The Federal Deposit Insurance Corporation approved the final rule on January 17 to require the covered insured depository institution (CIDI) with $50 billion assets or more to submit to the regulator periodic contingency plans for resolution in the event the institution faces bankruptcy. The new final rule is a complement to the separate joint rulemaking with the Federal Reserve approved in September last year.
Also dubbed as the “living will” rule, the regulation will require CIDIs to contemplate their mortality and inform the regulator how to resolve their institution in the most cost effective and efficient manner so that their clients will have access to their money within one business day after the institution’s failure. If the failure occurs on a day other than a Friday, clients will have access to their funds in two business days. The plan will also include details on how to maximize the net present value of the return from sale of assets and minimizes the amount of any real loss by the institution’s creditors.
