The Federal Deposit Insurance Corp. on Friday narrowed the requirements big banks must follow when submitting emergency wind-down blueprints — known as resolution plans — in an attempt to streamline the process and better position the agency to swiftly sell a collapsing bank over a weekend.
As part of the shift, FDIC Acting Chair Travis Hill said the agency is eliminating the need for banks to include hypothetical failure scenarios and bridge bank strategies in their next round of resolution plans. The change, he said, reflects lessons from recent collapses that revealed the limits and high costs of the bridge bank model.
“The 2023 bank failures served as a reminder of how costly and damaging a bridge bank solution can be,” said Acting Chairman Travis Hill. “Today’s action is one step in shifting our approach towards maximizing the likelihood of a lower cost and more stabilizing resolution for large regional banks.”
Under the requirements, banks become subject to FDIC resolution planning rules once they reach $50 billion in total assets, based on the average of their last four quarterly reports. After crossing this threshold, they are designated as Covered Insured Depository Institutions — or CIDIs — and must submit a full resolution plan within at least 270 days of notification. The rule maintains oversight of midsize banks —
The FDIC’s updated rules, released Friday in the form of revised answers to “frequently asked questions” allows firms more flexibility and principles-based approach to resolution planning submissions, with several previous requirements either revised or waived.
The FDIC has waived the requirement that CIDIs prescribe a bridge depository institution strategy as the default resolution plan. Filers may now propose one or multiple feasible strategies based on the specific structure of their business. The requirement to model a failure scenario has also been waived and the FDIC clarified that it will “only issue credibility findings” if a submission is determined to be not credible and its review will evaluate plans holistically rather than verifying banks’ projections.
The FDIC also has clarified several parts of its resolution planning rules to make expectations clearer and more tangible. For example, it expanded the definition of “key personnel” to include anyone critical to a bank’s operations or strategy — but exempted employees who can be easily replaced. It also sharpened how banks should categorize their major components to be parts of the business that can be sold off as-is.
Banks now only need to explain how they would estimate asset values in a general way, rather than using detailed calculations, and they don’t have to predict how economic impacts would be addressed in extreme scenarios. There’s also new guidance around digital platforms — that means banks now only need to report on systems that are hard to replace and help retain customers. The required communications plan — which describes the CIDI’s current communications capabilities upon a theoretical failure scenario — now must work across all possible resolution strategies, not just one.
The FDIC says it won’t start testing banks’ resolution capabilities until 2026 and initial tests will focus on whether a bank can quickly share key data for potential buyers. Meetings between the FDIC and banks will happen once per planning cycle, unless something urgent comes up, and banks will be told ahead of time what to prepare. Finally, smaller banks below $50 billion in total assets will get some waivers, reducing the amount of extra documentation they need to file.
Smaller firms are not required to address aspects such as the identification and analysis of franchise components or how those components might be marketed or sold during a resolution.
