In what they ascribe to “significant progress made in recent years,” the Federal Deposit Insurance Corporation and the Federal Reserve Board on have announced that the resolution plans of the eight largest and most complex domestic banking organizations did not have "deficiencies,” defined as weaknesses severe enough to trigger a resubmission process that could result in more stringent requirements.

The agencies, in a Dec. 18 announcement, also jointly determined that the plans of four firms have “shortcomings,” which are less-severe weaknesses that require additional work in their next plan: Bank of America, Goldman Sachs, Morgan Stanley, and Wells Fargo. The agencies did not identify specific shortcomings in the resolution plans from Bank of New York Mellon, Citigroup, J.P. Morgan Chase, and State Street.

Resolution plans, required by the Dodd-Frank Act and commonly known as living wills, must describe the company's strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company.

“While significant progress has been made, such as firms modifying their corporate structures so that losses can be borne by investors in an orderly way, there are inherent challenges and uncertainties associated with the resolution of a systemically important financial institution,” a statement by the agencies says. Toward that end, they identified areas in which more work needs to be done by all firms to continue to improve their resolvability: intra-group liquidity; internal loss-absorbing capacity; derivatives; and payment, clearing, and settlement activities.

Moreover, the resolvability of firms will change as markets change and as firms' activities, structures, and risk profiles change. As noted in feedback letters issued to each firm, the agencies expect the firms “to remain vigilant in considering the resolution consequences of their day-to-day management decisions.” For all eight firms, their next resolution plans are required by July 1, 2019.

Details on each individually assessed bank include: Bank of America; Bank of New York Mellon Corporation; Citigroup; Goldman Sachs Group; JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and Wells Fargo & Company.

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