[Federal Register Volume 88, Number 180 (Tuesday, September 19, 2023)]
[Notices]
[Pages 64626-64641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19267]



  Federal Register / Vol. 88 , No. 180 / Tuesday, September 19, 2023 / 
Notices  

[[Page 64626]]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1816]

FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-ZA37


Guidance for Resolution Plan Submissions of Domestic Triennial 
Full Filers

AGENCY: Board of Governors of the Federal Reserve System (Board) and 
Federal Deposit Insurance Corporation (FDIC).

ACTION: Proposed guidance; request for comments.

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SUMMARY: The Board and the FDIC (together, the agencies) are inviting 
comments on proposed guidance for the 2024 and subsequent resolution 
plan submissions by certain domestic banking organizations. The 
proposed guidance is meant to assist these firms in developing their 
resolution plans, which are required to be submitted pursuant to the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended 
(the Dodd-Frank Act), and the jointly issued implementing regulation 
(the Rule). The scope of application of the proposed guidance would be 
domestic triennial full filers (specified firms or firms), which are 
domestic Category II and III banking organizations. The proposed 
guidance is based on the agencies' review of the specified firms' 2021 
and prior resolution plan submissions, as well as the agencies' 
experiences resolving several large domestic banking organizations, and 
would describe the agencies' expectations regarding several aspects of 
the specified firms' plans for an orderly resolution under the U.S. 
Bankruptcy Code. The agencies invite public comment on all aspects of 
the proposed guidance.

DATES: Comments must be received by November 30, 2023.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to both agencies. Comments should be directed to:
    Board: You may submit comments, identified by Docket No. OP-1816, 
by any of the following methods:
     Agency Website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Email: [email protected]. Include docket 
number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    In general, all public comments will be made available on the 
Board's website at www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, and will not be modified to remove 
confidential, contact or any identifiable information. Public comments 
may also be viewed electronically or in paper in Room M-4365A, 2001 C 
St. NW, Washington, DC 20551, between 9:00 a.m. and 5:00 p.m. during 
federal business weekdays.
    FDIC: You may submit comments, identified by RIN 3064-ZA37, by any 
of the following methods:
     FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for submitting 
comments on the FDIC's website.
     Email: [email protected]. Include ``RIN 3064-ZA37'' on the 
subject line of the message.
     Mail: James P. Sheesley, Assistant Executive Secretary, 
Attention: Comments-RIN 3064-ZA37, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.
     Hand Delivery/Courier: Comments may be hand delivered to 
the guard station at the rear of the 550 17th Street NW building 
(located on F Street NW) on business days between 7 a.m. and 5 p.m.
     Public Inspection: Comments received, including any 
personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. 
Commenters should submit only information that the commenter wishes to 
make available publicly. The FDIC may review, redact, or refrain from 
posting all or any portion of any comment that it may deem to be 
inappropriate for publication, such as irrelevant or obscene material. 
The FDIC may post only a single representative example of identical or 
substantially identical comments, and in such cases will generally 
identify the number of identical or substantially identical comments 
represented by the posted example. All comments that have been 
redacted, as well as those that have not been posted, that contain 
comments on the merits of this document will be retained in the public 
comment file and will be considered as required under all applicable 
laws. All comments may be accessible under the Freedom of Information 
Act.

FOR FURTHER INFORMATION CONTACT: 
    Board: Catherine Tilford, Deputy Associate Director, (202) 452-
5240, Elizabeth MacDonald, Assistant Director, (202) 475-6316, Tudor 
Rus, Lead Financial Institution Analyst, (202) 475-6359, Division of 
Supervision and Regulation; or Jay Schwarz, Assistant General Counsel, 
(202) 452-2970; Andrew Hartlage, Special Counsel, (202) 452-6483; Sarah 
Podrygula, Senior Attorney, (202) 912-4658; or Brian Kesten, Senior 
Attorney, (202) 843-4079, Legal Division, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551. For users of TTY-TRS, please call 711 from any 
telephone, anywhere in the United States.
    FDIC: Robert C. Connors, Senior Advisor, (202) 898-3834, Division 
of Complex Financial Institution Supervision and Resolution; Celia Van 
Gorder, Senior Counsel, (202) 898-6749; Esther Rabin, Counsel, (202) 
898-6860, [email protected], Legal Division.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Overview of the Proposed Guidance
III. Paperwork Reduction Act
Appendix: Text of the Proposed Guidance

I. Background

A. The Dodd-Frank Act and the Rule

    Section 165(d) of the Dodd-Frank Act \1\ and the Rule \2\ require 
certain financial institutions to report periodically to the Board and 
the FDIC their plans for rapid and orderly resolution under the U.S. 
Bankruptcy Code (the Bankruptcy Code) in the event of material 
financial distress or failure. The Rule divides covered companies into 
three groups of filers: (a) biennial filers; (b) triennial full filers; 
and (c) triennial reduced filers.\3\
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    \1\ 12 U.S.C. 5365(d).
    \2\ 12 CFR parts 243 and 381.
    \3\ 12 CFR 243.4 and 12 CFR 381.4. The terms ``covered company'' 
and ``triennial full filer'' have the meanings given in the Rule, as 
do other, similar terms used throughout this proposal.
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    Triennial full filers under the Rule are required to file a 
resolution plan every three years, alternating between full and 
targeted resolution plans.\4\ The Rule requires each covered company's 
full resolution plan to include, among other things, a strategic 
analysis of the plan's components, a description of the range of 
specific actions the covered company proposes to take in resolution, 
and a description of the covered company's organizational structure, 
material

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entities, and interconnections and interdependencies.\5\ Targeted 
resolution plans are required to include a subset of information 
contained in a full plan.\6\ In addition, the Rule requires that all 
resolution plans consist of two parts: a confidential section that 
contains any confidential supervisory and proprietary information 
submitted to the agencies and a section that the agencies make 
available to the public.\7\ Public sections of resolution plans can be 
found on the agencies' websites.\8\
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    \4\ 12 CFR 243.4(b) and 12 CFR 381.4(b).
    \5\ 12 CFR 243.5 and 12 CFR 381.5.
    \6\ 12 CFR 243.6(b) and 12 CFR 381.6(b).
    \7\ 12 CFR 243.11(c) and 12 CFR 381.11(c).
    \8\ The public sections of resolution plans submitted to the 
agencies are available at www.federalreserve.gov/supervisionreg/resolution-plans.htm and www.fdic.gov/regulations/reform/resplans/.
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B. Recent Developments

    Implementation of the Rule has been an iterative process aimed at 
strengthening the resolution planning capabilities of financial 
institutions subject to the Rule. To assist the development of covered 
companies' resolution planning capabilities and plan submissions, the 
agencies have provided feedback on individual plan submissions, 
promulgated guidance to certain groups of covered companies, and issued 
answers to frequently asked questions. The agencies believe that 
guidance can help focus the efforts of similarly situated covered 
companies to improve their resolution capabilities and clarify the 
agencies' expectations for those filers' future progress. The agencies 
have issued guidance to: (a) U.S. global systemically important banks 
(GSIBs); \9\ which constitute the biennial filer group; and (b) certain 
large foreign banking organizations (FBOs) that are triennial full 
filers.\10\ The agencies have not, however, issued guidance to the 
domestic firms and additional FBOs that make up the remainder of the 
triennial full filers.
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    \9\ Guidance for Sec.  165(d) Resolution Plan Submissions by 
Domestic Covered Companies applicable to the Eight Largest, Complex 
U.S. Banking Organizations, 84 FR 1438 (Feb. 4, 2019) (2019 GSIB 
Guidance).
    \10\ Guidance for Resolution Plan Submissions of Certain 
Foreign-Based Covered Companies, 85 FR 83557 (Dec. 22, 2020) (2020 
FBO Guidance).
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    As the agencies previously indicated,\11\ they believe that it is 
now appropriate to issue guidance to the specified firms. The agencies' 
review of the 2021 targeted resolution plans submitted by domestic 
triennial full filers revealed significant inconsistencies in the 
amount and nature of information they provided on critical 
informational elements required by the Rule. In addition, some 
resolution plans included optimistic assumptions regarding the 
availability of financial resources at the firm at the time of a 
bankruptcy filing as well as the ability of a firm to access financial 
assistance prior to and during resolution. The agencies believe that 
future resolution plans from these firms would benefit from guidance 
regarding critical informational elements required by the Rule as well 
as appropriate assumptions.
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    \11\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20220930a.htm.
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    The proposed guidance also reflects the agencies' recent experience 
with Silicon Valley Bank (SVB), Signature Bank (SB), and First Republic 
Bank (First Republic). While SVB, SB, and First Republic were not 
required to file resolution plans under section 165(d) of the Dodd-
Frank Act and the Rule, the effects of their failures illustrate that 
the failure of a large insured depository institution (IDI) may have 
serious adverse effects on financial stability in the United 
States.\12\ This experience illustrates the importance of issuing 
guidance to domestic triennial full filers (many of which have large 
subsidiary IDIs) to assist their progress in developing plans for an 
orderly resolution in the event of material financial distress or 
failure.
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    \12\ For example, the FDIC--upon the recommendation of two-
thirds of each of the board of directors of the FDIC and the Board, 
as well as a determination by the Secretary of the Treasury, in 
consultation with the President--resolved SVB and SB using the 
systemic risk exception to the statutory requirement to employ the 
least-costly method to resolve a failed IDI. https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm; https://www.fdic.gov/news/press-releases/2023/pr23017.html.
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C. Resolution Plan Strategy

