Martin J. Gruenberg
Chairman
Federal Deposit Insurance Corporation
to
The Clearing House Annual Conference
New York, N.Y.
November 18, 2015
Chairman
Federal Deposit Insurance Corporation
to
The Clearing House Annual Conference
New York, N.Y.
November 18, 2015
1
Good morning. I am pleased to have the opportunity to speak with you today.
I would like to discuss the progress the FDIC has made in developing a framework under the
Dodd-Frank Act for the orderly failure of a large, complex, systemically important financial
institution while avoiding the taxpayer bailouts and the market breakdowns that took place
during the recent financial crisis. It has been two years since I last spoke to The Clearing House
on this topic, and there has been considerable progress about which I would like to update you.
As you know, bankruptcy is the statutory first option under the framework. The largest bank
holding companies and designated non-bank financial companies are required to prepare
resolution plans, also referred to as “living wills,” under Title I of the Dodd-Frank Act. These
living wills must demonstrate that the firm could be resolved under bankruptcy without severe
adverse consequences for the financial system or the U.S. economy. As a backstop, for
circumstances in which an orderly bankruptcy might not be possible, Title II of the Dodd-Frank
Act provides the Orderly Liquidation Authority. This public resolution authority allows the
FDIC to manage the orderly failure of the firm.
This framework helps to ensure that financial markets and the broader economy can weather the
failure of a SIFI; that shareholders, creditors, and culpable management of the firm will be held
accountable without cost to taxpayers; and that such an institution can be wound down and
liquidated in an orderly way.
In my remarks this morning, I would like to focus on three areas of progress. First, the utilization
of the living wills to bring about basic structural and operational changes in the firms to facilitate
Good morning. I am pleased to have the opportunity to speak with you today.
I would like to discuss the progress the FDIC has made in developing a framework under the
Dodd-Frank Act for the orderly failure of a large, complex, systemically important financial
institution while avoiding the taxpayer bailouts and the market breakdowns that took place
during the recent financial crisis. It has been two years since I last spoke to The Clearing House
on this topic, and there has been considerable progress about which I would like to update you.
As you know, bankruptcy is the statutory first option under the framework. The largest bank
holding companies and designated non-bank financial companies are required to prepare
resolution plans, also referred to as “living wills,” under Title I of the Dodd-Frank Act. These
living wills must demonstrate that the firm could be resolved under bankruptcy without severe
adverse consequences for the financial system or the U.S. economy. As a backstop, for
circumstances in which an orderly bankruptcy might not be possible, Title II of the Dodd-Frank
Act provides the Orderly Liquidation Authority. This public resolution authority allows the
FDIC to manage the orderly failure of the firm.
This framework helps to ensure that financial markets and the broader economy can weather the
failure of a SIFI; that shareholders, creditors, and culpable management of the firm will be held
accountable without cost to taxpayers; and that such an institution can be wound down and
liquidated in an orderly way.
In my remarks this morning, I would like to focus on three areas of progress. First, the utilization
of the living wills to bring about basic structural and operational changes in the firms to facilitate