FDIC Acting Chair Details Overhaul of Bank Resolution Framework

FDIC Acting Chair Travis Hill outlined the agency's plan to strengthen its resolution framework for large banks and incorporate lessons from the 2023 banking turmoil.

In remarks before the Single Resolution Board, the central resolution authority within the European Banking Union, Mr. Hill said the failures of several large institutions in the U.S. demonstrated the limitations of the current resolution framework. He described the two pillars of the framework in the U.S. under the FDIC - Dodd Frank Title I "which envisions a resolution under the U.S. Bankruptcy Code, and is focused on financial stability and mitigating systemic risk," and the insured depository institution ("IDI") Rule, which "envisions a resolution under the Federal Deposit Insurance Act, and is more focused on the operational aspects of executing a resolution."

Mr. Hill focused on the limitations of post-failure bridge banks, which often lose value quickly. He said that the FDIC's new objective is to maximize the likelihood of a weekend sale to preserve franchise value and reduce costs to the Deposit Insurance Fund. He noted that in April, the FDIC issued FAQs revising implementation of the Insured Depository Institution Rule to remove the bridge bank requirement and allow banks to propose alternative resolution strategies. He said these changes focus planning on operational readiness and will be codified in future rulemaking alongside efforts to better align the IDI and Title I resolution frameworks.

Mr. Hill said the FDIC is also modernizing its failed-bank bidding process to make resolutions faster and more competitive. He noted that engagement with potential bidders identified the need for greater transparency, clearer communication, and more flexible documentation to accommodate partnerships with nonbank firms. He stated that the FDIC has updated its least-cost test model to evaluate bids in hours rather than days and launched a Large Bank Ready Reserve program to cross-train staff. He added that the agency is reassessing bidder eligibility standards and piloting a pre-qualification and seller-financing program for nonbank participants beginning in January 2026.

Mr. Hill said the FDIC is also developing faster and lower-cost funding mechanisms for receiverships following the liquidity challenges of 2023. He explained that the agency is working with the Federal Financing Bank to securitize assets from failed institutions more rapidly, reducing reliance on costly Federal Reserve borrowings and strengthening the FDIC's ability to manage large or multiple bank failures.

He added that the FDIC is addressing cross-border and systemic issues, including legal challenges to "bail-in" procedures affecting bonds held by U.S. investors. He said the agency is chairing a new Financial Stability Board task force to harmonize international bail-in execution and continues to advance planning for the resolution of systemically important central counterparties in coordination with the Federal Reserve, SEC, CFTC, and Bank of England.