    The specified firms have adopted one of two resolution strategies: 
a single point of entry (SPOE) or multiple point of entry (MPOE) 
strategy. The SPOE and MPOE resolution plan strategies require firms to 
consider different risks and require different types of planning and 
development of capabilities for the execution of the respective 
strategies. The agencies do not prescribe a specific resolution 
strategy for any covered company, nor do the agencies identify a 
preferred strategy. The proposed guidance is not intended to favor one 
strategy or another. Specified filers may continue to submit resolution 
plans using the resolution strategies they believe would be most 
effective in achieving an orderly resolution of their firms, but a 
resolution plan must address the key vulnerabilities and support the 
underlying assumptions required to successfully execute the chosen 
resolution strategy.
    Under an SPOE strategy for a U.S. firm, all material entity 
subsidiaries are recapitalized and provided with liquidity, if needed, 
so that only the top tier bank holding company (BHC) enters resolution. 
The MPOE approach entails multiple U.S. material entities entering 
separate resolution proceedings: any top-tier U.S. material entity 
holding company enters bankruptcy; any U.S. material entity IDI 
subsidiary is resolved separately under the Federal Deposit Insurance 
Act of 1950, as amended (the FDI Act); and other individual U.S. 
material entity subsidiaries separately enter bankruptcy (or another 
appropriate resolution regime) or are wound down. All of the specified 
firms presented an MPOE strategy in their 2021 targeted resolution plan 
submissions.

D. Long-Term Debt Rulemaking

    The agencies, as well as the Office of the Comptroller of the 
Currency, are issuing a proposed rule for comment that would require 
certain large IDI holding companies, U.S. intermediate holding 
companies of FBOs, and certain IDIs, to issue and maintain outstanding 
a minimum amount of long-term debt (LTD), among other proposed 
requirements.\13\ This proposed rule would improve the resolvability of 
these firms, and, in particular, their IDI subsidiaries, in case of 
failure, reducing costs to the Deposit Insurance Fund (DIF), and 
mitigating financial stability and contagion risks by reducing the risk 
of loss to uninsured depositors. LTD issued by the IDI could help 
support resolution strategies by, among other things, recapitalizing a 
bridge depository institution and facilitating its exit from resolution 
as a newly chartered IDI that would have new ownership. The agencies 
expect that a final long-term debt rule could interact with how the 
specified firms plan for resolution under the Rule, and the agencies 
anticipate ensuring that the final resolution plan guidance for 
domestic triennial full filers is consistent with any final long-term 
debt rule. Accordingly, the agencies welcome comments that take the 
proposed long-term debt rulemaking into consideration.\14\
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    \13\ This proposed rulemaking is published elsewhere in this 
Federal Register.
    \14\ The public also may provide comments on the proposed 
guidance that assume that no long-term debt rule is finalized and 
that specified firms remain subject to current capital rules.
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II. Overview of the Proposed Guidance

    The proposed guidance begins with the proposed scope and then is 
organized into several substantive

[[Page 64628]]

topical areas. Each substantive topic is bifurcated, with separate 
guidance for an SPOE resolution strategy and an MPOE resolution 
strategy. As discussed, each resolution strategy poses distinct risks 
and requires its own type of planning and capabilities development for 
executing the strategy. Accordingly, the proposed guidance would 
account for the different challenges posed by each approach.
    The proposed guidance for firms that adopt an SPOE resolution 
strategy is generally based on the 2019 GSIB Guidance, with certain 
modifications that reflect the specific characteristics of and 
potential risks posed by the failure of the specified firms. Successful 
execution of an SPOE strategy relies on the ability to provide 
sufficient capital and liquidity to material entities, a governance 
structure that can identify the onset of financial stress events, and 
the ability to ensure the timely execution of the strategy and to 
maintain continuity of operations throughout resolution.
    The proposed guidance for firms that utilize an MPOE resolution 
strategy incorporates certain aspects of the 2019 GSIB Guidance that 
the agencies believe are applicable to large banking organizations, 
with modifications appropriate to this strategy and institutions with 
the characteristics displayed by the specified firms. For MPOE firms, 
the proposed guidance also omits aspects of the 2019 GSIB Guidance that 
would not apply in an MPOE resolution. The agencies are, however, 
proposing to clarify their expectations for specified firms that 
utilize an MPOE strategy that includes the resolution of a material 
entity that is a U.S. IDI. As discussed elsewhere in this proposal, the 
resolution of a large U.S. IDI under the FDI Act likely would pose 
substantial operational and legal challenges and complexities. 
Accordingly, the agencies believe that the resolution plans of firms 
whose resolution plans contemplate the separate resolution of a 
material entity that is a U.S. IDI would benefit from developing 
capabilities specific to and considering legal requirements regarding 
U.S. IDI resolution.
    The agencies believe that each substantive area of the proposed 
guidance would play a part in helping to ensure that the specified 
firms can be resolved in an orderly manner. The proposed guidance would 
describe the agencies' expectations for each of these areas. In 
addition, the proposed guidance would consolidate items of feedback 
provided to a number of the specified firms in the past, thereby 
providing the public with one source of applicable guidance for the 
specified firms. The proposed guidance is not, however, intended to 
override the obligation of an individual specified firm to respond, in 
its next resolution plan submission, to pending items of individual 
feedback or any shortcomings or deficiencies identified or determined 
by the agencies in that specified firm's prior resolution plan 
submission. The proposed guidance also is not meant to limit specified 
firms' consideration of additional vulnerabilities or obstacles that 
might arise based on a firm's particular structure, operations, or 
resolution strategy, and that should be factored into the specified 
firm's resolution plan submission.
    The proposed guidance concludes with information about the format 
and structure of a plan that applies equally to plans contemplating 
either an SPOE strategy or an MPOE strategy.

A. Scope of Application

    The agencies propose to apply the guidance to all domestic 
triennial full filers. The Board's tailoring framework provides clear, 
predictable scoping based on publicly reported quantitative data. As 
discussed above, the agencies believe that it is appropriate to provide 
resolution planning guidance to all domestic triennial full filers 
given issues identified in these firms' 2021 targeted resolution plans 
and considering lessons learned from recent events.
    The agencies would like the specified firms to submit resolution 
plans that take into consideration the final version of the proposed 
guidance as soon as practicable. However, the agencies understand that 
the specified firms may need time to take into consideration the 
guidance when developing their resolution plans. In light of the timing 
of this proposal, the agencies are considering providing a short 
extension of the next resolution plan submission date for the specified 
firms, with the expectation that these plan submissions would be due 
sooner than one year after the proposed guidance is published in final 
form.
    The agencies seek comment on all aspects of the proposed scope of 
application.
    Question 1: Should the agencies provide more than 6 months for the 
specified firms to take into consideration the expectations in the 
proposed guidance, once finalized? If so, what time period should the 
agencies provide?

B. Capital

    For specified firms with an SPOE resolution strategy, the agencies 
propose guidance substantially similar to the 2019 GSIB Guidance 
regarding capital. The ability to provide sufficient capital to 
material entities without disruption from creditors is important in 
order to ensure that material entities can continue to maintain 
operations as the firm is resolved. The proposal describes expectations 
concerning the appropriate positioning of capital and other loss-
absorbing instruments (e.g., debt that a parent holding company may 
choose to forgive or convert to equity) among the material entities 
within the firm (resolution capital adequacy and positioning, or RCAP). 
The positioning of capital resources within the firm should be 
consistent with any applicable rules requiring prepositioned resources 
in IDIs in the form of long-term debt. The proposal also describes 
expectations regarding a methodology for periodically estimating the 
amount of capital that may be needed to support each material entity 
after the bankruptcy filing (resolution capital execution need, or 
RCEN).
    The agencies are not proposing further expectations concerning 
capital to firms whose plans contemplate an MPOE resolution strategy, 
as an MPOE strategy assumes most material entities do not continue as 
going concerns upon entry into resolution.
    Question 2: In addition to the capital-related resolution plan 
requirements under the Rule, are there other capital-related 
expectations that would reasonably enhance the resolvability of a 
specified firm that utilizes an MPOE strategy in its resolution plan?
    Question 3: Do the capital-related resolution expectations in the 
proposed guidance align with the provisions of the interagency long-
term debt rulemaking proposal? Are there any aspects of the proposed 
guidance that should be revised, or additional expectations added, in 
light of the interagency long-term debt rulemaking proposal?
    Question 4: Is it appropriate for a specified firm utilizing an 
SPOE resolution strategy to assume, during the transition period for 
any final long-term debt rulemaking, that the entire amount of debt 
required under the rule after the transition period has been issued?

