2024-18186. Guidance for Resolution Plan Submissions of Foreign Triennial Full Filers

Table 1—Illustration of Bank A Payout Liquidation—Cost Estimate

[ dollars in billions]

Liquidation market value		Payout liquidation liability claim and amount recovered
Category	Value	Category	Claim	Recovery/(loss)
Loans	$175	Secured Claims	$25	$25/($0)
Securities	70	Deposits Insured	180	$162/($18)
Cash Other	25 25	FDIC incurs the loss for the insured deposits so that all insured deposits are fully repaid.
Total	295	Deposits Uninsured	120	$108/($12)
		Unsecured Claims/Debt	25	$0/($25)
		Equity Holders		No recovery
Loss to Deposit Insurance Fund (to make whole insured depositors) = $18 billion 59
Losses to uninsured depositors = $12 billion.

• However, the Plan also asserts and supports that the payout liquidation approach fails to reflect the franchise value of the combined deposit and loan relationships stemming from considerations such as the low administrative costs associated with servicing large deposits, the elimination of significant customer acquisition costs, the stable fee income stream associated with the accounts due to barriers to entry for certain products, and the importance and value of integrating the loan and deposit products.
• The Plan calculates, and provides the analysis supporting the calculation, that the economic benefit of packaging these benefits together in an all-deposit BDI is $20 billion, which is reflected as a bid premium to liquidation pricing in table 2.
• The result is that the all-deposit BDI is less costly to the DIF than liquidation because of the inclusion of the bid premium.

Table 2—Illustration of Bank A Preferred Strategy—Cost Estimate

[ dollars in billions]

All deposit bridge market value		All deposit bridge bank liability claim and amount recovered
Category	Value	Category	Claim	Recovery/(loss)
Loans	$175	Secured Claims	$25	$25/($0)
Securities	70	Deposits Insured	180	$174/($6)
Cash Other	25 25	FDIC incurs the loss for the insured deposits so that all insured deposits are fully repaid.
Sub Total	295	Deposits Uninsured	120	$116/($4)*
Bid Premium	20	Unsecured Claims/Debt	25	$0/($25)
Total	315	Equity Holders		No recovery
Loss to Deposit Insurance Fund (to make whole insured and uninsured depositors) = $10 billion, which is less than the payout liquidation loss.60
* Losses to uninsured depositors total $4 billion and are absorbed by the DIF.

J. Derivatives and Trading Activities

The agencies requested comment on whether to provide derivatives and trading activities guidance for specified firms that adopt a U.S. SPOE or MPOE resolution strategy. Some commenters argued that no derivatives and trading guidance is needed for foreign triennial full filers because they have limited derivatives and trading portfolios, particularly relative to the U.S. GSIB banking organizations covered by such guidance. These commenters also noted that not all of the biennial filers, which are Category I firms, are subject to this type of guidance. These commenters also argued that if the agencies adopt ( print page 66525) guidance on this topic, the agencies should be careful to avoid extraterritorial application of the guidance and should use the derivatives and trading expectations in the 2020 FBO Guidance for certain FBOs as a model, rather than the expectations in the 2020 Proposed FBO Guidance.

Other commenters supported providing such guidance to foreign triennial full filers, despite observing that these firms engage in less activity than the biennial filers. One commenter cautioned that derivatives activities for foreign triennial full filers may increase in the future and proposed the inclusion of an orderly-wind-down analysis for firms with net derivatives exceeding a given threshold. Another commenter recommended that the guidance include expectations for: roles and responsibilities in derivatives unwind, plan reporting regarding derivatives exposures, plan risk assessments in cross-border activity, barriers to swift unwind of derivatives activities booked outside the United States, and capabilities to generate detailed derivative reports. This commenter also argued that firms should specify plans to wind-down between affiliates and external counterparties, as well as describe potential sale of some trading positions.

