)(A).
Among potential strategies for the payment of depositors that
should be considered are: (a) A cash payment of insured deposits, \7\
(b) a purchase and assumption transaction with an insured depository
institution to assume insured deposits, (c) a purchase and assumption
transaction with an insured depository institution to assume all
deposits, (d) a purchase and assumption transaction with multiple
insured depository institutions in which branches are broken up and
sold separately in order to maximize franchise value, and (e) transfer
of insured deposits to a bridge institution chartered to assume such
deposits, as an interim step prior to the purchase of the deposit
franchise and assumption of such deposits by one or more insured
depository institutions.\8\
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\7\ This task could be accomplished through the exercise of
FDIC's authority to temporarily operate a new depository institution
under Section 11(m) of the FDI Act, 12 U.S.C. 1821(m).
\8\ A bridge depository institution is a new, temporary, full-
service insured depository institution controlled by the FDIC. It is
designed to ``bridge'' the gap between the failure of an insured
depository institution and the time when the FDIC can implement a
satisfactory acquisition by a third party. Section 11(n) of the FDI
Act, 12 U.S.C. 1821(n).
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Among potential strategies for the sale of core business lines and
assets that should be considered are: (a) Retention of some or all of
the assets in receivership, to be marketed broadly to eligible
purchasers, including insured depository institutions as well as other
interested purchasers, (b) sale of all or a portion of the core
business lines and assets in a purchase and assumption agreement, to
one or more insured
[[Page 58385]]
depository institutions, and (c) transfer of all or a portion of the
core business lines and assets to a bridge institution chartered to
continue operating the core business lines and service the assets
transferred to it, as an interim step prior to the sale of such core
business lines and assets through appropriate marketing strategies.\9\
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\9\ One significant benefit of using the bridge insured
depository institution relates to qualified financial contracts.
Qualified financial contracts are not subject to either the ipso
facto rule or the 90-day stay on enforcement of contracts in
default. However, the FDI Act precludes a counterparty from
terminating a qualified financial contract solely by reason of the
appointment of a receiver for a insured depository institution (a)
until 5 pm (Eastern time) on the business day following the date of
appointment; or (b) after the counterparty has received notice that
the contract has been transferred to a solvent financial
institution, including a bridge insured depository institution.
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In developing a resolution strategy, each CIDI may utilize one or
more of the methods described above, but is not limited to these
methods. The resolution strategy should be tailored to the size,
complexity and risk profile of the institution.
In addition to the strategic analyses described above, the
Resolution Plan should provide a detailed description of the processes
the CIDI employs for determining the current market values and
marketability of core business lines and material asset holdings,
assessing the feasibility of the CIDI's plans, under idiosyncratic and
industry-wide stress scenarios (including time frames), for executing
any sales, divestitures, restructurings, recapitalizations, or similar
actions contemplated in the Resolution Plan, and assessing the impact
of any sales, divestitures, restructurings, recapitalizations, or other
similar actions on the value, funding and operations of the CIDI and
its core business lines. This information will allow the FDIC to
understand the basis for the valuations included in the Resolution Plan
and to consider how those processes could be utilized in a resolution.
Major counterparties should be identified. The CIDI should describe
the interconnections, interdependencies and relationships with such
major counterparties and analyze whether the failure of each major
counterparty would likely have an adverse impact on or result in the
material financial distress or failure of the CIDI. The Resolution Plan
should describe any material off-balance-sheet exposures (including
guarantees and contractual obligations) of the CIDI and those exposures
should be mapped to core business lines.
The Resolution Plan should identify and describe processes used by
the CIDI to determine to whom the CIDI has pledged collateral, identify
the person or entity that holds such collateral, and identify the
jurisdiction in which the collateral is located; and if different, the
jurisdiction in which the security interest in the collateral is
enforceable against the CIDI.
The Resolution Plan should describe the practices of the CIDI and
its core business lines related to the booking of trading and
derivative activities. Each system on which the CIDI conducts a
material number or value amount of trades should be identified. Each
trading system should be mapped to the CIDI's legal entities and core
business lines. The Resolution Plan should identify material hedges of
the CIDI and its core business lines related to trading and derivative
activities, including a mapping to legal entity. Hedging strategies of
the CIDI should be described.
An unconsolidated balance sheet for the CIDI and a consolidating
schedule for all material entities that are subject to consolidation
with the CIDI should be provided. Amounts attributed to entities that
are not material may be aggregated on the consolidating schedule.
Financial statements for material entities should be provided. When
available, audited financial statements should be provided.
The Resolution Plan should identify each payment, clearing and
settlement system of which the CIDI, directly or indirectly, is a
member. Membership in each such system should be mapped to the CIDI's
legal entities and core business lines. Systems that are immaterial in
resolution planning, such as a local check clearing house, do not need
to be identified.
The Resolution Plan should provide detailed descriptions of the
funding, liquidity and capital needs of, and resources available to,
the CIDI and its material entities, which should be mapped to core
business lines and critical services. The Resolution Plan should also
describe the material components of the liabilities of the CIDI and its
material entities and identify types and amounts of short-term and
long-term liabilities by type and term to maturity, secured and
unsecured liabilities and subordinated liabilities.
The Resolution Plan should describe any material affiliate funding
relationships, accounts, and exposures, including terms, purpose, and
duration, that the CIDI and any of its subsidiaries have with its
parent or any parent company affiliate. All material affiliate
financial exposures, claims or liens, lending or borrowing lines and
relationships, guaranties, asset accounts, deposits, or derivatives
transactions should be described. The description should clearly
identify the nature and extent to which parent company or parent
company affiliates serve as a source of funding to the CIDI, the terms
of any contractual arrangements, including any capital maintenance
agreements, the location of related assets, funds or deposits and the
mechanisms by which funds can be downstreamed from the parent company
to the CIDI and its subsidiaries.
The Resolution Plan should describe systemically important
functions that the CIDI, its subsidiaries and affiliates provide,
including the nature and extent of the institution's involvement in
payment systems, custodial or clearing operations, large sweep
programs, and capital markets operations in which it plays a dominant
role. Critical vulnerabilities, estimated exposure and potential
losses, and why certain attributes of the businesses detailed in
previous sections could pose a systemic risk to the broader economy
should be discussed.