C. Liquidity

    For firms that adopt an SPOE resolution strategy, the agencies 
propose guidance substantially similar to the 2019 GSIB Guidance 
regarding liquidity. A firm's ability to reliably estimate and

[[Page 64629]]

meet its liquidity needs prior to, and in, resolution is important to 
the execution of a firm's resolution strategy because it enables the 
firm to respond quickly to demands from stakeholders and 
counterparties, including regulatory authorities in other jurisdictions 
and financial market utilities. Maintaining sufficient and 
appropriately positioned liquidity also allows the subsidiaries to 
continue to operate while the firm is being resolved in accordance with 
the firm's preferred resolution strategy.
    For firms that adopt an MPOE resolution strategy, the agencies 
propose that a firm should have the liquidity capabilities necessary to 
execute its preferred resolution strategy, and its plan should include 
analysis and projections of a range of liquidity needs during 
resolution.
    Question 5: In addition to the liquidity-related resolution plan 
requirements under the Rule and the liquidity-related expectations in 
the proposed guidance, are there other liquidity related expectations 
that would reasonably enhance the resolvability of a specified firm 
that utilizes an MPOE resolution strategy? Are there circumstances 
under which it would be appropriate for a resolution plan that utilizes 
an MPOE strategy to include the movement of liquidity among material 
entities that are in resolution?

D. Governance Mechanisms

    For firms using an SPOE resolution strategy, the agencies propose 
guidance that is substantially similar to the 2019 GSIB Guidance 
regarding governance mechanisms. An adequate governance structure with 
triggers that identify the onset, continuation, and increase of 
financial stress is important to ensure that there is sufficient time 
to allow firms to prepare for resolution, and to ensure the timely 
execution of the resolution strategy. The governance mechanisms section 
proposes expectations that firms have playbooks that describe the board 
and senior management actions necessary to execute the firm's preferred 
strategy. In addition, the proposal describes expectations that these 
firms have triggers that are linked to specific actions outlined in 
these playbooks to ensure the timely escalation of information to 
senior management and the board, to address the successful 
recapitalization of subsidiaries prior to the parent's bankruptcy, and 
to address how the firm would ensure the timely execution of a 
bankruptcy filing. The proposal also describes the expectations that 
firms identify and analyze potential legal challenges to the provision 
of capital and liquidity to subsidiaries that would precede the 
parent's bankruptcy filing under an SPOE resolution strategy, and any 
defenses and mitigants to such challenges.
    The agencies do not propose issuing guidance on this topic to firms 
whose resolution plans contemplate an MPOE resolution strategy, as 
entry of many types of material entities, including IDIs, into 
resolution would be determined by criteria prescribed in statute or 
dependent to some extent on actions taken by regulatory authorities in 
implementing a statute.
    Question 6: Should the agencies consider applying aspects of the 
governance mechanisms guidance developed for an SPOE strategy to 
resolution plans utilizing an MPOE resolution strategy? If, so, what 
aspects should be extended to resolution plans utilizing an MPOE 
resolution strategy? Should the agencies consider developing new 
governance mechanisms guidance specific to resolution plans utilizing 
an MPOE resolution strategy?
    Question 7: If a specified firm chooses to switch from utilizing an 
MPOE resolution strategy to an SPOE resolution strategy in its 
resolution plan, should the agencies provide a transition period for a 
firm to take into consideration the SPOE-specific guidance when 
developing its resolution planning capabilities and its next resolution 
plan? If so, are there aspects that should have a shorter transition 
period, and what period or periods would be appropriate?

E. Operational

    The development and maintenance of operational capabilities is 
important to support and enable execution of a firm's preferred 
resolution strategy, including providing for the continuation of 
identified critical operations and preventing or mitigating adverse 
effects on U.S. financial stability. For firms that utilize an SPOE 
resolution strategy, the agencies propose adopting portions of the 
operational expectations of the 2019 GSIB Guidance and SR letter 14-
1,\15\ with modifications that reflect the specific characteristics and 
complexities of the specified firms. Like the 2019 GSIB Guidance, the 
proposal contains expectations on payment, clearing and settlement 
activities, managing, identifying and valuing collateral, management 
information systems, and shared and outsourced services. For firms that 
utilize an MPOE resolution strategy, the agencies propose adopting 
expectations based on SR letter 14-1 and the 2019 GSIB Guidance that 
are most relevant to an MPOE resolution strategy. For example, the 
proposed expectations regarding payment, clearing and settlement 
activities are those most likely to support resolution in the MPOE 
context.
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    \15\ SR letter 14-1, ``Principles and Practices for Recovery and 
Resolution Preparedness'' (Jan. 24, 2014), available at https://www.federalreserve.gov/supervisionreg/srletters/sr1401.htm.
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F. Legal Entity Rationalization & Separability

    For specified firms that utilize an SPOE resolution strategy, the 
agencies propose substantively adopting the 2019 GSIB Guidance 
regarding legal entity rationalization and separability. It is 
important that firms maintain a structure that facilitates orderly 
resolution. To achieve this, the proposal states that a firm should 
develop and describe in their plans criteria supporting its resolution 
strategy and integrate them into day-to-day decision-making processes. 
The criteria would be expected to consider the best alignment of legal 
entities and business lines and facilitate resolvability as a firm's 
activities, technology, business models, or geographic footprint change 
over time. In addition, the proposed guidance provides that the firm 
should identify discrete operations that could be sold or transferred 
in resolution to provide meaningful optionality for the resolution 
strategy under a range of potential failure scenarios and include this 
information in their plans.
    For firms that utilize an MPOE resolution strategy, the proposed 
guidance would clarify that the firms should have legal entity 
structures that support their preferred resolution strategy and 
describe those structures in their plans. The proposal also provides 
that to the extent a material entity IDI relies upon other affiliates 
during resolution, the firm should discuss its rationale for the legal 
entity structure and associated resolution risks and potential 
mitigants. In addition, the agencies propose that the firms include 
options for the sale, transfer, or disposal of significant assets, 
portfolios, legal entities, or business lines in resolution.
    Question 8: Are there other separability related expectations that 
would reasonably enhance resolution plans that utilize an MPOE 
resolution strategy?

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G. Insured Depository Institution (IDI) Resolution 16
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    \16\ The FDIC has a separate rule requiring resolution plans 
from certain IDIs, 12 CFR 360.10, ``Resolution Plans Required for 
Insured Depository Institutions With $50 Billion or More in Total 
Assets'' (the IDI Rule). The Rule and the IDI Rule each have 
different goals and the expected content of the respective 
resolution plans accordingly also is different. The Rule requires a 
covered company to submit a resolution plan that would allow rapid 
and orderly resolution of the covered company under the Bankruptcy 
Code in the event of material financial distress or failure. The 
purpose of the IDI Rule is to ensure that the FDIC has access to all 
of the material information it needs to efficiently resolve an IDI 
in the event of its failure.
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    Background. When an IDI fails and the FDIC is appointed receiver, 
the FDIC generally must utilize the resolution option for the failed 
IDI that is least costly to the DIF of all possible methods (the least-
cost requirement).\17\ An exception to this requirement is provided 
where a determination is made by the Secretary of the Treasury, in 
consultation with the President and after a written recommendation from 
two-thirds of the FDIC's Board of Directors and two-thirds of the 
Board, that complying with the least-cost requirement would have 
serious adverse effects on economic conditions or financial stability 
and implementing another resolution option would avoid or mitigate such 
adverse effects.\18\ A specified firm should not assume the use of this 
systemic risk exception to the least-cost requirement in its resolution 
plan.
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    \17\ See 12 U.S.C. 1823(c)(4). A deposit payout and liquidation 
of the failed IDI's assets (payout liquidation) is the general 
baseline the FDIC uses in a least-cost requirement determination. 
See 12 U.S.C. 1823(c)(4)(D).
    \18\ See 12 U.S.C. 1823(c)(4)(G).
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    Purchase and Assumption Transaction. The FDIC typically seeks to 
resolve a failed IDI by identifying, before the IDI's failure, one or 
more potential acquirers so that as many of the IDI's assets and 
deposit liabilities as possible can be sold to and assumed by the 
acquirer(s) instead of remaining in the receivership created on the 
failure date.\19\ This transaction form, termed a ``purchase and 
assumption'' or ``P&A'' transaction, has historically been the 
resolution approach that is least costly to the DIF, easiest for the 
FDIC to execute, and least disruptive to the depositors of the failed 
IDI--particularly in the case of transactions involving the assumption 
of all the failed IDI's deposits by the assuming institution (an ``all-
deposit transaction'')--and typically can be completed over the weekend 
following the IDI's closure by its primary regulator but before 
business ordinarily would commence the following Monday (closing 
weekend). The limited size and operational complexity present in most 
small-bank failures has allowed the FDIC to execute a P&A transaction 
with a single acquirer on numerous occasions. Resolving an IDI via a 
P&A transaction over the closing weekend, however, may not be available 
to the FDIC, particularly in failures involving large IDIs. P&A 
transactions require lead time to identify potential buyers and allow 
due diligence on, and an auction of, the failing IDI's assets and 
banking business, also termed its ``franchise.'' Additionally, larger 
banks can pose significant, and potentially systemic, challenges in 
resolutions. These challenges include: a more limited pool of potential 
acquirers as a failed IDI increases in size, which makes a transaction 
in which nearly all assets and liabilities are transferred to one or 
more acquirers increasingly less likely; operational complexities which 
require advance planning on the part of the IDI and the FDIC and the 
development of certain capabilities; potential market concentration and 
antitrust considerations; and potentially the need to maintain the 
continuity of activities conducted in whole or in part in the IDI that 
are critical to U.S. financial stability.
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    \19\ See generally https://www.fdic.gov/resources/resolutions/bank-failures/ for background about the resolution of IDIs by the 
FDIC.
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    For example, the largest failed IDI in U.S. history, Washington 
Mutual Bank, had approximately $307 billion in assets. The DIF did not 
incur a loss associated with this failure in part because it benefitted 
from the FDIC's sale of the institution to an acquirer which had first 
engaged in exhaustive due diligence of the institution during a self-
marketing effort conducted by the IDI prior to its failure. A more 
recent example, that of First Republic Bank, which was also acquired in 
an all-deposit transaction, illustrates that such a transaction can be 
difficult to effectuate. The FDIC invited 21 banks and 21 nonbanks to 
participate in the bidding process and received bids from only four 
bidders.\20\ The least costly bid necessitated a loss-sharing 
agreement, and the transaction is expected to result in a significant 
loss to the DIF. In addition, the FDIC received only one viable bid for 
Silicon Valley Bank during the weekend following its failure, but this 
bid did not satisfy the least-cost test. The FDIC received no viable 
all-deposit bids for Signature Bank at the time it failed.\21\
---------------------------------------------------------------------------

