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Sullivan & Cromwell Discusses Resolution-Planning Guidance for U.S. Global Systemically Important Banks

On December 20, 2018, the Federal Reserve and the Federal Deposit Insurance Corporation (together, the “Agencies”) issued final guidance (the “Final Guidance”)[1] with respect to future resolution plan submissions under Title I of the Dodd-Frank Act by the eight U.S. Global Systemically Important Banks (U.S. G‑SIBs), including the plan submissions that are due July 1, 2019.[2]  The Final Guidance adopts, and addresses comments provided in response to, the proposed resolution planning guidance the Agencies issued for comment on June 29, 2018 (the “Proposed Guidance”).[3]  Like the Proposed Guidance and the foundational guidance issued by the Agencies in April 2016 (the “2016 Guidance”),[4] the Final Guidance describes the supervisory expectations of the Agencies with respect to firm capabilities in the following areas relevant to resolution:

Notably, the Final Guidance consolidates all prior resolution planning guidance into one document and states that any prior guidance not included in the Final Guidance is superseded.[5]

Although the Proposed Guidance sought comment on the capital and liquidity pre-positioning framework that was contained in the 2016 Guidance,[6] the Final Guidance does not include any substantial revisions to those elements of the guidance.  The release accompanying the Final Guidance (the “Adopting Release”) does explicitly affirm, however, that these topics will be the subject of one or more future proposals for public comment, whether in the form of proposed guidance, a proposed rule, or some combination of the two.[7]  The Agencies acknowledge that they will continue to consider the written comments that were received on capital and liquidity pre-positioning as they contemplate future action in this area.[8]

Consistent with the Proposed Guidance, the principal substantive areas in which the 2016 Guidance is being updated relate to: (i) PCS activities and (ii) derivatives and trading activities.

Most significantly, the Final Guidance provides that in planning for continuity with respect to its role as a provider of PCS services to “key” clients, a U.S. G-SIB should arrive at a determination of which clients are considered “key” by reference to quantitative and qualitative factors relating to the significance of that client’s activities relative to the overall PCS activities engaged in by the U.S. G-SIB itself,[9] rather than setting the expectation – as the Proposed Guidance would have – that the U.S. G-SIB must determine whether each client’s degree of reliance on the U.S. G-SIB for PCS services renders the U.S. G-SIB “key” from the vantage point of that client.  This clarification relieves the U.S. G-SIBs from an impracticality (or even impossibility) that would have been presented by this element of the Proposed Guidance.  In addition, the change will likely limit the number of clients that must be identified and addressed under the Final Guidance.  This in turn will reduce the extent and complexity of the analysis the U.S. G-SIBs are expected to provide within the playbooks that detail the measures they will undertake to maintain continuity with respect to each key financial market utility (FMU) and key agent bank, as well as to maintain continuity on behalf of key clients in those instances in which the U.S. G-SIB itself functions as a provider of PCS services, whether directly or as an agent bank.[10]

The Final Guidance summarizes supervisory expectations with regard to the resolution-related capabilities to be maintained by the six largest derivatives dealer firms among the U.S. G-SIBs[11] in the area of derivatives and trading.  In doing so, the Final Guidance adopts a handful of minor clarifications, generally adhering to the heightened expectations articulated by the Proposed Guidance, but otherwise leaves them largely unaltered.  The derivatives and trading standards require the dealer firm to address: (i) booking practices with respect to the dealer firm’s derivatives portfolios, (ii) inter-affiliate risk monitoring and controls, (iii) portfolio segmentation and forecasting, (iv) prime brokerage customer account transfers and (v) derivatives stabilization and de-risking strategy.[12]

In defining supervisory expectations with respect to separability (including the capability a U.S. G-SIB must maintain to identify and prepare for the potential future execution of business and asset divestiture options that will provide meaningful optionality in resolution), the Final Guidance eliminates the expectation under the 2016 Guidance that every U.S. G-SIB should, for each identified divestiture option, maintain and annually update a data room to facilitate buyer due diligence.  In place of this prior expectation, the Final Guidance emphasizes that U.S. G-SIBs should actively maintain (and be able upon request to demonstrate) the operational capacity to populate such data rooms with relevant information in a timely fashion.[13]