The Resolution Plan should describe individual components of the
CIDI's structure that are based or located outside the United States,
including foreign branches, subsidiaries and offices. Details should be
provided on the location and amount of foreign deposits and assets. The
Resolution Plan should discuss the nature and extent of the CIDI's
cross-border assets, operations, interrelationships and exposures which
should be mapped to legal entities and core business lines.
The Resolution Plan should provide a detailed inventory and
description of the key management information systems and applications,
including systems and applications for risk management, accounting, and
financial and regulatory reporting, used by the CIDI and its
subsidiaries. The legal owner or licensor of the systems should be
identified. The use and function of the system or application should be
described. A listing of service level agreements and any software and
systems licenses or associated intellectual property related thereto
should be provided. Any disaster recovery or other backup plans should
be identified and described. The Resolution Plan should identify common
or shared personnel, facilities, or systems. The Resolution Plan should
also describe the capabilities of the CIDI's processes and systems to
collect, maintain, and report the information and other data underlying
the resolution plan to management of the CIDI and, upon request to the
FDIC. Furthermore, the Resolution Plan should describe any
[[Page 58386]]
deficiencies, gaps or weaknesses in such capabilities and the actions
the CIDI intends to take to promptly address such deficiencies, gaps,
or weaknesses, and the time frame for implementing such actions.
The Resolution Plan should include a detailed description of how
resolution planning is integrated into the corporate governance
structure and processes of the CIDI, the CIDI's policies, procedures,
and internal controls governing preparation and approval of the
Resolution Plan, and the identity and position of the senior management
official of the CIDI that is primarily responsible for overseeing the
development, maintenance, implementation, and filing of the Resolution
Plan and for the CIDI's compliance with this section.
The Resolution Plan should describe the nature, extent, and results
of any contingency planning or similar exercise conducted by the CIDI
since the date of the most recently filed Resolution Plan to assess the
viability of or improve the Resolution Plan.
The Resolution Plan should identify and discuss any other material
factor that may impede the resolution of the CIDI.
Approval by CIDI's Board of Directors. The CIDI's board of
directors must approve the Resolution Plan. Such approval shall be
noted in the Board minutes.
Review of Resolution Plan. The FDIC desires to work closely with
CIDIs in the development of their Resolution Plans and is dedicating
staff for that purpose. The FDIC expects the review process to evolve
as CIDIs gain more experience in preparing their Resolution Plans. The
FDIC recognizes that plans will vary by institution and, in their
evaluation of plans, will take into account variances among
institutions in their core business lines, critical operations, foreign
operations, capital structure, risk, complexity, financial activities
(including the financial activities of their subsidiaries), size and
other relevant factors. Each Resolution Plan, however, must be
credible. A Resolution Plan is credible if its strategies for resolving
the CIDI, and the detailed information required by this section, are
well-founded and based on information and data related to the CIDI that
are observable or otherwise verifiable and employ reasonable
projections from current and historical conditions within the broader
financial markets.
Because each Resolution Plan is expected to be unique, the FDIC
encourages CIDIs to ask questions and, if so desired, to arrange a
meeting with the FDIC. The FDIC expects the initial Resolution Plan
will provide the foundation for developing more robust annual
Resolution Plans.
After receiving a Resolution Plan, the FDIC will determine whether
the submitted plan satisfies the minimum informational requirements of
this section. If the FDIC determines that a Resolution Plan is
informationally incomplete or that additional information is necessary
to facilitate review of the Resolution Plan, the FDIC will return the
Resolution Plan to the CIDI and inform the CIDI in writing of the
area(s) in which the plan is informationally incomplete or with respect
to which additional information is required. The CIDI must resubmit an
informationally complete Resolution Plan or such additional information
as requested to facilitate review of the Resolution Plan no later than
30 days after receiving the notice described in preceding sentence, or
such other time period as the FDIC may determine.
Upon acceptance of a Resolution Plan as complete, the FDIC will
review the Resolution Plan in consultation with the appropriate Federal
banking agency for the CIDI and its parent company. If the FDIC
determines that the Resolution Plan of a CIDI submitted is not
credible, the FDIC will notify the CIDI in writing of such
determination. Any notice provided under this paragraph will identify
the aspects of the Resolution Plan that the FDIC determines to be
deficient.
Within 90 days of receiving a notice of deficiencies issued
pursuant to the preceding paragraph, or such shorter or longer period
as the FDIC may determine, a CIDI must submit a revised Resolution Plan
to the FDIC that addresses the deficiencies identified by the FDIC and
discusses in detail the revisions made to address such deficiencies.
Upon a written request by a CIDI, the FDIC may extend any time
period under the Rule. Each extension request shall be in writing and
describe the basis and justification for the request.
Implementation Matters. In order to allow evaluation of the
Resolution Plan, each CIDI must provide the FDIC such information and
access to such personnel of the CIDI as the FDIC determines is
necessary to assess the credibility of the Resolution Plan and the
ability of the CIDI to implement the Resolution Plan. The FDIC will
rely to the fullest extent possible on examinations conducted by or on
behalf of the appropriate Federal banking agency for the relevant
company.
The CIDI's ability to produce the information and data underlying
its resolution rapidly and on demand is a vital element in a credible
Resolution Plan. Without up-to-date information on the CIDI, the FDIC,
as receiver, would be hampered in implementing the Resolution Plan.
Therefore, within a reasonable period of time, as determined by the
FDIC, after the filing of its initial Resolution Plan, the CIDI must
demonstrate its capability to produce promptly, in a format acceptable
to the FDIC, accurate and verifiable data underlying the key aspects of
Resolution Plan. The FDIC understands that the capability to produce
the data underlying the key aspects of the Resolution Plan will vary by
CIDI and, therefore, intends to review and discuss the CIDI's plans to
remedy deficiencies as part of their review of a CIDI's initial
Resolution Plan.
Notwithstanding the general requirements of this section, on a
case-by-case basis, the FDIC may extend, upon notice, the
implementation and updating time frames for all or part of the
requirements of this section. The FDIC may also, upon application of a
CIDI, exempt a CIDI from one or more of the requirements of this
section.