    \20\ See Remarks by Chairman Martin J. Gruenberg on ``Oversight 
of Prudential Regulators'' before the Committee on Financial 
Services, United States House of Representatives available at 
https://www.fdic.gov/news/speeches/2023/spmay1523.html; see also 
Remarks by Chairman Martin J. Gruenberg on ``Recent Bank Failures 
and the Federal Regulatory Response'' before the Committee on 
Banking, Housing, and Urban Affairs, United States Senate available 
at https://www.fdic.gov/news/speeches/2023/spmar2723.html.
    \21\ To protect depositors and preserve the value of the assets 
and operations of each of SVB and SB following failure--which can 
improve recoveries for creditors and the DIF--the FDIC ultimately 
transferred all the deposits and substantially all of the assets of 
each failed bank to a full-service bridge depository institution 
(BDI) operated by the FDIC while the FDIC marketed the institutions 
to potential bidders.
---------------------------------------------------------------------------

    If no P&A transaction that meets the least-cost requirement can be 
accomplished at the time an IDI fails, the FDIC must pursue an 
alternative resolution strategy. The primary alternative resolution 
strategies for a failed IDI are: (1) a payout liquidation; or (2) 
utilization of a BDI. The FDIC conducts payout liquidations by paying 
insured deposits in cash or transferring the insured deposits to an 
existing institution or a new institution organized by the FDIC to 
assume the insured deposits (generally, a Deposit Insurance National 
Bank or DINB). In payout liquidations, the FDIC as receiver retains 
substantially all of the failed IDI's assets for later sale, and the 
franchise value of the failed IDI is lost.
    Bridge Depository Institution. If the FDIC determines that 
temporarily continuing the operations of the failed IDI is less costly 
than a payout liquidation, it may organize a BDI to purchase certain 
assets and assume certain liabilities of the failed IDI.\22\ Generally, 
a BDI would continue the failed bank's operations according to business 
plans and budgets approved by the FDIC and carried out by FDIC-selected 
leadership of the BDI. In addition to providing depositors access to 
deposits and banking services, the BDI would conduct any necessary 
restructuring required to rationalize the failed IDI's operations and 
maximize value to be achieved in an eventual sale. Subject to the 
least-cost requirement, the initial structure of the BDI may be based 
upon an all-deposit transaction, a transaction in which the BDI assumes 
only the insured deposits, or a transaction in which the BDI assumes 
all insured deposits and a portion of the uninsured deposits. Once a 
BDI is established, the FDIC seeks to stabilize the institution while 
simultaneously planning for the eventual termination of

[[Page 64631]]

the BDI. In exiting and terminating a BDI, the FDIC may merge or 
consolidate the BDI with another depository institution, issue and sell 
a majority of the capital stock in the BDI, or effect the assumption of 
the deposits or acquisition of the assets of the BDI.\23\ However, many 
of the same factors that challenge the feasibility of a traditional P&A 
transaction also complicate planning for the termination of a BDI 
through a sale of the whole entity or its constituent parts. The 
proposed guidance would clarify the expectations for a firm adopting an 
MPOE resolution strategy with a material entity IDI to demonstrate how 
the IDI can be resolved in a manner that is consistent with the overall 
objective of the Plan to substantially mitigate the risk that the 
failure of the specified firm would have serious adverse effects on 
financial stability in the United States, while also adhering to the 
requirements of the FDI Act regarding failed bank resolutions without 
relying on the assumption that a systemic risk exception will be 
available. These expectations would not be applicable to firms adopting 
an SPOE resolution strategy because U.S. IDI subsidiaries of such firms 
would not be expected to enter resolution.
---------------------------------------------------------------------------

    \22\ Before a BDI may be chartered, the chartering conditions 
set forth in 12 U.S.C. 1821(n)(2) must also be satisfied. For 
purposes of this guidance, if the Plan provides appropriate analysis 
concerning the feasibility of the BDI strategy, there is no 
expectation that the resolution plan also demonstrate separately 
that the conditions for chartering the BDI have been satisfied.
    \23\ 12 U.S.C. 1821(n)(10).
---------------------------------------------------------------------------

    Question 9: Should the guidance indicate that if a specified filer 
proposes a strategy using a BDI to resolve its subsidiary material 
entity IDI, the plan should include a detailed description of the 
balance sheet components that would transfer to the BDI and of the 
process the specified filer believes is most appropriate to value the 
transferred components, inclusive of pro forma balance sheet and income 
statements?
    Question 10: Should the guidance indicate that if a specified filer 
proposes a strategy using a BDI to resolve its subsidiary material 
entity IDI, the plan should describe and quantify:
     The amounts to be realized through liquidating the failed 
IDI's assets and any expected premiums associated with selling the 
institution's deposits;
     Any franchise value bid premiums expected to be realized 
through maintaining certain ongoing business operations in a BDI; and
     A comparison of the loss to the DIF realized from a payout 
liquidation and from utilizing a BDI so as to support the conclusion 
that a BDI would result in the least costly resolution?

H. Derivatives and Trading Activities

    The agencies request comment on whether to provide guidance on 
derivatives and trading activities for specified firms that utilize an 
SPOE resolution strategy. Although the specified firms have limited 
derivatives and trading operations compared to the U.S. GSIBs, it 
remains important that their derivatives and trading activities can be 
stabilized and de-risked during resolution without causing significant 
disruption to U.S. markets. If the agencies were to provide guidance on 
derivatives and trading activities, the agencies likely would adopt 
aspects of the 2019 GSIB Guidance. The agencies do not anticipate 
providing derivatives and trading activities guidance to specified 
firms that utilize an MPOE resolution strategy.
    In the 2019 GSIB Guidance, the agencies specified the particular 
covered companies to which the derivatives and trading activities 
guidance was directed. The agencies recognize that covered companies 
may move in and out of the triennial full filer category and want to 
ensure that the proposal would remain applicable and relevant 
regardless of which covered companies are considered triennial full 
filers at any moment in time.
    Question 11: Should the agencies provide resolution plan guidance 
on derivatives and trading activities for specified firms that utilize 
an SPOE resolution strategy? If so, what should be the content of that 
guidance, what methodology should the agencies use to determine the 
scope of specified firms to be subject to that guidance, and would it 
be appropriate to adopt all or some of the expectations contained in 
the 2019 GSIB Guidance? What other derivatives and trading activities-
related expectations would reasonably enhance resolution plans that 
utilize an SPOE resolution strategy?
    Question 12: Should the agencies provide resolution plan guidance 
on derivatives and trading activities for specified firms that utilize 
an MPOE resolution strategy? If so, what should be the content of that 
guidance and what methodology should the agencies use to determine the 
scope of specified firms to be subject to that guidance?

I. Format and Structure of Plans; Assumptions

    This section states the agencies' preferred presentation regarding 
the format, assumptions, and structure of resolution plans. Plans 
should contain an executive summary, a narrative of the firm's 
resolution strategy, relevant technical appendices, and a public 
section as detailed in the Rule. The proposed format, structure, and 
assumptions are generally similar to those in the 2019 GSIB Guidance, 
except that the proposed guidance reflects the expectation that a firm 
should support any assumptions that it will have access to the Discount 
Window and/or other borrowings during the period immediately prior to 
entering bankruptcy and clarifies expectations around such assumptions 
and that firms should not assume the use of the systemic risk exception 
to the least-cost test in the event of a failure of an IDI requiring 
resolution under the FDI Act. In addition, for firms that adopt an MPOE 
resolution strategy, the proposal includes the expectation that a plan 
should demonstrate and describe how the failure event(s) results in 
material financial distress, including consideration of the likelihood 
of the diminution the firm's liquidity and capital levels prior to 
bankruptcy.
    Question 13: Certain firms' plans rely on lending facilities, 
including the Discount Window or other government-sponsored facilities 
in the period immediately preceding a bankruptcy filing. Should the 
guidance include additional clarifications related to assumptions 
regarding these lending facilities? Should the guidance contain 
clarifications relating to other assumptions discussed in the guidance 
or additional appropriate assumptions?
    Question 14: The agencies included in the 2019 GSIB Guidance and 
2020 FBO Guidance answers that had been previously published to 
frequently asked questions (FAQs) the agencies received from the 
guidance recipients about the topics in resolution plan guidance (e.g., 
capital, liquidity, etc.); however, there was no FAQ process for the 
specified firms given the limited number of common questions received. 
Should the agencies include in resolution guidance for the specified 
firms answers to FAQs similar to those contained in the 2019 GSIB 
Guidance and 2020 FBO Guidance? If so, which answers to FAQs should the 
final guidance contain, and what changes, if any, should the agencies 
make to the answers to FAQs in the 2019 GSIB Guidance and 2020 FBO 
Guidance?