After reviewing the comments and considering the scope of derivatives and trading activities of foreign triennial full filers,^[61] the agencies determined that the banking organizations that would be specified firms have limited derivatives and trading operations compared to the subset of Category I firms that are the subject of derivatives and trading guidance. The agencies also note that the Rule includes certain requirements regarding derivatives and trading activities with which all covered companies—including foreign triennial full filers—must comply, as well as the overall requirement to provide a strategic analysis describing the covered company's plan for orderly resolution.^[62] The agencies believe that for this set of covered companies (including the two firms that are in scope of the 2020 FBO guidance), given their current activities, the topic of derivatives and trading activities is sufficiently addressed by the Rule. The agencies are therefore finalizing the guidance without including expectations on derivatives and trading activity for the specified firms.

The agencies also recognize that derivatives activity or risk for foreign triennial full filers may change in the future. The agencies may consider the need for firm-specific derivatives and trading expectations in the future for specified firms that substantially increase their derivatives and trading activities or change in a way such that having a strategy to wind-down their derivatives portfolios is critical to their resolvability.

K. Branches

The agencies received no comments regarding the branches section of the proposed guidance. The agencies are finalizing the section as proposed.

L. Format and Structure of Plans; Assumptions

This section of the proposal described the agencies' preferred presentation regarding the format, assumptions, and structure of resolution plans. Under the proposal, plans would have been expected to contain an executive summary, a narrative of the firm's resolution strategy, relevant technical appendices, and a public section as detailed in the Rule. The proposed format, structure, and assumptions were generally similar to those in the 2020 FBO Guidance, except that the proposed guidance reflected the expectations that (a) a firm should support any assumptions that it will have access to the Discount Window and/or other borrowings during the period immediately prior to entering bankruptcy and clarified expectations around such assumptions, and (b) a firm should not assume the use of the systemic risk exception to the least-cost test in the event of a failure of an IDI requiring resolution under the FDI Act. In addition, for firms that adopt a U.S. MPOE resolution strategy, the proposal included the expectation that a plan should demonstrate and describe how the failure event(s) results in material financial distress of the firm's U.S. operations, including consideration of the likelihood of the diminution the firm's liquidity and capital levels prior to bankruptcy.

The final guidance also includes an expectation contained in the 2019 U.S. GSIB Guidance and 2020 FBO Guidance regarding the parameters of economic forecasting in resolution plan submission. Those guidance documents stated that a resolution plan should assume the Dodd-Frank Act Stress Test (DFAST) severely adverse scenario for the first quarter of the calendar year in which a resolution is submitted is the domestic and international economic environment at the time of the firm's failure and throughout the resolution process.^[63] While this assumption is similar to a provision in the Rule,^[64] the agencies believe it is important to provide guidance to firms about the timing of the required assumption in the Rule. The Board provides DFAST scenario information to the specified firms through the Board's public website. As such, the information is available to specified firms who themselves or their IHC subsidiaries are not subject to stress testing requirements.^[65]

The agencies received one comment in response to a question posed regarding assumptions related to lending facilities, including the Discount Window. The commenter supported the proposed assumptions guidance regarding these facilities and recommended that the agencies consider providing additional guidance on the assumptions related to the amount, timing, and limitations of liquidity that might become available from these sources. However, the additional guidance requested by the commenter is unnecessary, and the agencies are finalizing this section of the guidance as proposed with one clarification. Specifically, the proposed guidance regarding the relevant assumption already includes references to timing and limitations of liquidity commensurate with the activities of firms subject to the guidance.

As a clarification, the agencies have added a reference to Federal Home Loan Banks (FHLBs) as a type of borrowing for which firms should provide support in their resolution plans if they assume access during the period immediately prior to entering bankruptcy. The agencies' experiences in 2023 showed that many IDIs depend heavily on FHLB funding in times of stress and, accordingly, the agencies expect firms to be prepared to support any assumptions around such reliance for resolution planning purposes.

The agencies also received a comment recommending that more of firms' resolution plans be disclosed publicly to promote market discipline and specifically asking that the public portion of resolution plans describe ( print page 66526) potential acquirers of operations in the event of resolution. The Rule establishes at a high-level the required content of the public section of a resolution plan,^[66] and this final guidance clarifies the agencies' expectations with respect to that section. The agencies are mindful that the public disclosure of resolution plans, which may contain private commercial information, has both benefits and drawbacks, and the agencies believe that, at the moment, the Rule—revisions to which are outside the scope of this guidance—and the final guidance appropriately balance transparency with confidentiality.