In emphasizing the necessity for firms to maintain and be able to execute operationally a broad range of resolution-related capabilities, such as the ability to estimate liquidity needs in resolution, the Final Guidance represents an approach that has also recently been embraced – within a different legal framework and institutional setting – by the Bank of England and the UK Prudential Regulatory Authority, with the release of the proposed Resolvability Assessment Framework for large UK banks on December 18, 2018.[14]

For ease of reference, a comparison of the text of the Final Guidance against the 2016 Guidance is linked to this memorandum:  Also linked to this memorandum is a comparison of the text of the Final Guidance against the Proposed Guidance:

Key Revisions to the Proposed Guidance

The Final Guidance is largely consistent with the Proposed Guidance, except for limited modifications made in response to public comment, which include the following:

Future U.S. Agency Actions

With respect to future rulemaking, the Agencies have indicated that, in accordance with changes made to section 165 of the Dodd-Frank Act by the Economic Growth, Regulatory Relief, and Consumer Protection Act,[44] they plan to propose revisions to the resolution plan rule in order to address the applicability (or, presumptively, the inapplicability) of resolution plan requirements for bank holding companies with between $100 billion and $250 billion in assets and adjust the scope and applicability of resolution plan requirements for those firms that remain subject to them.[45]  In connection with this rulemaking, Agency officials have publicly indicated that they plan to consider ways in which the required informational content in plan filings might be streamlined in order to reduce the burden of plan preparation, as well as the formal adoption of a biannual submission cycle in place of the current annual filing requirement in the rule.[46]

In addition, Federal Reserve Vice Chairman Randal Quarles has indicated that the Board of Governors is considering revisions to the total loss-absorbing capacity (TLAC) requirements currently imposed on the U.S. G-SIBs and the U.S. intermediate holding companies of certain non-U.S. G-SIBs.  Elements under consideration for potential revision appear to include: (i) potential elimination of the stand-alone requirement to maintain a minimum amount of long-term debt in addition to satisfying the TLAC minimum and (ii) potential lowering of the minimum internal TLAC requirements that are applied to the U.S. intermediate holding companies of non-U.S. G-SIBs.  As noted by the Adopting Release for the Final Guidance, revisions to the capital pre-positioning framework under Title I could potentially be addressed as part of amendments to the TLAC rule, or could be encompassed in future revisions to Title I resolution plan guidance.[47]  Likewise, the Adopting Release indicated that future modifications to the liquidity pre‑positioning framework may be incorporated into either future proposed guidance or a future proposed rule.[48]

Also likely to be released during 2019 is proposed resolution planning guidance for the four largest foreign banking organizations (FBOs) that filed their most recent Title I resolution plans on July 1, 2018.  The Agencies released public feedback letters with respect to those FBO plans on December 20 at the same time that the Final Guidance was issued.[49]  These FBO feedback letters identified no “deficiencies” that might ultimately give rise to additional prudential restrictions under the Dodd-Frank statute, but did identify for each firm at least one “shortcoming” to be addressed by the time of the next required resolution plan submission by these firms on July 1, 2020.  The letters provide that detailed project plans for such remediation must be submitted to the Agencies by April 5, 2019.  The letters all indicate that the Agencies plan to engage with these firms and their relevant home-jurisdiction authorities to advance the objective of coordinated group-wide and U.S. planning with respect to the following topics: (i) Legal Entity Rationalization, (ii) PCS activities and (iii) Derivatives Booking Practices.

The FDIC has also indicated that it will release during 2019 an Advance Notice of Public Rulemaking that will seek public input on whether the FDIC rule requiring insured depository institutions (IDIs) with greater than $50 billion in assets to submit an IDI-specific resolution plan should be eliminated or modified.[50]  The FDIC has stated that no IDI plans will be required to be submitted until such rulemaking process has concluded.[51]


[1]           Board of Governors of the Federal Reserve System and FDIC, Resolution Planning Guidance for Eight Large, Complex U.S. Banking Organizations (December 20, 2018), available at (the “Adopting Release”).

