USA Trends and Developments Contributed by: David Sewell, Alison Hashmall and Nariné Atamian, Freshfields
resulting in an institution with over USD50 billion in assets. • Process and adjudication: Among other things, the final Statement emphasises the “importance of pre-filing meetings, substan - tially complete applications, and public feed - back.” The FDIC reserves the right to deny or not act on any merger transaction where one or more statutory factors are not resolved favourably, and incorporates the proposal’s non-exhaustive list of issues that could result in an unfavourable finding on one or more statutory factors. Ongoing Focus on Resolution and Recovery Planning and Institutional Resolvability Perhaps not surprisingly given the events of 2023, federal banking regulators continued in 2024 to focus on enhancing the resolution and recovery planning framework and taking further steps to ensure the resolvability of the nation’s largest banking organisations. Report on the resolution of US GSIBs In April, the FDIC issued a report (the “FDIC Report”) describing how and when the agency would exercise its resolution authority under Title II of the Dodd-Frank Act. This report provides the most comprehensive description released by the agency to date of its framework for resolving large, complex financial institutions under Title II. The agency describes its key policy priori - ties relating to the resolvability of large finan - cial institutions, including its desire to enhance institutions’ loss-absorbing capacity through enhanced long-term debt (LTD) requirements. At the same time, however, the document under - scores just how much will be left to decide when an individual institution appears likely to fail. Most notably, although the FDIC Report contains
detailed descriptions of the legal requirements and formal processes for invoking Title II, it does not – and cannot – provide ex ante guidance on what is arguably the most important issue: when policymakers will be willing to invoke this option when faced with an impending resolu - tion. As the process requires involvement of the Treasury Secretary and consultation with the President, any ultimate decision to invoke Title II would inherently be political and, therefore, hard to predict. Final insured depository institution resolution planning rule In June, the FDIC approved its final resolution planning rule for insured depository institutions (IDIs) with at least USD50 billion in total assets (the “IDI Rule”). Apart from a few key changes – particularly as relates to submission cadence – the IDI Rule was largely finalised as proposed in 2023. Going forward, all covered IDIs will be required to comply with enhanced or entirely new IDI resolution plan requirements, including substantially greater focus on capabilities testing and pre-resolution engagement with regulators. Notable changes from the rule proposal include: • Triennial submissions (except for the largest banks): As originally proposed, all covered IDIs would have been required to have a two-year submission cadence, with Group A IDIs submitting full resolution plans and Group B IDIs submitting informational filings every other year. The final Rule relaxed this cadence, so that the vast majority of covered IDIs are on a three-year submission cycle. • Feedback flexibility: Under the final Rule, FDIC staff that have concerns with the con - tent of an IDI resolution plan will no longer be forced to choose between either finding a “material weakness” in a plan or else find -
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