No limiting effect on the FDIC as receiver. No Resolution Plan
provided pursuant to the Rule shall be binding on the FDIC as
supervisor, deposit insurer or receiver for a CIDI or otherwise require
the FDIC to act in conformance with such plan.
Confidentiality of Information Submitted Pursuant to this Section.
Several commenters requested that the Resolution Plans be treated as
exempt from disclosure under the Freedom of Information Act (``FOIA'').
The FDIC is aware of and sensitive to the significant concerns
regarding confidentiality of Resolution Plans. The Rule contemplates
and requires the submission of highly detailed, internal proprietary
information of CIDIs. This is the type of information that CIDIs would
not customarily make available to the public and that an agency
typically would have access to and could review as part of the
supervisory process in assessing, for example, the safety and soundness
of a regulated institution. In the FDIC's view, release of this
information would impede the quality and extent of information provided
by CIDIs and could significantly impact the FDIC's efforts to encourage
effective and orderly resolution of the CIDIs in a crisis.
Under the Rule, the confidentiality of Resolution Plans is to be
assessed in accordance with the applicable exemptions under the FOIA, 5
U.S.C. 552(b), and the FDIC's Disclosure of Information Rule, 12 CFR
309. The FDIC certainly expects that large portions of
[[Page 58387]]
the submissions will contain or consist of ``trade secrets and
commercial or financial information obtained from a person and
privileged or confidential'' and information that is ``contained in or
related to examination, operating, or condition reports prepared by, on
behalf of, or for the use of an agency responsible for the regulation
or supervision of financial institutions.'' This information is subject
to withholding under exemptions 4 and 8 of the FOIA, 5 U.S.C. 552(b)(4)
and (8).
The FDIC also recognizes, however, that the regulation calls for
the submission of details regarding CIDIs that are publicly available
or otherwise are not sensitive and should be made public. Unless
inextricably intertwined with exempt information, these details would
be releasable under the FOIA. The FDIC is concerned that it and the
courts could reach inconsistent conclusions regarding which portions of
the Resolution Plans contain or consist of reasonably segregable
nonexempt information. This uncertainty, in turn, could impact the
quality and content of the information provided by CIDIs.
In order to reduce this uncertainty, the Rule requires Resolution
Plans to be divided into two sections: a public section and a
confidential section. The Rule further specifies the scope and content
of the information that is to comprise each section. In the FDIC's
view, the details required to be contained in the public section are or
should be publicly available. The public section of the resolution plan
should be segregated and separately identified from the confidential
section. The public section will be made available to the public in
accordance with the FDIC's Disclosure of Information Rule, 12 CFR part
309.
The FDIC also intends and will presume that the confidential
section of a resolution plan contains and consists of information that
is subject to withholding in full under one or more of the FOIA
exemptions. That said, a CIDI should submit a properly substantiated
request for confidential treatment of any details in the confidential
section that it believes are subject to withholding under exemption 4
of the FOIA. In addition, the FDIC will have to make formal exemption
and segregability determinations if and when a plan is requested under
the FOIA.
The public section of the Resolution Plan consists of an executive
summary of the Resolution Plan that describes the business of the CIDI
and includes, to the extent material to an understanding of the CIDI:
(1) The names of material entities; (2) a description of core business
lines; (3) consolidated financial information regarding assets,
liabilities, capital and major funding sources; (4) a description of
derivative activities and hedging activities; (5) a list of memberships
in material payment, clearing and settlement systems; (6) a description
of foreign operations; (7) the identities of material supervisory
authorities; (8) the identities of the principal officers; (9) a
description of the corporate governance structure and processes related
to resolution planning; (10) a description of material management
information systems; and (11) a description, at a high level, of the
CIDI's resolution strategy, covering such items as the range of
potential purchasers of the CIDI, its material entities and core
business lines.
IV. Interim Final Rule; Request for Comments
The FDIC finds that there is good cause and it is in the public
interest to adopt the Rule as an interim final rule. The Rule is
intended to address the continuing exposure of the banking industry to
the risks of insolvency of large and complex insured depository
institutions, an exposure that can be mitigated with proper resolution
planning. The Rule enables the FDIC to perform its resolution functions
most efficiently through extensive planning in cooperation with the
CIDI and to enhance its ability to evaluate potential loss severity if
an institution fails.
Resolution plans for large and complex insured depository
institutions are essential for their orderly and least-cost resolution.
The FDIC believes good cause exists for issuing the Rule as an interim
final rule and that its issuance is in the public interest. While the
FDIC issued the NPR on the Proposed Rule last year, many commenters
recommended that the FDIC defer final action until the companion
Section 165(d) rule was finalized. Concurrent with the issuance of the
Rule, the FDIC and the FRB are issuing a final rule requiring the
preparation of resolution plans pursuant to Section 165(d) of the Dodd-
Frank Act, 12 U.S.C. 5365(d). It is imperative that the two companion
rules incorporate coordinated requirements and for CIDIs to initiate
preparatory work for their resolution plans in concert with the related
plans of their holding companies. With limited exception, the parent
company of each insured depository institution covered by the Rule is
expected to file a DFA Resolution Plan required by Section 165(d). The
issuance of the Rule as an interim final rule outlining the
requirements for an insured depository institution subsidiary
Resolution Plan enables a holding company to consider these
requirements in preparing its DFA Resolution Plan.
The Rule will support the FDIC's ongoing resolution planning
activities as those insured depository institutions will be best
positioned to understand the most effective and efficient manner for
their resolution under their existing holding company structure. The
initiation of the CIDI resolution planning processes under the Rule
along with the related holding company resolution planning process
under the Section 165(d) rule will facilitate more effective planning,
reduce the risks of inconsistent plan development, and materially
assist the FDIC's planning efforts and evaluation of the development of
the companion resolution plans under the Section 165(d) rule. Finally,
it is in the public interest to issue the Rule as an interim final rule
in order to coordinate with the finalization of the Section 165(d)
rule, which is subject to a Congressional deadline. The issuance of the
Rule as an interim final rule outlining the requirements for a CIDI's
Resolution Plan enables a holding company to consider these
requirements in preparing its DFA Resolution Plan.