[2]           The U.S. G-SIBs are Bank of America Corporation; The Bank of New York Mellon Corporation; Citigroup Inc.; The Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and Wells Fargo & Company.

[3]           See Resolution Planning Guidance for Eight Large, Complex U.S. Banking Organizations, 83 Fed. Reg. 32856 (July 16, 2018) (the “Proposed Guidance Release”).  For further discussion of the Proposed Guidance, see our Client Memorandum, Proposed Resolution Planning Guidance for U.S. G-SIBs, dated July 2, 2018, available at

[4]           See Board of Governors of the Federal Reserve System and FDIC, Guidance for 2017 § 165(d) Annual Resolution Plan Submissions by Domestic Covered Companies that Submitted Resolution Plans in 2015 (the “Guidance for the 2017 Plan Submissions”) (April 12, 2016), available at

[5]           See Adopting Release at 48 n.33.  The Final Guidance makes clear that the U.S. G‑SIBs must ensure that they address any shortcomings identified in the feedback letters issued by the Agencies in December 2017, as well as any shortcomings or deficiencies identified in future firm-specific feedback letters.

[6]           See Proposed Guidance Release at 32858.

[7]           See Adopting Release at 5 (“The Agencies expect that any future actions in these areas [capital and liquidity], whether guidance or rules, would be adopted through notice and comment procedures, which would provide an additional opportunity for public input.”).  The Agencies also note that they “further expect to collaborate in taking such actions in a manner consistent with the [Federal Reserve’s] TLAC rule.”  Id. at 5-6.  This past May, Federal Reserve Vice Chairman for Supervision Randal Quarles stated that the Federal Reserve is “interested in views from the firms and the public on how the [capital and liquidity pre-positioning] regimes can be improved . . . .  In addition, we are currently weighing the costs and benefits of our current approach of directing firms to determine the appropriate amount of prepositioned capital and liquidity.  We are also considering whether formalizing resolution capital and liquidity requirements through a rulemaking process would improve the predictability and transparency of our approach.” Randal K. Quarles, Vice Chairman for Supervision, Federal Reserve, Trust Everyone – But Brand Your Cattle:  Finding the Right Balance in Cross-Border Resolution (May 16, 2018), available at

[8]           See Adopting Release at 17.

[9]           See id. at 23-24, 58.

[10]         See id. at 58-60.

[11]         The Final Guidance identifies the following six U.S. G-SIBs as “dealer firms” subject to the guidance on derivatives and trading activities:  Bank of America Corporation, Citigroup Inc., The Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley, and Wells Fargo & Company.  Id. at 70.

[12]         See id. at 70-83.

[13]         See id. at 34, 70.

[14]         See Bank of England, The Bank of England’s Approach to Assessing Resolvability (December 2018), available at and Bank of England, Prudential Regulatory Authority, Resolution Assessment and Public Disclosure by Firms (December 2018), available at

[15]         See id. at 11-12.  Specifically, the Final Guidance consolidates the Guidance for 2013 § 165(d) Annual Resolution Plan Submissions by Domestic Covered Companies that Submitted Initial Resolution Plans in 2012; firm-specific feedback letters issued in August 2014 and April 2016; the February 2015 staff communication; and the 2016 Guidance, including the frequently asked questions that were published in response to the 2016 Guidance.  See id. at 48 n.33.

[16]         See id. at 11 (discussing that commenters favored consolidating and making public the relevant aspects of all existing guidance into a single document).  Additionally, as previously noted, the consolidated guidance includes the U.S. G-SIB-specific feedback letters issued in August 2014, which were subject to restrictions on the sharing of confidential supervisory information.  See supra note 11.

[17]         See Adopting Release at 12.

[18]         Proposed Guidance Release at 32865.

