Remarks by
Martin J. Gruenberg, Chairman, FDIC
to the
Annual Washington Conference
of the
Institute of International Bankers
Washington, DC
March 4, 2013
Introduction
It is a pleasure to take part in the Annual Washington Conference of the Institute of
International Bankers.
Today I would like to focus my remarks on one of the key challenges we face in the
aftermath of the financial crisis of 2008-2009 – developing the capability to manage the
orderly resolution of a systemically important financial institution (SIFI) with extensive
cross-border operations.
Prior to the crisis, this was an issue that was not the subject of significant international
attention. Yet during the course of the crisis it became apparent that all of the major
countries lacked this capability. National jurisdictions lacked the basic authorities to
manage an orderly resolution of a SIFI, had no plans in place and no operational
capability to carry out an orderly resolution even if authorities had existed, and had not
developed cross-border relationships with key foreign authorities to facilitate critical
international cooperation. As a result, there was no ability to hold these firms
accountable to the discipline of the marketplace, by which I mean allowing these firms
to fail and ensuring that shareholders were wiped out, unsecured creditors haircut, and
culpable management replaced.
In the aftermath of the crisis, I think it is fair to say that this has been a subject of
intense international attention by both the Financial Stability Board of the G-20 countries
at the multilateral level, as well as at the level of national and regional jurisdictions.
I thought I would use my remarks today to describe the progress we have made in the
United States, as well as with some of our key foreign counterpart jurisdictions in this
critical area of financial reform.
Progress in the United States
Prior to the crisis, the resolution authorities of the FDIC were limited only to FDIC-
insured depository institutions. The FDIC did not have authority to place the holding
company or affiliates of an FDIC-insured institution into a public receivership process,
Martin J. Gruenberg, Chairman, FDIC
to the
Annual Washington Conference
of the
Institute of International Bankers
Washington, DC
March 4, 2013
Introduction
It is a pleasure to take part in the Annual Washington Conference of the Institute of
International Bankers.
Today I would like to focus my remarks on one of the key challenges we face in the
aftermath of the financial crisis of 2008-2009 – developing the capability to manage the
orderly resolution of a systemically important financial institution (SIFI) with extensive
cross-border operations.
Prior to the crisis, this was an issue that was not the subject of significant international
attention. Yet during the course of the crisis it became apparent that all of the major
countries lacked this capability. National jurisdictions lacked the basic authorities to
manage an orderly resolution of a SIFI, had no plans in place and no operational
capability to carry out an orderly resolution even if authorities had existed, and had not
developed cross-border relationships with key foreign authorities to facilitate critical
international cooperation. As a result, there was no ability to hold these firms
accountable to the discipline of the marketplace, by which I mean allowing these firms
to fail and ensuring that shareholders were wiped out, unsecured creditors haircut, and
culpable management replaced.
In the aftermath of the crisis, I think it is fair to say that this has been a subject of
intense international attention by both the Financial Stability Board of the G-20 countries
at the multilateral level, as well as at the level of national and regional jurisdictions.
I thought I would use my remarks today to describe the progress we have made in the
United States, as well as with some of our key foreign counterpart jurisdictions in this
critical area of financial reform.
Progress in the United States
Prior to the crisis, the resolution authorities of the FDIC were limited only to FDIC-
insured depository institutions. The FDIC did not have authority to place the holding
company or affiliates of an FDIC-insured institution into a public receivership process,
nor did it have authority to place a nonbank financial company whose failure might pose
a risk to the financial system into resolution.
Title II of the Dodd-Frank Act provided the FDIC these crucial authorities which are
really a threshold for the capability to manage an orderly resolution of a SIFI. Given the
highly integrated nature of the largest, most complex and diversified financial
companies with extensive cross border operations, authority to place the consolidated
entity into a resolution process is critical.
Since the enactment of Dodd-Frank, the FDIC has been actively developing internal
resolution plans for our major companies based on the expanded authorities provided
by the new law. In July 2011 the FDIC Board approved a final rule implementing the
Title II authority.
