Federal regulators have brought attention to significant shortcomings in the crisis management plans, also known as “living wills,” of four major U.S. banks, indicating a need for stronger protections against financial instability. The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve revealed that the proposals from Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase did not meet expectations, and have set a deadline of 2025 for necessary improvements.
Major Banks Facing Review: FDIC, Fed Urge Revamped Living Wills
Living wills, which have been mandatory since the 2008 financial crisis and subsequent Dodd-Frank reforms, require banks to outline a structured bankruptcy process without relying on taxpayer-funded bailouts. However, recent assessments by the FDIC and the Fed identified significant weaknesses in the strategies of these financial giants, raising concerns about their ability to effectively address systemic risks.
In particular, Citigroup’s plan was disputed by the two agencies, criticized for lacking credibility and failing to ensure an orderly resolution under the U.S. Bankruptcy Code—a clear indication of the stringent regulatory standards now in place. Despite these challenges, the banks are committed to addressing their deficiencies. Citigroup has recognized the need to enhance its data quality and regulatory frameworks to meet federal standards.
“We acknowledge that we need to expedite our efforts in certain areas, including improving data quality and regulatory processes such as resolution planning,” Citigroup stated in a report published by Marketwatch. “We remain confident that Citi could be resolved without causing systemic harm or requiring taxpayer funds,” the bank added.
As the deadline approaches, these financial institutions are expected to revise their resolution plans, focusing on contingency measures and securing necessary approvals from global authorities to implement their strategies. This directive follows last year’s financial upheavals, which saw the failures of Silvergate Bank, Silicon Valley Bank, First Republic Bank, and Signature Bank. Subsequently, First-Citizens Bank & Trust Company and Republic First Bank also experienced difficulties.
What are your thoughts on the demands from the FDIC and Fed? Feel free to share your opinions and perspectives on this matter in the comment section below.
