Regulators Tout Progress in Bank Regulation

Federal Reserve Bank of New York President and CEO William C. Dudley and FDIC Chair Martin J. Gruenberg reviewed the progress made to date in improving bank regulation.

At the Clearinghouse Annual Conference, Mr. Dudley outlined work that still needs to be done within both the official sector and the largest banking firms to effect an operational resolution for global systemically important banking organizations ("GSIBs").

Mr. Dudley stated that the policy approach to "too big to fail" reduces but does not completely eliminate the possibility of a large financial institution's failure and that, for this reason, work to prevent that possibility must continue. He recommended: (i) establishing a more rational and less complex legal entity structure that takes into account the best alignment of legal entities and business lines to improve firms' resolvability; (ii) ensuring the continuity of shared services that support critical operations and core business lines throughout the resolution process; and (iii) improving arrangements to enable appropriate access by firms in resolution to Financial Market Infrastructures ("FMIs") in a manner that is consistent with the need to ensure the safe operation of FMIs.

FDIC Chair Gruenberg focused on three areas of progress since the FDIC developed a framework under Dodd-Frank for the "orderly failure" of systemically important financial institutions ("SIFIs"): (i) the utilization of the living wills to bring about basic structural and operational changes in firms to facilitate orderly failure under bankruptcy; (ii) the ability of the FDIC to manage the orderly failure of SIFIs under the Title II Orderly Liquidation Authority; and (iii) the development of effective cross-border working relationships with key foreign jurisdictions for purposes of resolution.