In addition, the agencies received two comments requesting clarification of the definition of “material entity” as applied to certain non-U.S. entities, such as foreign offices, in order to improve the alignment of U.S. resolution planning with home country strategies. In particular, the commenter contended that an aspect of the proposed guidance, which concerned assumptions regarding material entities, was inconsistent with the Rule. This was not the agencies' intent, and the final guidance modifies the assumption's description of “material entity” for consistency with the Rule by adopting the language for that provision in the final 2020 FBO Guidance.

The agencies are otherwise finalizing this section of the guidance as proposed.^[67] The agencies did not receive any comments in response to the proposal's request for comments about answers to frequently asked questions, and the agencies have not included those prior answers to frequently asked questions because these prior answers were in response to questions posed by only a portion of the firms to which this guidance is applicable and regarding guidance with certain different expectations.

M. Additional Comments

Differentiating Resolution Plan Guidance

The agencies received several general comments about whether the expectations in the proposal were suitably modified from expectations included in past resolution plan guidance and whether the proposal appropriately distinguished between different types of triennial full filers. Several commenters contended that the proposed guidance did not sufficiently differentiate expectations among firms subject to resolution planning guidance. Some of these commenters specifically claimed because the specified firms have limited operations compared to the U.S. GSIBs and have reduced the size and complexity of their U.S. operations, they should not be subject to similar resolution planning guidance as the U.S. GSIBs. One commenter argued that section 165 of the Dodd-Frank Act requires the agencies to differentiate the content of the resolution planning guidance; the proposal was too similar to the 2019 U.S. GSIB Guidance; and expectations for the specified firms should be further differentiated based on size, risk, and other factors. Another commenter argued that the proposed guidance favors the U.S. MPOE resolution strategy by including fewer expectations for firms that adopt that strategy and recommended that the guidance should be more aligned with guidance for resolution plan filers using a U.S. SPOE resolution strategy.

While the differentiation requirement in section 165 of the Dodd-Frank Act does not apply to this non-binding resolution plan guidance, the guidance differentiates among covered companies, taking into consideration their size, complexity, and other risk-related factors; their resolution strategy, whether SPOE or MPOE; and whether they are domestic or foreign-based.

The thresholds and risk-based indicators that form the basis of the risk-based category framework used by the Rule are designed to take into account an individual firm's particular activities and organizational footprint that may present significant challenges to an orderly resolution.^[68] The Rule, using those categories, defines triennial full filers as one cohort because the failure of a Category II or III banking organization could pose a threat to U.S. financial stability. Banking organizations in these two categories often have similar characteristics, such as organizational structures, and similar resolution strategies that benefit from similar resolution guidance. Accordingly, the agencies believe the guidance is equally appropriate for all foreign Category II and III banking organizations. In addition, as discussed above, the regional bank failures in March 2023 demonstrated that the failure of banking organizations with $100 billion to $250 billion in total consolidated assets can be disruptive to U.S. financial stability. For these reasons, providing the guidance to foreign triennial full filers in that asset range is appropriate to prevent or mitigate risks to the financial stability of the United States.

Guidance for specified firms that adopt a U.S. SPOE resolution strategy is differentiated relative to guidance for Category I banking organizations ( i.e., the 2019 U.S. GSIB Guidance), notably with the absence of derivatives and trading expectations, which are applicable to most of the U.S. GSIBs, and other operational guidance as well as reduced separability expectations. Other aspects of the U.S. SPOE guidance are appropriately similar to the 2019 U.S. GSIB Guidance because the successful execution of a U.S. SPOE resolution strategy benefits from the capabilities discussed in the guidance. The guidance for firms that adopt a U.S. MPOE resolution strategy includes substantially simpler expectations, relative to U.S. SPOE guidance and the 2019 U.S. GSIB Guidance, in the areas of capital, liquidity, governance mechanisms, operational, legal entity rationalization and separability, derivatives and trading expectations, and PCS. Having simpler expectations relative to U.S. SPOE guidance does not necessarily mean a firm adopting a U.S. MPOE strategy will encounter fewer challenges developing its resolution plans; regardless of the strategy chosen, the firm is responsible for providing adequate information and analysis to demonstrate its plan will facilitate an orderly resolution. Each firm remains free to choose the resolution strategy it believes would most effectively facilitate an orderly resolution, and the agencies are not suggesting that any firm change its resolution strategy, nor do the agencies identify a preferred strategy for a specific firm or set of firms.^[69]