Issuance of the resolution plan requirements for CIDIs through the
Rule also will facilitate the development of such plans at an earlier
date and provide adequate time for the institutions covered by the Rule
to prepare their first Resolution Plans for submission on their initial
submission date, as well as to prepare their DFA Resolution Plans for
submission in accordance with the Section 165(d) rule.
The FDIC realizes that the Rule imposes additional regulatory and
financial burdens on the industry. The FDIC is seeking to minimize the
burden while carrying out its mandates as insurer and as receiver. The
FDIC seeks comments on all aspects of the Rule. Comments will be
considered by the FDIC and appropriate revisions will be made to the
Rule, if necessary, before a Final Rule is issued. Comments are
specifically requested on the following:
Scope
Should a CIDI be defined differently? Should the asset threshold
for inclusion be lower or higher than $50 billion?
Definitions
1. What terms defined by the Rule require further clarification and
how should they be defined?
2. What other terms used in the Rule should the FDIC define?
[[Page 58388]]
Strategic Analysis
1. What additional elements of strategic analysis should be
included in the CIDI's Resolution Plan? Are there any elements listed
in the Rule that create an unnecessary burden or that should not be
included in the CIDI's Resolution Plan?
2. How can the requirements regarding the strategic analysis be
improved to provide additional clarity?
Governance
1. What additional resolution planning governance and oversight
requirements should the Rule include?
2. What alternative governance requirements might exist that would
ensure that a CIDI places adequate importance and attention on
resolution planning?
Informational Elements
1. What additional informational elements should the Rule require
as part of a Resolution Plan? What impediments attend collection and
production of the informational elements identified by the Rule? What
impediments apply to collection and production of additional
informational elements you have identified?
2. Do the informational elements described in the Rule capture the
correct types of information for resolution planning? Are any of the
informational elements identified in the Rule not necessary?
3. Which of the information elements described in the Rule could be
clarified?
4. To the extent any of the informational elements identified in
the Rule are not readily available, identify the burden of or
impediment to (e.g., technology limits, confidentiality concerns, etc.)
obtaining and reporting such information? What changes could the FDIC
make to the Rule to reduce burdens and impediments?
5. Should any informational elements be required to be available on
an ``on demand'' or ``real time'' basis? What impediments apply to
making such information available on demand?
6. What is the burden related to producing an unconsolidated
balance sheet and providing consolidating schedules? What alternatives
could the FDIC include in the Rule to reduce that burden?
Process
1. Are the proposed timelines for Resolution Plan submission (i.e.,
initial, annual and notice of material change) adequate for the CIDI to
develop and submit the information required by the Rule? If not, what
timelines would be appropriate?
2. With regard to the provision of the Rule that would require a
CIDI to file a notice of material change upon a material event,
occurrence, or change, should the Rule provide greater specificity
(e.g., in terms of a dollar amount or percentage of assets acquired or
disposed of in a significant transaction)?
3. Are there explicit factors the FDIC should consider in
determining whether a Resolution Plan is not credible?
4. What additional steps could be taken to allow a CIDI to
integrate the resolution planning that takes place under the Rule with
its parent company's DFA Resolution Plan?
V. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.) (``PRA''), the FDIC may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid Office of Management and Budget (OMB)
control number. The estimated burden for the reporting and disclosure
requirements, as set forth in the Notice of Proposed Rulemaking, is as
follows:
Title: Resolution plans required for insured depository
institutions with $50 billion or more in total assets.
OMB Number: 3064-New Collection.
Affected Public: Insured depository institutions with $50 billion
or more in total assets.
A. Estimated Number of Respondents for Contingent Resolution Plan:
37.
Frequency of Response: Once.
Estimated Time per Response: 7,200 hours per respondent.
Estimated Total Initial Burden: 266,400 hours.
B. Estimated Number of Respondents for Annual Update of Resolution
Plan: 37.
Frequency of Response: Annual.
Estimated Time per Response: 452 hours per respondent.
Estimated Total Initial Burden: 16,724 hours.
C. Estimated Number of Respondents for Notice of Material Change
Affecting Resolution Plan: 37.
Frequency of Response: Zero to two times annually.
Estimated Time per Response: 226 hours per respondent.
Estimated Total Initial Burden: 8,362 hours.
Background/General Description of Collection: Section 360.10
contains collections of information pursuant to the PRA. In particular,
the following requirements of the Rule constitute collections of
information as defined by the PRA: all CIDIs are required to submit to
the FDIC a Resolution Plan that contains certain required information
and meets certain described standards; updates to the analysis and plan
are required to be submitted annually, with certain notices to be filed
more frequently as a result of material changes. The collections of
information contained in the Rule are being submitted to OMB for
review.
Comments: In addition to the questions raised elsewhere in this
Preamble, comment is solicited on (1) whether the collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (2) the accuracy of the agency's estimate of the burden of the
collection of information, including the validity of the methodology
and assumptions used; (3) ways to enhance the quality, utility, and
clarity of the information to be collected; (4) ways to minimize the
burden of the information collection on respondents, including through
the use of automated collection techniques or other forms of
information technology, e.g., permitting electronic submission of
responses; and (5) estimates of capital or start-up costs and costs of
operation, maintenance, and purchases of services to provide
information.
Addresses: Interested parties are invited to submit written
comments to the FDIC concerning the PRA implications of the Rule. Such
comments should refer to ``Resolution plans required for insured
depository institutions with $50 billion or more in total assets''
Comments may be submitted by any of the following methods:
Agency Web Site: http://www.FDlC.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency Web
Site.
E-mail: [email protected]. Include ``Resolution plans
required for insured depository institutions with $50 billion or more
in total assets'' in the subject line of the message.
Mail: Gary A. Kuiper (202.898.3877), Counsel, Attention:
Comments, FDIC, 550 17th Street, NW., Room F-1072, Washington, DC
20429.
Hand Delivery/Courier: Comments may be hand-delivered to
the guard station at the rear of the 550 17th Street Building (located
on F Street), on business days between 7 a.m. and 5 p.m. (EST).
A copy of the comments may also be submitted to the OMB
desk officer for the FDIC, Office of Information and Regulatory
Affairs, Office of Management and Budget, New Executive Office
Building, Room 3208, Washington, DC 20503.
[[Page 58389]]
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal including any
personal information provided.