III. Paperwork Reduction Act

    Certain provisions of the proposed guidance contain ``collections 
of information'' within the meaning of the Paperwork Reduction Act of 
1995 (PRA) (44 U.S.C. 3501-3521). In accordance with the requirements 
of the PRA, the agencies may not conduct or sponsor, and a respondent 
is not required to respond to, an information collection unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number. The agencies reviewed the proposed guidance and 
determined that it would revise the

[[Page 64632]]

reporting revisions that have been previously approved by OMB under the 
Board's OMB control number 7100-0346 (Reporting Requirements Associated 
with Regulation QQ; FR QQ) and the FDIC's control number 3064-0210 
(Reporting Requirements Associate with Resolution Planning). The Board 
has reviewed the proposed guidance under the authority delegated to the 
Board by OMB.
    Comments are invited on the following:
    (A) Whether the collections of information are necessary for the 
proper performance of the agencies' functions, including whether the 
information has practical utility;
    (B) the accuracy of the agencies' estimates of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    (C) ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (D) ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (E) estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments on aspects of this document that may affect reporting, 
recordkeeping, or disclosure requirements and burden estimates should 
be sent to the addresses listed in the ADDRESSES section of the 
Supplementary Information. A copy of the comments may also be submitted 
to the OMB desk officer for the Agencies: By mail to U.S. Office of 
Management and Budget, 725 17th Street NW, #10235, Washington, DC 20503 
or by facsimile to (202) 395-5806, Attention, Federal Banking Agency 
Desk Officer.

Proposed Revisions, With Extension, of the Following Information 
Collections Board

    Collection title: Reporting Requirements Associated with Regulation 
QQ.
    Collection identifier: FR QQ.
    OMB control number: 7100-0346.
    Frequency: Triennial, Biennial, and on occasion.
    Respondents: Bank holding companies (including any foreign bank or 
company that is, or is treated as, a bank holding company under section 
8(a) of the International Banking Act of 1978 and meets the relevant 
total consolidated assets threshold) with total consolidated assets of 
$250 billion or more, bank holding companies with $100 billion or more 
in total consolidated assets with certain characteristics, and nonbank 
financial firms designated by the Financial Stability Oversight Council 
for supervision by the Board.

FDIC

    Collection title: Reporting Requirements Associated with Resolution 
Planning.
    OMB control number: 3064-0210.
    Current Actions: The proposed guidance would apply to all triennial 
full filers, but expectations would differ based on whether a firm 
adopts an SPOE or an MPOE resolution strategy and whether it is foreign 
or domestic. The proposed guidance is intended to clarify the agencies' 
expectations concerning the resolution plans required pursuant to the 
Rule. The document does not have the force and effect of law. Rather, 
it describes the agencies' expectations and priorities regarding these 
the resolution plans of triennial full filers and the agencies' general 
views regarding specific areas where additional detail should be 
provided and where certain capabilities or optionality should be 
developed and maintained to demonstrate that each firm has considered 
fully, and is able to mitigate, obstacles to the successful 
implementation of its preferred resolution strategy.
    The proposed guidance for triennial full filers using an SPOE 
strategy is based on the 2019 GSIB guidance (for domestic firms) and 
the 2020 FBO guidance (for foreign firms). It would clarify the 
agencies' expectations around capital, liquidity, governance 
mechanisms, and operations. The proposed guidance also would clarify 
expectations concerning management information systems capabilities and 
the identification of discrete separability options appropriate to the 
resolution strategy. Additionally, if finalized, the foreign banking 
organizations that adopt an SPOE resolution strategy should address how 
their U.S. resolution plan aligns with their group resolution plan.
    The proposed guidance for triennial full filers using an MPOE 
resolution strategy addresses similar topics but reflects the risks of 
and capabilities needed for an MPOE resolution. The proposed guidance 
explains the agencies' expectations around liquidity and operational 
capabilities, and legal entity rationalization. The proposed guidance 
also provides clarified expectations related to the separate resolution 
of a U.S. IDI and to identification of discrete separability options. 
Foreign banking organizations that adopt an MPOE resolution strategy 
would have expectations related to governance mechanisms; the role of 
branches; and the group resolution plan.
    The proposed guidance does not specify expectations around 
derivatives and trading activities.
    Historically, the Board and the FDIC have split the respondents for 
purposes of PRA clearances. As such, the agencies will split the change 
in burden as well. As a result of this split and the proposed 
revisions, there is a proposed net increase in the overall estimated 
burden hours of 13,386 hours for the Board and 17,610 hours for the 
FDIC. Therefore, the total Board estimated burden for its entire 
information collection would be 216,853 hours and the total FDIC 
estimate burden for its entire information collection would be 211,300 
hours.
    The following table presents only the change in the estimated 
burden hours, as amended if the guidance were finalized, broken out by 
agency. The table does not include a discussion of the remaining 
estimated burden hours, which remain unchanged.\24\ As shown in the 
table, the Triennial Full filing types would be estimated more 
granularly according to SPOE and MPOE resolution strategies.
---------------------------------------------------------------------------

    \24\ In addition to the proposed revisions to the estimations 
for Triennial Full filings, the agencies have revised the estimation 
for Biennial Full filings from 40,115 hours per response to 39,550 
hours per response to align the burden estimation methodology with 
what was used for Triennial Full filings under the proposed 
guidance. Specifically, the agencies removed a component for a 
biennial full filer's analysis of its critical operations as part of 
its submission of targeted and full resolution plans, because this 
critical operations analysis is integrated in the preparation of 
such plans.

[[Page 64633]]



            Table 1--Burden Hour Estimates Under Current Regulations and Under the Proposed Guidance
----------------------------------------------------------------------------------------------------------------
                                                     Estimated       Estimated       Estimated       Estimated
                      FR QQ                          number of        annual       average hours   annual burden
                                                    respondents      frequency     per response        hours
----------------------------------------------------------------------------------------------------------------
                                                  Board Burdens
----------------------------------------------------------------------------------------------------------------
Current
    Triennial Full:
        Complex Foreign.........................               1               1           9,777           9,777
        Foreign and Domestic....................               7               1           4,667          32,669
                                                 ---------------------------------------------------------------
            Current Total.......................  ..............  ..............  ..............          42,446
Proposed
    Triennial Full:
        FBO SPOE *..............................               2               1          11,848          23,696
        FBO MPOE................................               3               1           5,939          17,817
        Domestic MPOE...........................               3  ..............           5,513          16,539
                                                 ---------------------------------------------------------------
            Proposed Total......................  ..............  ..............  ..............          58,052
----------------------------------------------------------------------------------------------------------------
                                                  FDIC Burdens
----------------------------------------------------------------------------------------------------------------
Current
    Triennial Full:
        Complex Foreign.........................               0               1           9,777               0
        Foreign and Domestic....................               7               1           4,667          32,669
                                                 ---------------------------------------------------------------
            Current Total.......................  ..............  ..............  ..............          32,669
Proposed
    Triennial Full:
        FBO SPOE *..............................               2               1          11,848          23,696
        FBO MPOE................................               3               1           5,939          17,817
        Domestic MPOE...........................               2               1           5,513          11,026
                                                 ---------------------------------------------------------------
            Proposed Total......................  ..............  ..............  ..............          52,539
----------------------------------------------------------------------------------------------------------------
* There are currently no domestic triennial full filers utilizing a SPOE strategy. Estimated hours per response
  for a domestic SPOE triennial full filer would be 11,235 hours.