Finally, resolution plan guidance for Category II and III banking organizations is adapted to whether a covered company is based in the United States or in a foreign jurisdiction, with dedicated guidance documents for each type of firm. The Rule differentiates between banking organizations based on home jurisdiction,^[70] and whether a banking organization is based in the United States can significantly impact its resolution strategy, resolution capabilities, and resolution planning. Accordingly, expectations for domestic and foreign-based triennial full filers are differentiated in the areas of capital, liquidity, governance mechanisms, ( print page 66527) shared services, separability, branches, and group-wide resolution plans.

Relation to the 2020 Proposed FBO Guidance and 2020 FBO Guidance

Two commenters asserted that the agencies did not adequately explain why the proposal contained certain expectations the agencies had included in the 2020 Proposed FBO Guidance but declined to adopt in the 2020 FBO Guidance. One of these commenters also contended that the agencies did not adhere to certain administrative law requirements to identify and justify the proposed changes in expectations, particularly given that the agencies recently adopted the 2020 FBO Guidance. The proposal adequately identified and explained the proposed changes in resolution planning expectations,^[71] and the guidance is permissible under section 165(d) of the Dodd-Frank Act and the Rule. However, to promote transparency in the guidance-making process, the agencies have further clarified areas in which and explained why the final guidance differs from the 2020 FBO Guidance and adopts certain expectations proposed in the 2020 Proposed FBO Guidance.^[72]

The agencies also considered whether the 2020 FBO Guidance engendered reliance interests among the banking organizations that were the subject of that guidance. The agencies received no comments explicitly identifying such reliance interests; the 2020 FBO Guidance, like the current guidance, did not have the force and effect of law; and the 2020 FBO Guidance was applicable for only one resolution plan submission cycle, and only three banking organizations were within the scope of application of the 2020 FBO Guidance for the 2021 targeted plan submission (and one such banking organization no longer exists). Accordingly, the agencies believe that resolvability improvements that may arise from issuing this guidance outweigh any reliance interests generated by the 2020 FBO Guidance.

General Comments About the Proposal

The agencies received several general comments about resolution planning guidance. The agencies have considered these commenters' input but have made no modifications to the final guidance.

One commenter expressed support for the proposed guidance, in part because it reaffirms that bankruptcy is the preferred resolution strategy and would improve the quality of resolution plan submissions through enhanced information and assumptions, better enabling the resolution of a specified firm in an orderly manner. Another commenter praised the agencies' proposal for providing needed clarity and transparency on expectations for specified firms' resolution plans, and for making several improvements that will improve specified firms' resolution plans.

Another commenter recommended that the agencies adopt the content of the guidance in the form of a legally binding and enforceable rule, in part due to the size and scope of specified firms, the importance of resolution planning, and the financial stability implications involved. This commenter also suggested that the large bank failures in 2023 demonstrated the need for improvement in banking organizations' resolution planning and the agencies' process for assessing these plans.

Resolution planning is important to U.S. financial stability; however, the agencies have not made changes to the guidance in response to these comments. The Rule, which is legally enforceable, identifies the specific topics that must be addressed in resolution plans. In contrast, resolution plan guidance outlines the agencies' supervisory expectations and priorities and articulates the agencies' general views regarding appropriate resolution planning practices for the specified firms. The final guidance provides examples of resolution plan content and capabilities that the agencies generally consider consistent with effective resolution planning. This approach is consistent with resolution planning guidance provided to other covered companies in the past, including guidance for Category I banking organizations and certain foreign Category II banking organizations.

