Magazine article American Banker

Agencies Update 'Living Will' Instructions for Nonbanks

Magazine article American Banker

Agencies Update 'Living Will' Instructions for Nonbanks

Article excerpt

Byline: Joe Adler

WASHINGTON -- Three nonbank giants designated for tougher federal supervision received added guidance Tuesday on what regulators expect to see in the companies' mandated resolution plans.

The stepped-up regulatory requirements for American International Group, Prudential Financial and General Electric Capital -- all designated as systemically important -- include that they must submit annual "living wills" to prove they could be unwound in bankruptcy without harming the economy.

Following the firms' initial July 2014 submissions, the Federal Deposit Insurance Corp. and Federal Reserve Board announced they had provided the companies with feedback on the first drafts, as well as both common and specific guidance on what the next submissions -- due on Dec. 31 -- should include.

Under the Dodd-Frank Act, the living will requirements for nonbanks mirror similar standards for "systemically important" banks with at least $50 billion in assets. Policymakers included the requirements to force companies to strategize ways to become simpler.

In the plans, firms must come up with a plan for how they would be resolved through a traditional bankruptcy, but the plans can also aid the FDIC in the agency's development of a facility to resolve a firm when the government deems its bankruptcy could cause systemic problems. The law gave the two agencies powers to order firms with repeatedly subpar plans to divest certain assets or take other corrective action. …

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