[19]         See id. at 25, 58.

[20]         See id. at 25.

[21]         See id. at 58 n.43.

[22]         See id. at 58.

[23]         Id. at 58-59.

[24]         Compare Proposed Guidance Release at 32869 with Adopting Release at 74.

[25]         Compare Proposed Guidance Release at 32871 with Adopting Release at 82.

[26]         Adopting Release at 82 n.82.

[27]         Compare Proposed Guidance Release at 32868 n.41 with Adopting Release at 70 n.52.

[28]         Adopting Release at 73 n.59.

[29]         See 12 C.F.R §§ 252.81-252.88, pt. 382 and pt. 47.

[30]         See, e.g., 12 C.F.R. § 252.82(f).

[31]         See 12 C.F.R. § 252.81.

[32]         12 C.F.R § 252.82(f).

[33]         Id.

[34]         Adopting Release at 63 n.49.

[35]         Compare Proposed Guidance Release at 32868 with Adopting Release at 70.

[36]         See Adopting Release at 83-84.

[37]         Id. at 87.

[38]         Id.

[39]         See id.

[40]         Id. at 14.  The FDIC and Treasury have indicated that SPOE is the strategy that would likely be pursued for U.S. G-SIBs if they were resolved under Title II of the Dodd-Frank Act, and all of the U.S. G-SIBs have adopted, or announced their intention of adopting, the SPOE strategy in their Title I resolution plans. See FDIC, Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy, 78 Fed. Reg. 76614 (December 18, 2013), available at; U.S. Department of the Treasury, Orderly Liquidation Authority and Bankruptcy Reform (February 21, 2018), available at  However, the Agencies have been consistent in their position that each U.S. G-SIB is responsible for determining the most suitable resolution strategy for its resolution plan.

[41]         Id. at 19.

[42]         Id. at 21.

[43]         Id. (internal citation omitted).

[44]         See Board of Governors of the Federal Reserve System, FDIC and OCC, Interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) (July 6, 2018), available at

[45]         See Prudential Standards for Large Bank Holding Companies and Savings and Loan Holding Companies, 83 Fed. Reg. 61408 (November 29, 2018) at 61410; Randal K. Quarles, Vice Chairman for Supervision, Federal Reserve, Getting It Right:  Factors for Tailoring Supervision and Regulation of Large Financial Institutions (July 18, 2018), available at (“But most firms with total assets between $100 billion and $250 billion do not pose a high degree of resolvability risk, especially if they are less complex and less interconnected.  Therefore, we should consider scaling back or removing entirely resolution planning requirements for most of the firms in that asset range.  Further, we should consider limiting the scope of application of resolution planning requirements to only the largest, most complex, and most interconnected banking firms because their failure poses the greatest spillover risk to the broader economy.  For firms that would still be subject to resolution planning requirements, we could reduce the frequency and burden of such requirements, perhaps by requiring more-targeted resolution plans.”).

[46]         See, e.g., Randal K. Quarles, Vice Chairman for Supervision, Federal Reserve, Early Observations on Improving the Effectiveness of Post-Crisis Regulation (January 19, 2018), available at (“I believe we should continue to improve the resolution planning process in light of the substantial progress made by firms over the past few years, including a permanent extension of submission cycles from annual to once every two years and reduced burden for banking firms with less significant systemic footprints”).

[47]         See Adopting Release at 5-6.

[48]         Id. at 5.

[49]         See Federal Reserve, Federal Reserve and FDIC Announce Resolution Plan Determinations for Four Foreign-Based Banks and Finalize Guidance for Eight Domestic Banks (December 20, 2018), available at

[50]         See Jelena McWilliams, Chairman, FDIC, Keynote Remarks to 2018 Annual Conference of The Clearing House and Bank Policy Institute (November 28, 2018), available at

[51]         Id.

This post comes to us from Sullivan & Cromwell LLP. It is based on the firm’s memorandum, “Final Resolution Planning Guidance for U.S. G-SIBs,” dated December 26, 2018, and available here.

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