VI. Regulatory Flexibility Act
The Regulatory Flexibility Act 5 U.S.C. 601 et seq. (RFA) requires
each Federal agency to prepare a final regulatory flexibility analysis
in connection with the promulgation of a final rule, or certify that
the final rule will not have a significant economic impact on a
substantial number of small entities.\10\ Under regulations issued by
the Small Business Administration (``SBA''), a ``small entity''
includes those firms within the ``Finance and Insurance'' sector with
asset sizes that vary from $7 million or less in assets to $175 million
or less in assets.\11\ Therefore, insured depository institutions with
assets sizes of $175 million or less are considered small entities for
purposes of the RFA.
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\10\ See 5 U.S.C. 603, 604 and 605.
\11\ 13 CFR 121.201.
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The Rule would apply only to insured depository institutions with
$50 billion or more in total assets. The Rule would apply to 37 insured
depository institutions upon its effective date. Pursuant to section
605(b) of the Regulatory Flexibility Act, the FDIC certifies that the
Rule will not have a significant economic impact on a substantial
number of small entities and therefore a regulatory flexibility
analysis under the RFA is not required.
VII. Government Appropriations Act, 1999--Assessment of Federal
Regulations and Policies on Families
The FDIC has determined that the Rule will not affect family well-
being within the meaning of section 654 of the Treasury and General
Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999
(Pub. L. 105-277, 112 Stat. 2681).
VIII. Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat.1338, 1471), requires the Federal banking agencies to use plain
language in all proposed and final rules published after January 1,
2000. The FDIC has sought to present the Rule in a simple and
straightforward manner.
IX. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the Rule is
not a ``major rule'' within the meaning of the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 et
seq.). As required by SBREFA, the FDIC will file the appropriate
reports with Congress and the General Accounting Office so that the
Rule may be reviewed.
X. Riegle Community Development and Regulatory Improvement Act
Section 302 of Riegle Community Development and Regulatory
Improvement Act (RCDRIA) \12\ generally requires that regulations
prescribed by Federal banking agencies which impose additional
reporting, disclosures or other new requirements on insured depository
institutions take effect on the first day of a calendar quarter which
begins on or after the date on which the regulations are published in
final form unless an agency finds good cause that the regulations
should become effective sooner. The effective date of the Rule is
January 1, 2012, which is the first day of the calendar quarter which
begins on or after the date on which the regulations are published in
final form, as required by RCDRIA.
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\12\ 12 U.S.C. 4802.
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List of Subjects in 12 CFR Part 360
Banks, Banking, Bank deposit insurance, Holding companies, National
banks, Participations, Reporting and recordkeeping requirements,
Savings associations, Securitizations.
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation amends part 360 of title 12 of the Code
of Federal Regulations as follows:
PART 360--RESOLUTION AND RECEIVERSHIP
0
1. The authority citation for part 360 is revised to read as follows:
Authority: 12 U.S.C. 1817(b), 1818(a)(2), 1818(t), 1819(a)
Seventh, Ninth and Tenth, 1820(b)(3), (4), 1821(d)(1),
1821(d)(10)(c), 1821(d)(11), 1821(e)(1), 1821(e)(8)(D)(i),
1823(c)(4), 1823(e)(2); Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.
0
2. Add new Sec. 360.10 to read as follows:
Sec. 360.10 Resolution plans required for insured depository
institutions with $50 billion or more in total assets.
(a) Scope and purpose. This section requires each insured
depository institution with $50 billion or more in total assets to
submit periodically to the FDIC a plan for the resolution of such
institution in the event of its failure. This section also establishes
the rules and requirements regarding the submission and content of a
resolution plan as well as procedures for review by the FDIC of a
resolution plan. This section requires a covered insured depository
institution to submit a resolution plan that should enable the FDIC, as
receiver, to resolve the institution under Sections 11 and 13 of the
Federal Deposit Insurance Act (``FDI Act''), 12 U.S.C. 1821 and 1823,
in a manner that ensures that depositors receive access to their
insured deposits within one business day of the institution's failure
(two business days if the failure occurs on a day other than Friday),
maximizes the net present value return from the sale or disposition of
its assets and minimizes the amount of any loss realized by the
creditors in the resolution. This rule is intended to ensure that the
FDIC has access to all of the material information it needs to resolve
efficiently a covered insured depository institution in the event of
its failure.
(b) Definitions--(1) Affiliate has the same meaning given such term
in Section 3(w)(6) of the FDI Act, 12 U.S.C. 1813(w)(6).
(2) Company has the same meaning given such term in Sec. 362.2(d)
of the FDIC's Regulations, 12 CFR 362.2(d).
(3) Core business lines means those business lines of the covered
insured depository institution (``CIDI''), including associated
operations, services, functions and support, that, in the view of the
CIDI, upon failure would result in a material loss of revenue, profit,
or franchise value.
(4) Covered insured depository institution (``CIDI'') means an
insured depository institution with $50 billion or more in total
assets, as determined based upon the average of the institution's four
most recent Reports of Condition and Income or Thrift Financial
Reports, as applicable to the insured depository institution.
(5) Critical services means services and operations of the CIDI,
such as servicing, information technology support and operations, human
resources and personnel that are necessary to continue the day-to-day
operations of the CIDI.
(6) Foreign-based company means any company that is not
incorporated or organized under the laws of the United States.
(7) Insured depository institution shall have the meaning given
such term in Section 3(c)(2) of the FDI Act, 12 U.S.C. 1813(c)(2).
(8) Material entity means a company that is significant to the
activities of a critical service or core business line.
[[Page 58390]]
(9) Parent company means the company that controls, directly or
indirectly, an insured depository institution. In a multi-tiered
holding company structure, parent company means the top-tier of the
multi-tiered holding company only.
(10) Parent company affiliate means any affiliate of the parent
company other than the CIDI and subsidiaries of the CIDI.
(11) Resolution plan means the plan described in paragraph (c) of
this section for resolving the CIDI under Sections 11 and 13 of the FDI
Act, 12 U.S.C. 1821 and 1823.
(12) Subsidiary has the same meaning given such term in Section
3(w)(4) of the FDI Act, 12 U.S.C. 1813(w)(4).
