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Martin J. Gruenberg

Chairman, Federal Deposit Insurance Corporation

Determinations on Resolution Plan Submissions of Eight Systemically Important, Domestic
Banking Institutions

FDIC Board Meeting

December 19, 2017

The Dodd-Frank Act gave the FDIC and the Federal Reserve Board important new authority to
review resolution plans submitted by systemically important financial institutions (SIFIs) for
their rapid and orderly resolution under the U.S. Bankruptcy Code. The statutory standard for
reviewing the plans is whether the plan is not credible or would not facilitate an orderly
resolution of the firm under the Bankruptcy Code.

In April 2016, the Federal Reserve and FDIC Board provided important feedback to the eight
largest, and most complex, U.S. bank holding companies regarding their resolution plans. That
feedback included a number of joint deficiencies and shortcomings as well as specific guidance
regarding key vulnerabilities to orderly resolution in bankruptcy.

Since that time, staffs of the FDIC and Federal Reserve have had extensive engagement with the
firms as they worked to address in their July 2017 submissions the shortcomings and
vulnerabilities previously identified.

As noted in the proposed feedback letters to the firms, staff found that they made substantial
progress in this effort. Staff identified no deficiencies but did identify shortcomings in the plans
of four firms: Bank of America, Goldman Sachs, Morgan Stanley, and Wells Fargo. While the
agencies agreed these weaknesses did not necessitate an immediate plan resubmission, they are
important enough to highlight and have addressed in the firms’ 2019 plans.

Among other things, the firms have taken steps to rationalize their corporate structures; establish
clean holding companies with market-funded, loss-absorbing capacity; develop frameworks for
identifying their resource availability and needs in resolution; and identify and mitigate key legal
and operational obstacles.

While significant progress has been made, there are inherent challenges and uncertainties
associated with the resolution of a systemically important financial institution. Toward that end,
the agencies identified four areas in which more work may need to be done by all eight firms to
continue to improve their resolvability: intra-group liquidity; internal loss-absorbing capacity;
derivatives; and payment, clearing, and settlement activities.
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Moreover, the resolvability of firms will change as markets change and as firms’ activities,
structures, and risk profiles change. As noted in the feedback letters, the agencies expect the
firms to remain vigilant in considering the resolution consequences of their management
decisions.

The agencies continue to explore ways to improve the resolution planning process and are
considering extending the cycle for resolution plan submissions from annual to once every two
years, reflecting the agencies’ experience regarding the time needed to prepare and review the
plans.

In addition to the progress made by the firms, I also want to highlight the way the staff at both
the FDIC and the Federal Reserve worked together on this review. In addition to meeting jointly
with firms in the planning and pre-filing period, the agencies developed joint resolution plan
review teams, performed joint training, utilized joint assessment materials, and engaged in a joint
vetting process leading to today’s recommendations.

The staff recommendations before the Board today are an important step in continuing to
promote the orderly resolution under the Bankruptcy Code without cost to taxpayers and with
accountability for the shareholders, creditors, and culpable management of the firms.

I would like to thank the staff of both agencies for an outstanding job in bringing forward the
recommendations presented today. I would like to thank the FDIC staff in particular for the
dedication and commitment they brought to this very challenging task. I am pleased to support
the recommendations being presented to the Board.