The Federal Deposit Insurance Corporation (FDIC) board of directors approved the publication of an Advance Notice of Proposed Rulemaking (ANPR) for requirements for large banks should they fail.
Specifically, the rule is designed to put requirements for large U.S. banking organizations in place to improve the prospects for orderly resolution should they fail. The ANPR is being proposed by the FDIC as well as the Board of Governors of the Federal Reserve System.
The federal regulators are seeking comment on the proposed rule related to the potential new requirements and resources that could be used for an orderly resolution of these large banking organizations. Specifically, the agencies focused on the issuance of long-term debt by large banking organizations and their insured depository institutions to enhance options for the orderly resolution of the nation’s largest and most complex banks.
“It is clear that the FDIC must have other options for the orderly resolution of these large institutions in a way that minimizes the destruction of value, addresses the impact on depositors and local communities, maintains U.S. financial stability, and minimizes the cost to the Deposit Insurance Fund (DIF). One such option is the formation of a bridge bank, which can be established to take over the operations of the failed institution to allow time for restructuring and marketing the institution – but only if that approach can preserve the franchise value of the failed institution sufficient to make that approach less costly to the DIF than liquidation of the bank and payoff of the insured depositors,” Martin Gruenberg, acting chair of the FDIC, said in an Oct. 18 speech on the proposed rulemaking.
All interested parties are encouraged to submit written comments to the FDIC and the Board of Governors of the Federal Reserve System within 60 days of the notice’s publication.