(13) Total assets are defined in the instructions for the filing of
Reports of Condition and Income and Thrift Financial Reports, as
applicable to the insured depository institution, for determining
whether it qualifies as a CIDI.
(14) United States means the United States and includes any state
of the United States, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa and the Virgin
Islands.
(c) Resolution Plans to be submitted by CIDI to FDIC.
(1) General. (i) Initial resolution plans required. Each CIDI shall
submit a resolution plan to the FDIC, Attention: Office of Complex
Financial Institutions, 550 17th Street, NW., Washington, DC 20429, on
or before the date set forth below (``Initial Submission Date''):
(A) July 1, 2012, with respect to a CIDI whose parent company, as
of the effective date of this section, had $250 billion or more in
total nonbank assets (or in the case of a parent company that is a
foreign-based company, such company's total U.S. nonbank assets);
(B) July 1, 2013, with respect to any CIDI not described in
paragraph (c)(1)(i)(A) of this section whose parent company, as of the
effective date of this section, had $100 billion or more in total
nonbank assets (or, in the case of a parent company that is a foreign-
based company, such company's total U.S. nonbank assets); and
(C) December 31, 2013, with respect to any CIDI not described in
paragraph (c)(1)(i)(A) or (B) of this section.
(ii) Submission by new CIDIs. An insured depository institution
that becomes a CIDI after the effective date of this section shall
submit its initial resolution plan no later than July 1 of the
following calendar year.
(iii) After filing its initial Resolution Plan pursuant to
paragraph (c)(1)(i) or (c)(1)(ii) of this section, each CIDI shall
submit a Resolution Plan to the FDIC annually on or before each
anniversary date of its Initial Submission Date.
(iv) Notwithstanding anything to the contrary in this paragraph
(c)(1), the FDIC may determine that a CIDI shall file its initial or
annual Resolution Plan by a date other than as provided in this
paragraph (c). The FDIC shall provide a CIDI with written notice of a
determination under this paragraph (c)(1)(iv) no later than 180 days
prior to the date on which the FDIC determines to require the CIDI to
submit its Resolution Plan.
(v) Notice of material events. (A) Each CIDI shall file with the
FDIC a notice no later than 45 days after any event, occurrence, change
in conditions or circumstances or other change that results in, or
could reasonably be foreseen to have, a material effect on the
resolution plan of the CIDI. Such notice shall describe the event,
occurrence or change, describe any material effects that the event,
occurrence or change may have on the resolution plan and summarize the
changes that are required in the resolution plan. The CIDI shall
address any event, occurrence or change with respect to which it has
provided notice pursuant hereto in the following resolution plan
submitted by the CIDI.
(B) A CIDI shall not be required to file a notice under paragraph
(c)(1)(v)(A) of this section if the date on which the CIDI would be
required to submit a notice under paragraph (c)(1)(v)(A) would be
within 45 days prior to the date on which the CIDI is required to file
an annual Resolution Plan under paragraph (c)(1)(iii) of this section.
(iv) Incorporation of data and other information from a Dodd-Frank
Act resolution plan. The CIDI may incorporate data and other
information from a resolution plan filed pursuant to Section 165(d) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12
U.S.C. 5365(d), by its parent company.
(2) Content of the resolution plan. The resolution plan submitted
should enable the FDIC, as receiver, to resolve the CIDI in the event
of its insolvency under the FDI Act in a manner that ensures that
depositors receive access to their insured deposits within one business
day of the institution's failure (two business days if the failure
occurs on a day other than Friday), maximizes the net present value
return from the sale or disposition of its assets and minimizes the
amount of any loss realized by the creditors in the resolution in
accordance with Sections 11 and 13 of the FDI Act, 12 U.S.C. 1821 and
1823. The resolution plan strategies should take into account that
failure of the CIDI may occur under the baseline, adverse and severely
adverse economic conditions developed by the Board of Governors of the
Federal Reserve System pursuant to 12 U.S.C. 5365(i)(1)(B); provided,
however, a CIDI may submit its initial resolution plan assuming the
baseline conditions only, or, if a baseline scenario is not then
available, a reasonable substitute developed by the CIDI. At a minimum,
the resolution plan shall:
(i) Executive summary. Include an executive summary describing the
key elements of the CIDI's strategic plan for resolution under the FDI
Act in the event of its insolvency. After the CIDI files its initial
plan, each annual resolution plan shall also describe:
(A) Material events, such as acquisitions, sales, litigation and
operational changes, since the most recently filed plan that may have a
material effect on the plan;
(B) Material changes to the CIDI's resolution plan from its most
recently filed plan; and
(C) Any actions taken by the CIDI since filing of the previous plan
to improve the effectiveness of its resolution plan or remediate or
otherwise mitigate any material weaknesses or impediments to the
effective and timely execution of the resolution plan.
(ii) Organizational structure: legal entities; core business lines
and branches. Provide the CIDI's, parent company's, and affiliates'
legal and functional structures and identify core business lines.
Provide a mapping of core business lines, including material asset
holdings and liabilities related thereto, to material entities. Discuss
the CIDI's overall deposit activities including, among other things,
unique aspects of the deposit base or underlying systems that may
create operational complexity for the FDIC, result in extraordinary
resolution expenses in the event of failure and a description of the
branch organization, both domestic and foreign. Identify key personnel
tasked with managing core business lines and deposit activities and the
CIDI's branch organization.
(iii) Critical services. Identify critical services and providers
of critical services. Provide a mapping of critical services to
material entities and core business lines. Describe the CIDI's strategy
for continuing critical services in the event of the CIDI's failure.
When critical services are provided by the parent company or a parent
company affiliate, describe the CIDI's strategy for continuing critical
services in the event of the parent company's or parent company
affiliate's failure. Assess the
[[Page 58391]]
ability of each parent company affiliate providing critical services to
function on a stand-alone basis in the event of the parent company's
failure.
(iv) Interconnectedness to parent company's organization. Identify
the elements or aspects of the parent company's organizational
structure, the interconnectedness of its legal entities, the structure
of legal or contractual arrangements, or its overall business
operations that would, in the event the CIDI were placed in
receivership, diminish the CIDI's franchise value, obstruct its
continued business operations or increase the operational complexity to
the FDIC of resolution of the CIDI.
