OCC Comptroller Calls Resolution Plan Requirements an "Extralegal" Process
Comptroller of the Currency Jonathan V. Gould abstained from a vote on FDIC staff feedback letters regarding the resolution plans of U.S. global systemically important banks ("GSIBs"). He said fundamental issues with the resolution-planning process remain unaddressed.
In a statement, Mr. Gould said the proposed feedback letters on the GSIBs Section 165(d) ("Enhanced supervision and prudential standards") resolution plans themselves were "relatively benign", identifying no new shortcomings or deficiencies and articulating expectations that were not overly burdensome compared with prior years. He said that they nonetheless rest on, and perpetuate a "seriously flawed and, in my opinion, extralegal process."
Mr. Gould argued that the federal banking agencies have a history of imposing binding requirements on firms through resolution-plan feedback letters and guidance without prior notice or an opportunity for comment. He listed examples of requirements that had emerged that way: (i) the capital and liquidity standards known as RCAP, RCEN, RLAP and RLEN, (ii) the "assurance framework" introduced through 2024 feedback letters to the U.S. GSIBs that called for at least five identified elements, and (iii) the "contingency strategies" discussed in the new letters describing how firms would support critical operations through alternative resolution scenarios when financial resources fall significantly short of execution needs after a bankruptcy filing. The process, he wrote, has moved from planning, to planning plus capabilities, to planning plus capabilities plus assurance of capabilities. He said his vote to abstain reflected the lack of focus on the Section 165(d) framework.
The Comptroller said the FDIC was making progress reforming its covered insured depository institution resolution-plan requirements. However, the Section 165(d) plans, which Dodd-Frank requires from large bank holding companies and are reviewed jointly by the FDIC and the Federal Reserve, had yet to receive the same scrutiny. He called for extending the time between plan submissions and reexamining the resolution-planning guidance and feedback that has produced binding requirements and significant burden "without commensurate value." Mr. Gould said next year's plans appeared to involve additional capabilities testing, the incremental value of which was questionable.