Appendix: Text of the Proposed Guidance

Guidance for Resolution Plan Submissions of Domestic Triennial Full 
Filers

I. Introduction

    Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5365(d)) requires certain financial 
companies to report periodically to the Board of Governors of the 
Federal Reserve System (the Board) and the Federal Deposit Insurance 
Corporation (the FDIC) (together, the agencies) their plans for 
rapid and orderly resolution in the event of material financial 
distress or failure. On November 1, 2011, the agencies promulgated a 
joint rule implementing the provisions of Section 165(d).\1\ 
Subsequently, in November 2019, the agencies finalized amendments to 
the joint rule addressing amendments to the Dodd-Frank Act made by 
the Economic Growth, Regulatory Relief, and Consumer Protection Act 
and improving certain aspects of the joint rule based on the 
agencies' experience implementing the joint rule since its 
adoption.\2\ Financial companies meeting criteria set out in the 
Rule must file a resolution plan (Plan) according to the schedule 
specified in the Rule.
---------------------------------------------------------------------------

    \1\ Resolution Plans Required, 76 FR 67323 (Nov. 1, 2011).
    \2\ Resolution Plans Required, 84 FR 59194 (Nov. 1, 2019). The 
amendments became effective December 31, 2019. ``Rule'' means the 
joint rule as amended in 2019. Terms not defined herein have the 
meanings set forth in the Rule.
---------------------------------------------------------------------------

    This document is intended to provide guidance to certain 
domestic financial companies required to submit Plans to assist 
their further development of a Plan for their 2024 and subsequent 
Plan submissions. Specifically, the guidance applies to any domestic 
covered company that is a triennial full filer under the Rule 
(specified firms).\3\ The Plan for a specified firm would address 
the subsidiaries and operations that are domiciled in the United 
States as well as the foreign subsidiaries, offices, and operations 
of the covered company.
---------------------------------------------------------------------------

    \3\ See 12 CFR 243.4(b)(1) and 12 CFR 381.4(b)(1).
---------------------------------------------------------------------------

    In general, this document is organized around a number of key 
challenges in resolution (capital; liquidity; governance mechanisms; 
operational; legal entity rationalization and separability; and 
insured depository institution resolution, if applicable) that apply 
across resolution plans, depending on their strategy. Additional 
challenges or obstacles may arise based on a firm's particular 
structure, operations, or resolution strategy. Each firm is expected 
to satisfactorily address these vulnerabilities in its Plan. In 
addition, each topic of this guidance is separated into expectations 
for a specified firm that utilizes a single point of entry (SPOE) 
resolution strategy for its Plan and expectations for a specified 
firm that utilizes a multiple point of entry (MPOE) resolution 
strategy for its Plan.
    Under the Rule, the agencies will review a Plan to determine if 
it satisfactorily addresses key potential challenges, including 
those specified below. If the agencies jointly decide that an aspect 
of a Plan presents a weakness that individually or in conjunction 
with other aspects could undermine the feasibility of the Plan, the 
agencies may determine jointly that the Plan is not credible or 
would not facilitate an orderly resolution under the U.S. Bankruptcy 
Code.

II. Capital

SPOE

    The firm should have the capital capabilities necessary to 
execute its resolution strategy, including the modeling and 
estimation process described below.
    Resolution Capital Adequacy and Positioning (RCAP). In order to 
help ensure that a firm's material entities \4\ could operate while 
the parent company is in bankruptcy, the firm should have an 
adequate amount of

[[Page 64634]]

loss-absorbing capacity to recapitalize those material entities. 
Thus, a firm should have outstanding a minimum amount of loss-
absorbing capacity, including long-term debt, to help ensure that 
the firm has adequate capacity to meet that need at a consolidated 
level (external LAC).
---------------------------------------------------------------------------

    \4\ The terms ``material entities,'' ``identified critical 
operations,'' and ``core business lines'' have the same meaning as 
in the Rule.
---------------------------------------------------------------------------

    A firm's external LAC should be complemented by appropriate 
positioning of loss-absorbing capacity within the firm (i.e., 
internal LAC), consistent with any applicable rules requiring 
prepositioned resources at IDIs in the form of long-term debt. After 
adhering to any requirements related to prepositioning long-term 
debt at IDIs, the positioning of a firm's remaining resources should 
balance the certainty associated with pre-positioning resources 
directly at material entities with the flexibility provided by 
holding recapitalization resources at the parent (contributable 
resources) to meet unanticipated losses at material entities. That 
balance should take account of both pre-positioning at material 
entities and holding resources at the parent, and the obstacles 
associated with each. With respect to material entities that are not 
U.S. IDIs subject to pre-positioned long-term debt requirements, the 
firm should not rely exclusively on either full pre-positioning or 
parent contributable resources to recapitalize such entities. The 
Plan should describe the positioning of resources within the firm, 
along with analysis supporting such positioning.
    Finally, to the extent that pre-positioned resources at a 
material entity are in the form of intercompany debt and there are 
one or more entities between that material entity and the parent, 
the firm should structure the instruments so as to ensure that the 
material entity can be recapitalized.
    Resolution Capital Execution Need (RCEN). To support the 
execution of the firm's resolution strategy, material entities need 
to be recapitalized to a level that allows them to operate or be 
wound down in an orderly manner following the parent company's 
bankruptcy filing. The firm should have a methodology for 
periodically estimating the amount of capital that may be needed to 
support each material entity after the bankruptcy filing (RCEN). The 
firm's positioning of resources should be able to support the RCEN 
estimates. In addition, the RCEN estimates should be incorporated 
into the firm's governance framework to ensure that the parent 
company files for bankruptcy at a time that enables execution of the 
preferred strategy.
    The firm's RCEN methodology should use conservative forecasts 
for losses and risk-weighted assets and incorporate estimates of 
potential additional capital needs through the resolution period,\5\ 
consistent with the firm's resolution strategy. The RCEN methodology 
should be calibrated such that recapitalized material entities will 
have sufficient capital to maintain market confidence as required 
under the preferred resolution strategy. Capital levels should meet 
or exceed all applicable regulatory capital requirements for ``well-
capitalized'' status and meet estimated additional capital needs 
throughout resolution. Material entities that are not subject to 
capital requirements may be considered sufficiently recapitalized 
when they have achieved capital levels typically required to obtain 
an investment-grade credit rating or, if the entity is not rated, an 
equivalent level of financial soundness. Finally, the methodology 
should be independently reviewed, consistent with the firm's 
corporate governance processes and controls for the use of models 
and methodologies.
---------------------------------------------------------------------------

    \5\ The resolution period begins immediately after the parent 
company bankruptcy filing and extends through the completion of the 
preferred resolution strategy.
---------------------------------------------------------------------------

MPOE

    The agencies do not propose issuing guidance on this topic to 
firms whose Plans contemplate a MPOE resolution strategy.

III. Liquidity

SPOE

    The firm should have the liquidity capabilities necessary to 
execute its preferred resolution strategy. For resolution purposes, 
these capabilities should include having an appropriate model and 
process for estimating and maintaining sufficient liquidity at or 
readily available to material entities and a methodology for 
estimating the liquidity needed to successfully execute the 
resolution strategy, as described below.
    Resolution Liquidity Adequacy and Positioning (RLAP). With 
respect to RLAP, the firm should be able to measure the stand-alone 
liquidity position of each material entity (including material 
entities that are non-U.S. branches)--i.e., the high-quality liquid 
assets (HQLA) at the material entity less net outflows to third 
parties and affiliates--and ensure that liquidity is readily 
available to meet any deficits. The RLAP model should cover a period 
of at least 30 days and reflect the idiosyncratic liquidity profile 
and risk of the firm. The model should balance the reduction in 
frictions associated with holding liquidity directly at material 
entities with the flexibility provided by holding HQLA at the parent 
available to meet unanticipated outflows at material entities. Thus, 
the firm should not rely exclusively on either full pre-positioning 
or an expected contribution of liquid resources from the parent. The 
model \6\ should ensure that the parent holding company holds 
sufficient HQLA (inclusive of its deposits at the U.S. branch of the 
lead bank subsidiary) to cover the sum of all stand-alone material 
entity net liquidity deficits. The stand-alone net liquidity 
position of each material entity (HQLA less net outflows) should be 
measured using the firm's internal liquidity stress test assumptions 
and should treat inter-affiliate exposures in the same manner as 
third-party exposures. For example, an overnight unsecured exposure 
to an affiliate should be assumed to mature. Finally, the firm 
should not assume that a net liquidity surplus at one material 
entity could be moved to meet net liquidity deficits at other 
material entities or to augment parent resources.
---------------------------------------------------------------------------

    \6\ ``Model'' refers to the set of calculations estimating the 
net liquidity surplus/deficit at each legal entity and for the firm 
in aggregate based on assumptions regarding available liquidity, 
e.g., HQLA, and third-party and interaffiliate net outflows.
---------------------------------------------------------------------------

    Additionally, the RLAP methodology should take into account: (A) 
the daily contractual mismatches between inflows and outflows; (B) 
the daily flows from movement of cash and collateral for all inter-
affiliate transactions; and (C) the daily stressed liquidity flows 
and trapped liquidity as a result of actions taken by clients, 
counterparties, key FMUs, and foreign supervisors, among others.
    Resolution Liquidity Execution Need (RLEN). The firm should have 
a methodology for estimating the liquidity needed after the parent's 
bankruptcy filing to stabilize the surviving material entities and 
to allow those entities to operate post-filing. The RLEN estimate 
should be incorporated into the firm's governance framework to 
ensure that the firm files for bankruptcy in a timely way, i.e., 
prior to the firm's HQLA falling below the RLEN estimate.
    The firm's RLEN methodology should:
    (A) Estimate the minimum operating liquidity (MOL) needed at 
each material entity to ensure those entities could continue to 
operate post-parent's bankruptcy filing and/or to support a wind-
down strategy;
    (B) Provide daily cash flow forecasts by material entity to 
support estimation of peak funding needs to stabilize each entity 
under resolution;
    (C) Provide a comprehensive breakout of all inter-affiliate 
transactions and arrangements that could impact the MOL or peak 
funding needs estimates; and
    (D) Estimate the minimum amount of liquidity required at each 
material entity to meet the MOL and peak needs noted above, which 
would inform the firm's board(s) of directors of when they need to 
take resolution-related actions.
    The MOL estimates should capture material entities' intraday 
liquidity requirements, operating expenses, working capital needs, 
and inter-affiliate funding frictions to ensure that material 
entities could operate without disruption during the resolution. The 
peak funding needs estimates should be projected for each material 
entity and cover the length of time the firm expects it would take 
to stabilize that material entity. Inter-affiliate funding frictions 
should be taken into account in the estimation process.
    The firm's forecasts of MOL and peak funding needs should ensure 
that material entities could operate post-filing consistent with 
regulatory requirements, market expectations, and the firm's post-
failure strategy. These forecasts should inform the RLEN estimate, 
i.e., the minimum amount of HQLA required to facilitate the 
execution of the firm's strategy. The RLEN estimate should be tied 
to the firm's governance mechanisms and be incorporated into the 
playbooks as discussed below to assist the board of directors in 
taking timely resolution-related actions.

