OCC Comptroller Criticizes FDIC's Bank Resolution Plans

In remarks to the American Bar Association Banking Law Committee, Comptroller of the Currency Jonathan V. Gould argued that the current framework for bank resolution planning is both legally questionable and, as a practical matter, ineffective.

Mr. Gould questioned the legal basis for requiring large insured depository institutions, referred to as "covered insured depository institutions" ("CIDIs"), to submit resolution plans, known as CIDI Plans. He asserted that unlike plans required by the Dodd-Frank Act, "there is no explicit statutory authorization" for CIDI Plans. Mr. Gould claimed that these plans failed to aid in resolving large banks during the 2023 failures of Silicon Valley Bank and First Republic Bank, which resulted in substantial losses to the Deposit Insurance Fund.  

Mr. Gould argued that the FDIC has effectively outsourced its statutory mission as a receiver by requiring banks to plan for their own failures. He warned that these requirements create a "backdoor" for the FDIC to influence business-as-usual activities of banks supervised by other regulators. As to the resolution planning requirements under Section 165(d) of the Dodd-Frank Act for bank holding companies, Mr. Gould criticized the use of "guidance" to effectively impose binding capital and liquidity requirements without proper rulemaking. He characterized these voluminous plans as "compliance exercises" rather than useful tools, observing that failed institutions often did not follow them.

Mr. Gould addressed the growth of a "resolution planning industry" involving consultants and lawyers, arguing that resources are consumed by bureaucracy rather than ensuring safe and sound operations. He suggested specific reforms, including reducing the frequency of Plan submissions to once every five to ten years and eliminating requirements dressed up as guidance. Mr. Gould stated that the FDIC should shift its focus away from unauthorized CIDI Plans and toward improving its own internal readiness to manage receiverships.