FDIC Approves Final Guidance to Enhance Resolution Planning at Large Banks (2024)

FAQs

What is the FDIC resolution planning rule? ›

The FDIC's new rule strengthens the existing IDI resolution planning framework under 12 CFR § 360.10 by requiring a full resolution submission from most covered IDIs every three years with limited supplements filed in the off years.

The Federal Deposit Insurance Corporation was created in 1933 during the economic turmoil of the Great Depression in order to maintain stability and public confidence in the nation's financial system.

Under the final rule, a deposit owner's trust deposits will be insured in an amount up to $250,000 per beneficiary, not to exceed five beneficiaries, regardless of whether a trust is revocable or irrevocable, and regardless of contingencies or the allocation of funds among the beneficiaries.

Resolution plans, also known as living wills, must describe a bank's strategy for orderly resolution in bankruptcy in the event of its material financial distress or failure.

The final rule strengthens existing requirements by requiring those CIDIs with $100 billion or more in total assets (group A CIDIs) to submit full resolution plans containing an identified strategy appropriate to the CIDI for its orderly and efficient resolution, as well as other information described in the final rule ...

The FDIC uses a number of methods to resolve failed banks including deposit payoffs, insured-deposit transfers, purchase and assumption (P&A) agreements, whole- bank transactions, and open-bank assistance.

A bank resolution occurs when authorities determine that, contrary to normal insolvency proceedings, resolution would better protect financial stability, depositors and minimise the recourse to public funds (so called public interest assessment).

The FDIC protects the money depositors place in insured banks in the unlikely event of an insured-bank failure.

FDIC deposit insurance protects your money in deposit accounts at FDIC-insured banks in the event of a bank failure. Since the FDIC was founded in 1933, no depositor has lost a penny of FDIC-insured funds.

WHAT HAPPENS WHEN THE FDIC TAKES OVER. As 60 Minutes reported in 2009, there are three ways the FDIC can take over a bank: It can close it and pay off depositors; run the bank itself; or try to find a buyer.

How do millionaires deal with FDIC insurance? ›

Millionaires don't worry about FDIC insurance. Their money is held in their name and not the name of the custodial private bank. Other millionaires have safe deposit boxes full of cash denominated in many different currencies.

April 1, 2024

The amendments simplify the deposit insurance regulations by establishing a "trust accounts" category that governs coverage of deposits of Payable on Death (POD/ITF) accounts, formal revocable trusts and irrevocable trusts using a common calculation.

These plans must include an identified strategy that would provide timely access to insured deposits, maximize value from the sale or disposition of assets, minimize any losses realized by creditors in resolution, and address potential risk of adverse effects on US economic conditions or financial stability.

Section 33 of the Code Liquidation Liquidation proceedings will be initiated if resolution plan fails to get approved.

(3) A resolution plan shall demonstrate that – Page 4 (a) it addresses the cause of default; (b) it is feasible and viable; (c) it has provisions for its effective implementation; (d) it has provisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement ...

(2) A resolution plan shall provide: (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its term; and (c) adequate means for supervising its implementation.

First issued in 2012, the IDI Resolution Plan Rule requires IDIs with over US$50 billion in total assets to submit periodic resolution plans that facilitate the FDIC's readiness to resolve an IDI, and its subsidiaries, as receiver under the Federal Deposit Insurance Act, in the event of insolvency.

FDIC is required by law to set deposit insurance assessments based on risk to support the Deposit Insurance Fund (DIF). A risk-based assessment system reduces the subsidy that lower-risk banks provide higher-risk banks and incentivizes banks to monitor and reduce risks that could increase potential losses to the DIF.

The FDIC is an independent government agency that was created by Congress following the Great Depression to help restore confidence in U.S. banks. FDIC insurance generally covers $250,000 per depositor, per bank, in each account ownership category.