Bank Resolution Plan
Basel, Switzerland

You may or may not have heard about something called a Resolution Plan. A requirement from Title 1, Section 165(d) of the Dodd-Frank Act, any bank holding company with assets greater than $50 Billion is required to have one submitted to the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). The Plan is specifically fulfilling the requirement in subsection 1 of the section. It has three enumerated requirements and one catch all requirement. The enumerated requirements are: the extent to which the institution is adequately protected from nonbank subsidiary risks; descriptions of the org structure, assets, liabilities and other obligations; and enumerate collateral with which securities are guaranteed. The catch all requirement just states the institution must provide “any other information that the Board of Governors and the Corporation jointly require by rule or order.”

This is a yearly exercise banks must pass in order to keep their bank charters. The idea is that the two major insurers of these institutions receive enough information so that there is enough insurance to cover for any losses by depositors and debtees. Unlike regular insurance plans, the insurance premium won’t go up. That has been taken off of the table. Instead, the institution could be required to increase its ability to cover for the risks.

The risks are measured using Basel 3 standards. Metrics such as CCAR and CVar are used to determine a financial instrument’s ownership and level of risk. So, basically this is an exercise in accounting, primarily, and finance, secondarily.

Despite the title of the section, it is left up to the Fed and the FDIC to figure out if a resolution plan can be derived from the requirements. That is to say, the “Resolution Plan and Credit Exposure Report,” submitted by the institution does not actually contain a plan on how to resolve a dissolution of the institution. It provides information with which the Fed and FDIC can do so.

For banks that are smaller and simpler, FDIC is implementing a plan to perform the exercise itself, taking the burden of performance off of these other institutions that do not face direct risks from collateralized securities.

Credit Unions have their own equivalent to the FDIC called National Credit Union Administration (NCUA). There are some similar rules for credit unions but because of the limited offerings credit unions are allowed to provide, the risks are inherently lower, therefore, the standards are lower.

This short explanation is a good start to understanding the goals DFA Title 1 Section 165 (d)1.

FDIC Chief Reveals Global Capital Index

To illustrate this point, a colleague and I at the FDIC have constructed the Global Capital Index, which shows the tangible capital levels for each of the largest global banking firms and the average levels for different size groups of US banks. – Thomas M. Hoenig, Vice Chairman of FDIC, from A Conversation about Regulatory Relief and the Community Bank

Thomas Hoenig from Gannett
Thomas Hoenig from Gannett

On April 15th Hoenig revealed that the Dodd-Frank Act is a burden that might not be necessary for banks that did not and cannot cause a crash like that of 2008 Financial Crisis. He’s leading FDIC’s effort to propose regulatory relief to banks that:

  1. banks that hold, effectively, zero trading assets or liabilities;
  2. banks that hold no derivative positions other than interest rate swaps and foreign exchange derivatives; and
  3. banks whose total notional value of all their derivatives exposures – including cleared and non-cleared derivatives – is less than $3 billion.

Effectively, community banks are the only institutions that apply. (Credit Unions are not insured by the FDIC and are insured by the National Credit Union Administration (NCUS)).

For the whole text of the Hoenig’s speech outlining the regulatory relief proposal, go to this link.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How Criminals Got Paid And Got Away.


FFIEC Means Federal Financial Institutions Examination Council

The Council is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB), and to make recommendations to promote uniformity in the supervision of financial institutions. In 2006, the State Liaison Committee (SLC) was added to the Council as a voting member. The SLC includes representatives from the Conference of State Bank Supervisors (CSBS), the American Council of State Savings Supervisors (ACSSS), and the National Association of State Credit Union Supervisors (NASCUS). – FFIEC

FFIEC, recently, has been very much focused on information technology and cybercrime resilience.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.

SSFA Means Simplified Supervisory Formula Approach

Financial Institution Letter

Regulatory Capital Rules:
Regulatory Capital Tool for Securitization Exposures


The FDIC has published a simplified supervisory formula approach (SSFA) tool as part of its continued outreach efforts to help institutions implement the revised capital rules. The SSFA is a new method banks may use under the revised capital rules to calculate capital requirements for securitization exposures. It is a formula-based approach designed to apply relatively higher capital requirements to the more risky junior tranches that are the first to absorb losses, and relatively lower requirements to the most senior tranches.

Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised banks and savings associations, including community institutions.

FDIC-Supervised Banks and Savings Associations

Complete Financial Institution Letter:

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.