(v) Strategy to separate from parent company's organization.
Provide a strategy to unwind or separate the CIDI and its subsidiaries
from the organizational structure of its parent company in a cost-
effective and timely fashion. Describe remediation or mitigating steps
that could be taken to eliminate or mitigate obstacles to such
separation.
(vi) Strategy for the sale or disposition of deposit franchise,
business lines and assets. Provide a strategy for the sale or
disposition of the deposit franchise, including branches, core business
lines and major assets of the CIDI in a manner that ensures that
depositors receive access to their insured deposits within one business
day of the institution's failure (two business days if the failure
occurs on a day other than Friday), maximizes the net present value
return from the sale or disposition of such assets and minimizes the
amount of any loss realized in the resolution of cases.
(vii) Least costly resolution method. Describe how the strategies
for the separation of the CIDI and its subsidiaries from its parent
company's organization and sale or disposition of deposit franchise,
core business lines and major assets can be demonstrated to be the
least costly to the Deposit Insurance Fund of all possible methods for
resolving the CIDI.
(viii) Asset valuation and sales. Provide a detailed description of
the processes the CIDI employs for:
(A) Determining the current market values and marketability of core
business lines and material asset holdings;
(B) Assessing the feasibility of the CIDI's plans, under
idiosyncratic and industry-wide stress scenarios (including
timeframes), for executing any sales, divestitures, restructurings,
recapitalizations, or similar actions contemplated in the CIDI's
resolution plan; and
(C) Assessing the impact of any sales, divestitures,
restructurings, recapitalizations, or other similar actions on the
value, funding and operations of the CIDI and its core business lines.
(ix) Major counterparties. Identify the major counterparties of the
CIDI and describe the interconnections, interdependencies and
relationships with such major counterparties. Analyze whether the
failure of each major counterparty would likely have an adverse impact
on or result in the material financial distress or failure of the CIDI.
(x) Off-balance-sheet exposures. Describe any material off-balance-
sheet exposures (including guarantees and contractual obligations) of
the CIDI and map those exposures to core business lines.
(xi) Collateral pledged. Identify and describe processes used by
the CIDI to:
(A) Determine to whom the CIDI has pledged collateral;
(B) Identify the person or entity that holds such collateral; and
(C) Identify the jurisdiction in which the collateral is located;
and if different, the jurisdiction in which the security interest in
the collateral is enforceable against the CIDI.
(xii) Trading, derivatives and hedges. Describe the practices of
the CIDI and its core business lines related to the booking of trading
and derivative activities. Identify each system on which the CIDI
conducts a material number or value amount of trades. Map each trading
system to the CIDI's legal entities and core business lines. Identify
material hedges of the CIDI and its core business lines related to
trading and derivative activities, including a mapping to legal entity.
Describe hedging strategies of the CIDI.
(xiii) Unconsolidated balance sheet of CIDI; material entity
financial statements. Provide an unconsolidated balance sheet for the
CIDI and a consolidating schedule for all material entities that are
subject to consolidation with the CIDI. Provide financial statements
for material entities. When available, audited financial statements
should be provided.
(xiv) Payment, clearing and settlement systems. Identify each
payment, clearing and settlement system of which the CIDI, directly or
indirectly, is a member. Map membership in each such system to the
CIDI's legal entities and core business lines.
(xv) Capital structure; funding sources. Provide detailed
descriptions of the funding, liquidity and capital needs of, and
resources available to, the CIDI and its material entities, which shall
be mapped to core business lines and critical services. Describe the
material components of the liabilities of the CIDI and its material
entities and identify types and amounts of short-term and long-term
liabilities by type and term to maturity, secured and unsecured
liabilities and subordinated liabilities.
(xvi) Affiliate funding, transactions, accounts, exposures and
concentrations. Describe material affiliate funding relationships,
accounts, and exposures, including terms, purpose, and duration, that
the CIDI or any of its subsidiaries have with its parent or any parent
company affiliate. Include in such description material affiliate
financial exposures, claims or liens, lending or borrowing lines and
relationships, guaranties, asset accounts, deposits, or derivatives
transactions. Clearly identify the nature and extent to which parent
company or parent company affiliates serve as a source of funding to
the CIDI and its subsidiaries, the terms of any contractual
arrangements, including any capital maintenance agreements, the
location of related assets, funds or deposits and the mechanisms by
which funds can be downstreamed from the parent company to the CIDI and
its subsidiaries.
(xvii) Systemically important functions. Describe systemically
important functions that the CIDI, its subsidiaries and affiliates
provide, including the nature and extent of the institution's
involvement in payment systems, custodial or clearing operations, large
sweep programs, and capital markets operations in which it plays a
dominant role. Discuss critical vulnerabilities, estimated exposure and
potential losses, and why certain attributes of the businesses detailed
in previous sections could pose a systemic risk to the broader economy.
(xviii) Cross-border elements. Describe individual components of
the CIDI's structure that are based or located outside the United
States, including foreign branches, subsidiaries and offices. Provide
detail on the location and amount of foreign deposits and assets.
Discuss the nature and extent of the CIDI's cross-border assets,
operations, interrelationships and exposures and map to legal entities
and core business lines.
(xix) Management information systems; software licenses;
intellectual property. Provide a detailed inventory and description of
the key management information systems and applications, including
systems and applications for risk management, accounting, and financial
and regulatory reporting, used by the CIDI and its subsidiaries.
Identify
[[Page 58392]]
the legal owner or licensor of the systems identified above; describe
the use and function of the system or application, and provide a
listing of service level agreements and any software and systems
licenses or associated intellectual property related thereto. Identify
and discuss any disaster recovery or other backup plans. Identify
common or shared personnel, facilities, or systems. Describe the
capabilities of the CIDI's processes and systems to collect, maintain,
and report the information and other data underlying the resolution
plan to management of the CIDI and, upon request to the FDIC. Describe
any deficiencies, gaps or weaknesses in such capabilities and the
actions the CIDI intends to take to promptly address such deficiencies,
gaps, or weaknesses, and the time frame for implementing such actions.