MPOE

    The firm should have the liquidity capabilities necessary to 
execute its preferred resolution strategy. A Plan with an MPOE

[[Page 64635]]

strategy should include analysis and projections of a range of 
liquidity needs during resolution, including intraday; reflect 
likely failure and resolution scenarios; and consider the guidance 
on assumptions provided in Section VIII, Format and Structure of 
Plans; Assumptions.

IV. Governance Mechanisms

SPOE

    Playbooks and Triggers. A firm should identify the governance 
mechanisms that would ensure execution of required board actions at 
the appropriate time (as anticipated under the firm's preferred 
strategy) and include pre-action triggers and existing agreements 
for such actions. Governance playbooks should detail the board and 
senior management actions necessary to facilitate the firm's 
preferred strategy and to mitigate vulnerabilities, and should 
incorporate the triggers identified below. The governance playbooks 
should also include a discussion of: (A) the firm's proposed 
communications strategy, both internal and external; \7\ (B) the 
boards of directors' fiduciary responsibilities and how planned 
actions would be consistent with such responsibilities applicable at 
the time actions are expected to be taken; (C) potential conflicts 
of interest, including interlocking boards of directors; and (D) any 
employee retention policy. All responsible parties and timeframes 
for action should be identified. Governance playbooks should be 
updated periodically for all entities whose boards of directors 
would need to act in advance of the commencement of resolution 
proceedings under the firm's preferred strategy.
---------------------------------------------------------------------------

    \7\ External communications include those with U.S. and foreign 
authorities and other external stakeholders, such as large 
depositors and shareholders.
---------------------------------------------------------------------------

    The firm should demonstrate that key actions will be taken at 
the appropriate time in order to mitigate financial, operational, 
legal, and regulatory vulnerabilities. To ensure that these actions 
will occur, the firm should establish clearly identified triggers 
linked to specific actions for:
    (A) The escalation of information to senior management and the 
board(s) to potentially take the corresponding actions at each stage 
of distress leading eventually to the decision to file for 
bankruptcy;
    (B) Successful recapitalization of subsidiaries prior to the 
parent's filing for bankruptcy and funding of such entities during 
the parent company's bankruptcy to the extent the preferred strategy 
relies on such actions or support; and
    (C) The timely execution of a bankruptcy filing and related pre-
filing actions.\8\
---------------------------------------------------------------------------

    \8\ Key pre-filing actions include the preparation of any 
emergency motion required to be decided on the first day of the 
firm's bankruptcy.
---------------------------------------------------------------------------

    These triggers should be based, at a minimum, on capital, 
liquidity, and market metrics, and should incorporate the firm's 
methodologies for forecasting the liquidity and capital needed to 
operate as required by the preferred strategy following a parent 
company's bankruptcy filing. Additionally, the triggers and related 
actions should be specific.
    Triggers linked to firm actions as contemplated by the firm's 
preferred strategy should identify when and under what conditions 
the firm, including the parent company and its material entities, 
would transition from business-as-usual conditions to a stress 
period and from a stress period to the recapitalization/resolution 
periods. Corresponding escalation procedures, actions, and 
timeframes should be constructed so that breach of the triggers will 
allow prerequisite actions to be completed. For example, breach of 
the triggers needs to occur early enough to ensure that resources 
are available and can be downstreamed, if anticipated by the firm's 
strategy, and with adequate time for the preparation of the 
bankruptcy petition and first-day motions, necessary stakeholder 
communications, and requisite board actions. Triggers identifying 
the onset of stress and recapitalization/resolution periods, and the 
associated escalation procedures and actions, should be discussed 
directly in the governance playbooks.
    Pre-Bankruptcy Parent Support. The Plan should include a 
detailed legal analysis of the potential state law and bankruptcy 
law challenges and mitigants to planned provision of capital and 
liquidity to the subsidiaries prior to the parent's bankruptcy 
filing (Support). Specifically, the analysis should identify 
potential legal obstacles and explain how the firm would seek to 
ensure that Support would be provided as planned. Legal obstacles 
include claims of fraudulent transfer, preference, breach of 
fiduciary duty, and any other applicable legal theory identified by 
the firm. The analysis also should include related claims that may 
prevent or delay an effective recapitalization, such as equitable 
claims to enjoin the transfer (e.g., imposition of a constructive 
trust by the court). The analysis should apply the actions 
contemplated in the Plan regarding each element of the claim, the 
anticipated timing for commencement and resolution of the claims, 
and the extent to which adjudication of such claim could affect 
execution of the firm's preferred resolution strategy.
    The analysis should include mitigants to the potential 
challenges to the planned Support. The Plan should identify the 
mitigant(s) to such challenges that the firm considers most 
effective. In identifying appropriate mitigants, the firm should 
consider the effectiveness of a contractually binding mechanism 
(CBM), pre-positioning of financial resources in material entities, 
and the creation of an intermediate holding company. Moreover, if 
the Plan includes a CBM, the firm should consider whether it is 
appropriate that the CBM should have the following:
    (A) Clearly defined triggers;
    (B) Triggers that are synchronized to the firm's liquidity and 
capital methodologies;
    (C) Perfected security interests in specified collateral 
sufficient to fully secure all Support obligations on a continuous 
basis (including mechanisms for adjusting the amount of collateral 
as the value of obligations under the agreement or collateral assets 
fluctuates); and
    (D) Liquidated damages provisions or other features designed to 
make the CBM more enforceable.
    The firm also should consider related actions or agreements that 
may enhance the effectiveness of a CBM. A copy of any agreement and 
documents referenced therein (e.g., evidence of security interest 
perfection) should be included in the Plan.
    The governance playbooks included in the Plan should incorporate 
any developments from the firm's analysis of potential legal 
challenges regarding the Support, including any Support approach(es) 
the firm has implemented. If the firm analyzed and addressed an 
issue noted in this section in a prior plan submission, the Plan may 
reproduce that analysis and arguments and should build upon it to at 
least the extent described above. In preparing the analysis of these 
issues, firms may consult with law firms and other experts on these 
matters. The agencies do not object to appropriate collaboration 
between firms, including through trade organizations and with the 
academic community, to develop analysis of common legal challenges 
and available mitigants.

MPOE

    The agencies do not propose issuing guidance on this topic to 
firms whose Plans utilize a MPOE resolution strategy.

V. Operational

SPOE

    Payment, Clearing, and Settlement Activities Framework. 
Maintaining continuity of payment, clearing, and settlement (PCS) 
services is critical for the orderly resolution of firms that are 
either users or providers,\9\ or both, of PCS services. A firm 
should demonstrate capabilities for continued access to PCS services 
essential to an orderly resolution through a framework to support 
such access by:
---------------------------------------------------------------------------

    \9\ A firm is a user of PCS services if it accesses PCS services 
through an agent bank or it uses the services of a financial market 
utility (FMU) through its membership in that FMU or through an agent 
bank. A firm is a provider of PCS services if it provides PCS 
services to clients as an agent bank or it provides clients with 
access to an FMU or agent bank through the firm's membership in or 
relationship with that service provider. A firm is also a provider 
if it provides clients with PCS services through the firm's own 
operations (e.g., payment services or custody services).
---------------------------------------------------------------------------

     Identifying clients,\10\ FMUs, and agent banks as key 
from the firm's perspective, using both quantitative (volume and 
value) \11\ and qualitative criteria;
---------------------------------------------------------------------------

    \10\ For purposes of this section, a client is an individual or 
entity, including affiliates of the firm, to whom the firm provides 
PCS services and any related credit or liquidity offered in 
connection with those services.
    \11\ In identifying entities as key, examples of quantitative 
criteria may include: for a client, transaction volume/value, market 
value of exposures, assets under custody, usage of PCS services, and 
any extension of related intraday credit or liquidity; for an FMU, 
the aggregate volumes and values of all transactions processed 
through such FMU; and for an agent bank, assets under custody, the 
value of cash and securities settled, and extensions of intraday 
credit.
---------------------------------------------------------------------------

     Mapping material entities, identified critical 
operations, core business lines, and key clients to both key FMUs 
and key agent banks; and

[[Page 64636]]