A commenter argued that the agencies should allow for an iterative process for foreign triennial full filers to develop their strategies and capabilities, similar to the gradual maturation of Category I banking organizations' resolution plans. This commenter also argued the agencies should provide more than one year for firms to incorporate the final guidance into their next resolution plan submissions and that the guidance should not be the basis for a deficiency.

By statute and under the Rule, each resolution plan filer must submit a plan for orderly resolution under the Bankruptcy Code, and the agencies must assess the credibility of each plan. Each firm remains free to choose the resolution strategy it believes would most effectively facilitate an orderly resolution and the agencies are not suggesting that any firm change its resolution strategy, nor do the agencies identify a preferred strategy for a specific firm or set of firms. The standard of review for a resolution plan submission of a firm that transitions to a new strategy is the same as for any firm subject to the Rule. The agencies stated in the preamble to the 2019 revisions to the Rule that they would endeavor to finalize guidance a year in advance of the next applicable resolution plan submission date, and the agencies are extending the next resolution plan submission deadline for these firms to provide at least one year advanced notice of general guidance.^[73] The agencies also reaffirm that the guidance does not have the force and effect of law, and the agencies do not take enforcement actions or issue findings based on resolution planning guidance.

A commenter argued that the various capital and resolution related proposals would, when considered holistically, disproportionately affect international banks and discourage international bank participation in U.S. banking and financial services markets to the detriment of U.S. financial stability. This commenter further cautioned that additional expectations for the U.S. operations of international banks could have unintended consequences and may lead to similar demands by other host-country supervisors, which could lead to fragmentation and less orderly resolution.

This guidance does not create additional requirements, but rather describes one approach to resolution plan content that could address the agencies' expectations. Furthermore, the agencies recognize that the specified firms' U.S. operations differ not only in the businesses they engage in, but also in their scope, size, and complexity. As such, the agencies expect that firms will adapt the guidance expectations in a manner commensurate with the risk profile of their U.S. operations. Doing so in a proportionate manner does not disadvantage the specified firms relative to domestic or foreign peers and the guidance does not serve as a deterrent to participating in the U.S. financial market.

Additionally, the agencies believe the guidance would help facilitate orderly resolution of U.S. operations of the specified firms in the event an orderly home-country led group-wide resolution is not feasible. The agencies note that to date, the existence of guidance for ( print page 66528) certain FBOs has not led to increased fragmentation, but rather has enhanced the dialogue among authorities about expectations for those FBOs' capabilities and resolution preparedness. The agencies will continue to engage with home-country authorities on resolution planning for foreign triennial full filers.

Comments About Resolution Planning Generally

Finally, a commenter asked the agencies to provide more information on the inconsistencies and problematic assumptions found in the 2021 plan submissions, as well as why the UBS Group AG's acquisition of CS and the U.S. domestic bank resolutions in 2023 prompted reversals of policy.

The agencies believe the preamble to the proposed guidance addresses the findings from the 2021 resolution plan submissions and learnings from the 2023 bank resolutions. The agencies would refer the commenter to other areas of this preamble for explanation of new areas of guidance, including the 2020 FBO Proposed Guidance. No specific changes have been made to the final guidance in response to this comment.

Comments Outside the Scope of Proposal

The agencies received several comments outside the scope of the proposed guidance. One commenter urged the agencies to shorten the length between resolution plan submissions under the Rule, from three to two years, and evaluate key aspects of plans annually. This commenter also recommended the agencies create an independent committee to advise the agencies on resolution planning matters as well as require large banking organizations to hold more capital generally. Another commenter argued that any LTD requirements should reflect a banking organization's preferred resolution strategy and not push a banking organization to adopt a particular strategy. That commenter also encouraged the FDIC to provide banking organizations at least one year to comply with any final IDI Rule and to align aspects of the IDI Rule with resolution planning under section 165(d) of the Dodd-Frank Act. The agencies have not made any changes to the guidance to address these comments.

