President Barack Obama with Sen. Christopher Dodd (D-Conn.), center, and Rep. Barney Frank (D-Mass.), waving, after signing the Dodd-Frank Wall Street Reform and Consumer Protection Act in Washington, July 21, 2010. Despite two rulings that suggest that federal regulators are losing ground against “too big to fail” financial institutions, a wider view shows that Dodd-Frank is mostly intact — and exacting slow, steady results. (Doug Mills / The New York Times)
The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board jointly released a statement last week that showed that five of eight systemically important banks have failed to provide “credible” living wills. “Living wills” or resolution plans are a part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and require big banks to provide a plan that ensures that bankruptcy procedures will be carried out in an orderly fashion as per the US Bankruptcy Code in the event of a financial failure.
The banks that have to adhere to a resolution plan include bank-holding companies with total consolidated assets of $50 billion or more and non-bank financial companies designated by the Financial Stability Oversight Council. Big banks that have not met the standards of Section 165(d) of the Dodd-Frank Act are Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street and Wells Fargo. The banks have been given a deadline of October 1, 2016, failing which they may face “stringent prudential requirements.”
This news of five banks’ failure to produce a credible living will came a week after JPMorgan chief executive Jamie Dimon mentioned in a 50-page letter that JPMorgan held enough capital to absorb “all the losses, assumed by [the Comprehensive Capital Analysis and Review], of the 31 largest banks in the United States.” The Comprehensive Capital…