In addition, Title I of the Dodd-Frank Act requires bank holding companies with total
consolidated assets of $50 billion or more, and certain nonbank financial companies
that the Financial Stability Oversight Council (FSOC) designates as systemic, to
develop, maintain, and periodically submit to the FDIC and the Federal Reserve Board
resolution plans that are credible and would enable these entities to be resolved under
the Bankruptcy Code. These are the so-called “living wills.” In 2011 the FDIC and the
Federal Reserve Board jointly issued the basic rulemaking regarding these resolution
plans. On July 1, 2012 the first group of living wills, generally involving bank holding
companies and foreign banking organizations with $250 billion or more in nonbank
assets, was received. Banking organizations with less than $250 billion, but with $100
billion or more in assets will file by July 1 of this year, and all other banking
organizations with assets over $50 billion will file by December 31.
The FDIC and the Federal Reserve are currently in the process of reviewing the first
round of plans submitted by the largest companies. As I indicated, the Dodd-Frank Act
requires that the ultimate result of this process is that these plans be credible and
facilitate an orderly resolution of these firms under the Bankruptcy Code.
International Efforts on Resolution
In October 2011 the Financial Stability Board (FSB) of the G-20 countries released the
Key Attributes of Effective Resolution Regimes for Financial Institutions which set out
the core elements that the FSB considers to be necessary for an effective resolution
regime. The Key Attributes, as they are known, outline critical resolutions authorities
along the lines of those available in the United States under the Federal Deposit
Insurance Act and the Dodd-Frank Act.
In order to monitor compliance by member jurisdictions with international standards
promulgated by the FSB, including the Key Attributes, the FSB has established a
regular program of country and thematic peer reviews of its member jurisdictions. The
FDIC is currently leading the first peer review to evaluate FSB jurisdictions’ existing
resolution regimes and any planned changes to those regimes using the Key Attributes
a risk to the financial system into resolution.
Title II of the Dodd-Frank Act provided the FDIC these crucial authorities which are
really a threshold for the capability to manage an orderly resolution of a SIFI. Given the
highly integrated nature of the largest, most complex and diversified financial
companies with extensive cross border operations, authority to place the consolidated
entity into a resolution process is critical.
Since the enactment of Dodd-Frank, the FDIC has been actively developing internal
resolution plans for our major companies based on the expanded authorities provided
by the new law. In July 2011 the FDIC Board approved a final rule implementing the
Title II authority.
In addition, Title I of the Dodd-Frank Act requires bank holding companies with total
consolidated assets of $50 billion or more, and certain nonbank financial companies
that the Financial Stability Oversight Council (FSOC) designates as systemic, to
develop, maintain, and periodically submit to the FDIC and the Federal Reserve Board
resolution plans that are credible and would enable these entities to be resolved under
the Bankruptcy Code. These are the so-called “living wills.” In 2011 the FDIC and the
Federal Reserve Board jointly issued the basic rulemaking regarding these resolution
plans. On July 1, 2012 the first group of living wills, generally involving bank holding
companies and foreign banking organizations with $250 billion or more in nonbank
assets, was received. Banking organizations with less than $250 billion, but with $100
billion or more in assets will file by July 1 of this year, and all other banking
organizations with assets over $50 billion will file by December 31.
The FDIC and the Federal Reserve are currently in the process of reviewing the first
round of plans submitted by the largest companies. As I indicated, the Dodd-Frank Act
requires that the ultimate result of this process is that these plans be credible and
facilitate an orderly resolution of these firms under the Bankruptcy Code.
International Efforts on Resolution
In October 2011 the Financial Stability Board (FSB) of the G-20 countries released the
Key Attributes of Effective Resolution Regimes for Financial Institutions which set out
the core elements that the FSB considers to be necessary for an effective resolution
regime. The Key Attributes, as they are known, outline critical resolutions authorities
along the lines of those available in the United States under the Federal Deposit
Insurance Act and the Dodd-Frank Act.
In order to monitor compliance by member jurisdictions with international standards
promulgated by the FSB, including the Key Attributes, the FSB has established a
regular program of country and thematic peer reviews of its member jurisdictions. The
FDIC is currently leading the first peer review to evaluate FSB jurisdictions’ existing
resolution regimes and any planned changes to those regimes using the Key Attributes