IV. Paperwork Reduction Act

Certain provisions of the final guidance contain “collections of information” within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with the requirements of the PRA, the agencies may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The agencies have requested and OMB has assigned to the agencies the respective control numbers shown. The information collections contained in the final guidance have been submitted to OMB for review and approval by the FDIC under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section 1320.11 of OMB's implementing regulations (5 CFR part 1320). The Board reviewed the final guidance under the authority delegated to the Board by OMB and has approved these collections of information.

The agencies did not receive any comments related to the PRA.

The agencies have a continuing interest in the public's opinions of information collections. At any time, commenters may submit comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, to the addresses listed in the ADDRESSES caption in the proposed guidance notice. All comments will become a matter of public record. Written comments and recommendations for these information collections also should be sent within 30 days of publication of this document to www.reginfo.gov/​public/​do/​PRAMain. Find this particular information collection by selecting “Currently under 30-day Review—Open for Public Comments” or by using the search function.

Collection title: Board: Reporting Requirements Associated with Regulation QQ.

FDIC: Reporting Requirements Associated with Resolution Planning.

OMB control number: Board 7100-0346; FDIC 3064-0210.

Frequency: Triennial, Biennial, and on occasion.

Respondents: Bank holding companies (including any foreign bank or company that is, or is treated as, a bank holding company under section 8(a) of the International Banking Act of 1978 and meets the relevant total consolidated assets threshold) with total consolidated assets of $250 billion or more, a bank holding companies with $100 billion or more in total consolidated assets with certain characteristics, and nonbank financial firms designated by the Financial Stability Oversight Council for supervision by the Board.

Current actions: The final guidance modifies certain provisions of the proposed guidance. For domestic firms, the final guidance eliminates expectations related to separability, reducing the average burden hours per response by 3,000 for domestic firms using an SPOE strategy and 975 for domestic firms using an MPOE strategy. The final guidance also clarifies expectations around operational shared services for firms using an SPOE resolution strategy and around the IDI Resolution Plan/Least-Cost Test for all firms. Regarding operational shared services, the guidance clarifies that a firm's implementation plan to ensure continuity of shared services should include those that are material to the execution of the resolution strategy, such as reliance on outside bankruptcy counsel and consultants. Regarding the FDI Act's least-cost requirement and how it relates to expectations around IDI resolution, the agencies provided additional detail on how firms can develop and support the valuation of an IDI's assets and liabilities in an IDI resolution. The agencies do not anticipate these clarifications impacting the burden estimates.

Historically, the Board and the FDIC have split the respondents for purposes of PRA clearances. As such, the agencies will split the change in burden as well. As a result of this split and the final revisions, there is a proposed net increase in the overall estimated burden hours of 14,922 hours for the Board and 14,304 hours for the FDIC. Therefore, the total Board estimated burden for its entire information collection would be 216,129 hours and the total FDIC estimated burden would be 210,844 hours.

The following table presents only the change in the estimated burden hours, as amended by the final guidance, broken out by agency. The table does not include a discussion of the remaining estimated burden hours which remain unchanged.^[74] As shown in the table, the triennial full filers' resolution plan submissions would be estimated more granularly according to SPOE and MPOE resolution strategies.

( print page 66529)

FR QQ	Estimated number of respondents	Estimated annual frequency	Estimated average hours per response	Estimated annual burden hours
Board Burdens
Current
Triennial Full:
Complex Foreign	1	1	9,777	9,777
Foreign and Domestic	7	1	4,667	32,669
Current Total				42,446
Final
Triennial Full:
FBO SPOE *	2	1	11,848	23,696
FBO MPOE	3	1	5,939	17,817
Domestic MPOE	3	1	5,285	15,855
Final Total				57,368
FDIC Burdens
Current
Triennial Full:
Complex Foreign	1	1	9,777	9,777
Foreign and Domestic	6	1	4,667	28,002
Current Total				37,779
Final
Triennial Full:
FBO SPOE	2	1	11,848	23,696
FBO MPOE	3	1	5,939	17,817
Domestic MPOE	2	1	5,285	10,570
Final Total				52,083
* There are currently no domestic triennial full filers utilizing an SPOE strategy. Estimated hours per response for a domestic SPOE triennial full filer would be 10,535 hours.