Two federal banking regulators found deficiencies with the sale of derivatives in the resolution plans of Bank of America, Goldman Sachs, and JPMorgan Chase, while the regulators disagreed on the severity of an issue with Citigroup’s plan.
The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Board conducted reviews of the resolution plans for the eight largest and most complex U.S. banks. The reviews found no weaknesses with the plans from Bank of New York Mellon, Morgan Stanley, State Street, and Wells Fargo. Resolution plans “describe a bank’s strategy for orderly resolution in bankruptcy in the event of its material financial distress or failure,” the agencies said Friday in a joint press release.
The regulators ordered Bank of America, Goldman Sachs, and JPMorgan to conduct additional validation and testing of their plans to unwind their derivative portfolios in the event the banks fail and ensure that they are sold in an orderly manner.
The FDIC also identified a weakness with Citigroup’s plan to unwind its derivatives portfolio, while the Fed considered the deficiency less serious, rather categorizing it as a shortcoming, per the release. Citigroup must conduct additional validation and testing of its resolution plan related to unwinding derivatives in the event the bank fails.
Each bank found to have deficiencies must submit a plan to address them to the regulators by September, according to their feedback letters.
The banks’ shortcomings “are to be addressed in the next resolution plans due by July 1, 2025,” and that “each bank, in its 2025 resolution plan submission, should address the topics of contingency planning and obtaining foreign government actions necessary to execute the resolution strategy,” the agencies said.
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