(xx) Corporate governance. Include a detailed description of:
(A) How resolution planning is integrated into the corporate
governance structure and processes of the CIDI;
(B) The CIDI's policies, procedures, and internal controls
governing preparation and approval of the resolution plan; and
(C) The identity and position of the senior management official of
the CIDI that is primarily responsible for overseeing the development,
maintenance, implementation, and filing of the resolution plan and for
the CIDI's compliance with this section.
(xxi) Assessment of the resolution plan. Describe the nature,
extent, and results of any contingency planning or similar exercise
conducted by the CIDI since the date of the most recently filed
resolution plan to assess the viability of or improve the resolution
plan.
(xxii) Any other material factor. Identify and discuss any other
material factor that may impede the resolution of the CIDI.
(3) Approval. The CIDI's board of directors must approve the
resolution plan. Such approval shall be noted in the Board minutes.
(4) Review of resolution plan.
(i) Each resolution plan submitted shall be credible. A resolution
plan is credible if its strategies for resolving the CIDI, and the
detailed information required by this section, are well-founded and
based on information and data related to the CIDI that are observable
or otherwise verifiable and employ reasonable projections from current
and historical conditions within the broader financial markets.
(ii) After receiving a resolution plan, the FDIC shall determine
whether the submitted plan satisfies the minimum informational
requirements of paragraph (c)(2) of this section; and either
acknowledge acceptance of the plan for review or return the resolution
plan if the FDIC determines that it is incomplete or that substantial
additional information is required to facilitate review of the
resolution plan.
(iii) If the FDIC determines that a resolution plan is
informationally incomplete or that additional information is necessary
to facilitate review of the plan, the FDIC shall inform the CIDI in
writing of the area(s) in which the plan is informationally incomplete
or with respect to which additional information is required.
(iv) The CIDI shall resubmit an informationally complete resolution
plan or such additional information as requested to facilitate review
of the resolution plan no later than 30 days after receiving the notice
described in preceding paragraph, or such other time period as the FDIC
may determine.
(v) Upon acceptance of a resolution plan as informationally
complete, the FDIC will review the resolution plan in consultation with
the appropriate Federal banking agency for the CIDI and its parent
company. If the FDIC determines that the resolution plan of a CIDI
submitted is not credible, the FDIC shall notify the CIDI in writing of
such determination. Any notice provided under this paragraph shall
identify the aspects of the resolution plan that the FDIC determines to
be deficient.
(vi) Within 90 days of receiving a notice of deficiencies issued
pursuant to paragraph (c)(4)(v) of this section, or such shorter or
longer period as the FDIC may determine, a CIDI shall submit a revised
resolution plan to the FDIC that addresses the deficiencies identified
by the FDIC and discusses in detail the revisions made to address such
deficiencies.
(vii) Upon its own initiative or a written request by a CIDI, the
FDIC may extend any time period under this section. Each extension
request shall be in writing and shall describe the basis and
justification for the request.
(d) Implementation matters. (1) In order to allow evaluation of the
resolution plan, each CIDI must provide the FDIC such information and
access to such personnel of the CIDI as the FDIC determines is
necessary to assess the credibility of the resolution plan and the
ability of the CIDI to implement the resolution plan. The FDIC will
rely to the fullest extent possible on examinations conducted by or on
behalf of the appropriate Federal banking agency for the relevant
company.
(2) Within a reasonable period of time, as determined by the FDIC,
following its Initial Submission Date, the CIDI shall demonstrate its
capability to produce promptly, in a format acceptable to the FDIC, the
information and data underlying its resolution plan.
(3) Notwithstanding the general requirements of paragraph (c)(1) of
this section, on a case-by-case basis, the FDIC may extend, on its own
initiative or upon written request, the implementation and updating
time frames for all or part of the requirements of this section.
(4) FDIC may, on its own initiative or upon written request, exempt
a CIDI from one or more of the requirements of this section.
(e) No limiting effect on FDIC. No resolution plan provided
pursuant to this section shall be binding on the FDIC as supervisor,
deposit insurer or receiver for a CIDI or otherwise require the FDIC to
act in conformance with such plan.
(f) Form of resolution plans; confidential treatment of resolution
plans. (1) Each resolution plan of a CIDI shall be divided into a
Public Section and a Confidential Section. Each CIDI shall segregate
and separately identify the Public Section from the Confidential
Section. The Public Section shall consist of an executive summary of
the resolution plan that describes the business of the CIDI and
includes, to the extent material to an understanding of the CIDI:
(i) The names of material entities;
(ii) A description of core business lines;
(iii) Consolidated financial information regarding assets,
liabilities, capital and major funding sources;
(iv) A description of derivative activities and hedging activities;
(v) A list of memberships in material payment, clearing and
settlement systems;
(vi) A description of foreign operations;
(vii) The identities of material supervisory authorities;
(viii) The identities of the principal officers;
(ix) A description of the corporate governance structure and
processes related to resolution planning;
(x) A description of material management information systems; and
(xi) A description, at a high level, of the CIDI's resolution
strategy, covering such items as the range of potential purchasers of
the CIDI, its material entities and core business lines.
(2) The confidentiality of resolution plans shall be determined in
accordance with applicable exemptions under the Freedom of Information
Act (5 U.S.C. 552(b)) and the FDIC's Disclosure of Information Rules
(12 CFR part 309).
[[Page 58393]]
(3) Any CIDI submitting a resolution plan or related materials
pursuant to this section that desires confidential treatment of the
information submitted pursuant to 5 U.S.C. 552(b)(4) and the FDIC's
Disclosure of Information Rules (12 CFR part 309) and related policies
may file a request for confidential treatment in accordance with those
rules.
(4) To the extent permitted by law, information comprising the
Confidential Section of a resolution plan will be treated as
confidential.
(5) To the extent permitted by law, the submission of any
nonpublicly available data or information under this section shall not
constitute a waiver of, or otherwise affect, any privilege arising
under Federal or state law (including the rules of any Federal or state
court) to which the data or information is otherwise subject.
Privileges that apply to resolution plans and related materials are
protected pursuant to Section 18(x) of the FDI Act, 12 U.S.C. 1828(x).
By order of the Board of Directors.
Dated at Washington, DC, this 13th day of September, 2011.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2011-24179 Filed 9-20-11; 8:45 am]
BILLING CODE 6714-01-P