USA Law and Practice Contributed by: Edward P. O’Keefe, Neil T. Bloomfield, John A. Stoker and Kathryn (Kate) G. Wellman, Moore & Van Allen, PLLC
of its insured deposits. The FDIC has recently indicated that these transactions may not be a viable option for some large institutions due to a limited number of potential acquirers and transactional complexity. • Deposit payoffs: The FDIC pays insured depositors up to the maximum insured amount. The FDIC liquidates remaining assets to satisfy the claims of the bank’s creditors according to their relative priority in payment. Uninsured depositors are paid ahead of the bank’s general creditors, with any remaining amounts paid to the bank’s stockholders. Although the FDIC is required to pursue the least-cost resolution approach, an exception exists if the FDIC and the Federal Reserve Board determine the bank’s failure may pose a sys - temic risk, allowing for a guarantee of uninsured deposits. This exception was used in March 2023 to guarantee uninsured deposits of several failed large banks. The preferred method of resolution for holding companies is through the US bankruptcy code, but the FDIC is authorised to resolve large, com - plex holding companies with the agreement of a two-thirds majority of the board of the Fed - eral Reserve Board and the Treasury Security, in consultation with the President, and may borrow money from the US Treasury to fund the resolu - tion. To the extent borrowed funds are not recov - ered through the resolution process, the FDIC will assess any deficit on other large, complex financial institutions. BHCs with total assets of USD250 billion or more are periodically required to submit resolu - tion plans (“living wills”) to the Federal Reserve Board, the FDIC, and the Financial Stability Oversight Council. The Federal Reserve Board is authorised to apply living will and other pru -
dential requirements to a BHC with less than USD250 billion, but more than USD100 billion, of total assets upon a determination that the requirements are appropriate to address finan - cial stability risks. In response to the 2023 bank failures, the Federal Reserve Board and the FDIC issued final guidance enhancing resolution plan submissions by “triennial full filers” (Categories II and III firms). The guidance generally mir - rors the requirements on GSIBs where the firm uses a single-point-of-entry (SPOE) resolution approach, involving the top-tier parent compa - ny’s entry into bankruptcy proceedings while its subsidiaries continue to operate or are wound down. Companies that use a multiple-point-of- entry (MPOE) approach, involving the parent company’s entry into bankruptcy along with resolution of its subsidiaries under their respec - tive regimes, are subject to certain elements of the GSIB guidance and additional requirements targeted at supporting the bank’s resolution. The FDIC also recently enhanced the require - ments on insured depository institutions (IDIs) with USD50 billion or more in total assets to periodically make resolution submissions to the FDIC. Following recently effective revisions to the FDIC’s resolution planning rule, IDIs with USD100 billion or more in total assets are required to submit resolution plans, and IDIs with between USD50 billion and under USD100 bil - lion in total assets are required to submit infor - mational filings, to the FDIC. Full submissions are filed every three years, except for IDI affiliates of US GSIBs, which submit every other year. In addition, IDIs not affiliated with US GSIBs must submit supplemental information in the years in which they do not make a full submission. The content requirements for resolution plans and informational filings are largely the same, except that only the larger institutions are required to
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