Resolution plans for large banks will no longer require the institutions to use a bridge bank strategy and a hypothetical failure scenario in the plan, the federal insurer of bank deposits said Friday.
In a release, the Federal Deposit Insurance Corp. (FDIC) said the exemptions are meant to focus the plans on two aspects that the agency says are the most important to it: resolving a large bank through a weekend sale, or operating the bank for a short period of time while rapidly marketing the institution for sale.
According to the FDIC, planning for use of a bridge bank is both “costly and damaging.” The agency pointed to the bank failures of 2023 as examples. In spring of that year, three, large regional banks failed: Silicon Valley Bank (SVB) of Santa Clara, Calif.; Signature Bank of New York, N.Y.; and First Republic Bank of San Francisco, Calif.
“Today’s action is one step in shifting our approach towards maximizing the likelihood of a lower cost and more stabilizing resolution for large regional banks,” said Acting FDIC Board Chairman Travis Hill said in a statement.
In conjunction with the announcement of the exemptions, the FDIC issued an updated set of frequently asked questions (FAQs) describing the exemptions and clarifying certain expectations.
FDIC Modifies Approach to Resolution Planning for Large Banks
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