     Developing a playbook for each key FMU and key agent 
bank reflecting the firm's role(s) as a user and/or provider of PCS 
services.
    The framework should address direct relationships (e.g., a 
firm's direct membership in an FMU, a firm's provision of clients 
with PCS services through its own operations, or a firm's 
contractual relationship with an agent bank) and indirect 
relationships (e.g., a firm's provision of clients with access to 
the relevant FMU or agent bank through the firm's membership in or 
relationship with that FMU or agent bank).
    Playbooks for Continued Access to PCS Services. The firm is 
expected to provide a playbook for each key FMU and key agent bank 
that addresses considerations that would assist the firm and its key 
clients in maintaining continued access to PCS services in the 
period leading up to and including the firm's resolution. Each 
playbook should provide analysis of the financial and operational 
impact to the firm's material entities and key clients due to 
adverse actions that may be taken by a key FMU or a key agent bank 
and contingency actions that may be taken by the firm. Each playbook 
also should discuss any possible alternative arrangements that would 
allow continued access to PCS services for the firm's material 
entities, identified critical operations and core business lines, 
and key clients, while the firm is in resolution. The firm is not 
expected to incorporate a scenario in which it loses key FMU or key 
agent bank access into its preferred resolution strategy or its RLEN 
and RCEN estimates. The firm should continue to engage with key 
FMUs, key agent banks, and key clients, and playbooks should reflect 
any feedback received during such ongoing outreach.
    Content Related to Users of PCS Services. Individual key FMU and 
key agent bank playbooks should include:
     Description of the firm's relationship as a user with 
the key FMU or key agent bank and the identification and mapping of 
PCS services to material entities, identified critical operations, 
and core business lines that use those PCS services;
     Discussion of the potential range of adverse actions 
that may be taken by that key FMU or key agent bank when the firm is 
in resolution,\12\ the operational and financial impact of such 
actions on each material entity, and contingency arrangements that 
may be initiated by the firm in response to potential adverse 
actions by the key FMU or key agent bank; and
---------------------------------------------------------------------------

    \12\ Examples of potential adverse actions may include increased 
collateral and margin requirements and enhanced reporting and 
monitoring.
---------------------------------------------------------------------------

     Discussion of PCS-related liquidity sources and uses in 
business-as-usual (BAU), in stress, and in the resolution period, 
presented by currency type (with U.S. dollar equivalent) and by 
material entity.
    [cir] PCS Liquidity Sources: These may include the amounts of 
intraday extensions of credit, liquidity buffer, inflows from FMU 
participants, and key client prefunded amounts in BAU, in stress, 
and in the resolution period. The playbook also should describe 
intraday credit arrangements (e.g., facilities of the key FMU, key 
agent bank, or a central bank) and any similar custodial 
arrangements that allow ready access to a firm's funds for PCS-
related key FMU and key agent bank obligations (including margin 
requirements) in various currencies, including placements of firm 
liquidity at central banks, key FMUs, and key agent banks.
    [cir] PCS Liquidity Uses: These may include firm and key client 
margin and prefunding and intraday extensions of credit, including 
incremental amounts required during resolution.
    [cir] Intraday Liquidity Inflows and Outflows: The playbook 
should describe the firm's ability to control intraday liquidity 
inflows and outflows and to identify and prioritize time-specific 
payments. The playbook also should describe any account features 
that might restrict the firm's ready access to its liquidity 
sources.
    Content Related to Providers of PCS Services.\13\ Individual key 
FMU and key agent bank playbooks should include:
---------------------------------------------------------------------------

    \13\ Where a firm is a provider of PCS services through the 
firm's own operations, the firm is expected to produce a playbook 
for the material entities that provide those services, addressing 
each of the items described under ``Content Related to Providers of 
PCS Services,'' which include contingency arrangements to permit the 
firm's key clients to maintain continued access to PCS services.
---------------------------------------------------------------------------

     Identification and mapping of PCS services to the 
material entities, identified critical operations, and core business 
lines that provide those PCS services, and a description of the 
scale and the way in which each provides PCS services;
     Identification and mapping of PCS services to key 
clients to whom the firm provides such PCS services and any related 
credit or liquidity offered in connection with such services;
     Discussion of the potential range of firm contingency 
arrangements available to minimize disruption to the provision of 
PCS services to its key clients, including the viability of 
transferring key client activity and any related assets, as well as 
any alternative arrangements that would allow the firm's key clients 
continued access to PCS services if the firm could no longer provide 
such access (e.g., due to the firm's loss of key FMU or key agent 
bank access), and the financial and operational impacts of such 
arrangements from the firm's perspective;
     Descriptions of the range of contingency actions that 
the firm may take concerning its provision of intraday credit to key 
clients, including analysis quantifying the potential liquidity the 
firm could generate by taking such actions in stress and in the 
resolution period, such as: (i) requiring key clients to designate 
or appropriately pre-position liquidity, including through 
prefunding of settlement activity, for PCS-related key FMU and key 
agent bank obligations at specific material entities of the firm 
(e.g., direct members of key FMUs) or any similar custodial 
arrangements that allow ready access to key clients' funds for such 
obligations in various currencies; (ii) delaying or restricting key 
client PCS activity; and (iii) restricting, imposing conditions upon 
(e.g., requiring collateral), or eliminating the provision of 
intraday credit or liquidity to key clients; and
     Descriptions of how the firm will communicate to its 
key clients the potential impacts of implementation of any 
identified contingency arrangements or alternatives, including a 
description of the firm's methodology for determining whether any 
additional communication should be provided to some or all key 
clients (e.g., due to the key client's BAU usage of that access and/
or related intraday credit or liquidity), and the expected timing 
and form of such communication.
    Capabilities. The firm is expected to have and describe 
capabilities to understand, for each material entity, the 
obligations and exposures associated with PCS activities, including 
contractual obligations and commitments. The firm should be able to:
     Track the following items by: (i) material entity; and 
(ii) with respect to customers, counterparties, and agents and 
service providers, location and jurisdiction:
    [cir] PCS activities, with each activity mapped to the relevant 
material entities, identified critical operations, and core business 
lines; \14\
---------------------------------------------------------------------------

    \14\ 12 CFR 243.5(e)(12) and 12 CFR 381.5(e)(12).
---------------------------------------------------------------------------

    [cir] Customers and counterparties for PCS activities, including 
values and volumes of various transaction types, as well as used and 
unused capacity for all lines of credit; \15\
---------------------------------------------------------------------------

    \15\ Id.
---------------------------------------------------------------------------

    [cir] Exposures to and volumes transacted with FMUs, nostro 
agents, and custodians; and \16\
---------------------------------------------------------------------------

    \16\ 12 CFR 252.34(h).
---------------------------------------------------------------------------

    [cir] Services provided and service level agreements, as 
applicable, for other current agents and service providers (internal 
and external).\17\
---------------------------------------------------------------------------

    \17\ 12 CFR 243.5(f)(l)(i) and 12 CFR 381.5(f)(1)(i).
---------------------------------------------------------------------------

     Assess the potential effects of adverse actions by 
FMUs, nostro agents, custodians, and other agents and service 
providers, including suspension or termination of membership or 
services, on the firm's operations and customers and counterparties 
of those operations; \18\
---------------------------------------------------------------------------

    \18\ 12 CFR 252.34(f).
---------------------------------------------------------------------------

     Develop contingency arrangements in the event of such 
adverse actions; \19\ and
---------------------------------------------------------------------------

    \19\ Id.
---------------------------------------------------------------------------

     Quantify the liquidity needs and operational capacity 
required to meet all PCS obligations, including any change in demand 
for and sources of liquidity needed to meet such obligations.
    Managing, Identifying, and Valuing Collateral. The firm is 
expected to have and describe its capabilities to manage, identify 
and value the collateral that it receives from and posts to external 
parties and affiliates. Specifically, the firm should:
     Be able to query and provide aggregate statistics for 
all qualified financial contracts concerning cross-default clauses, 
downgrade triggers, and other key collateral-related contract 
terms--not just those terms that may be impacted in an adverse 
economic environment--across contract types, business lines, legal 
entities, and jurisdictions;

[[Page 64637]]

     Be able to track both collateral sources (i.e., 
counterparties that have pledged collateral) and uses (i.e., 
counterparties to whom collateral has been pledged) at the CUSIP 
level on at least a t+1 basis;
     Have robust risk measurements for cross-entity and 
cross-contract netting, including consideration of where collateral 
is held and pledged;
     Be able to identify CUSIP and asset class level 
information on collateral pledged to specific central counterparties 
by legal entity on at least a t+1 basis;
     Be able to track and report on inter-branch collateral 
pledged and received on at least a t+1 basis and have clear policies 
explaining the rationale for such inter-branch pledges, including 
any regulatory considerations; and
     Have a comprehensive collateral management policy that 
outlines how the firm as a whole approaches collateral and serves as 
a single source for governance.\20\
---------------------------------------------------------------------------

    \20\ The policy may reference subsidiary or related policies 
already in place, as implementation may differ based on business 
line or other factors.
---------------------------------------------------------------------------

    Management Information Systems. The firm should have the 
management information systems (MIS) capabilities to readily produce 
data on a legal entity basis and have controls to ensure data 
integrity and reliability. The firm also should perform a detailed 
analysis of the specific types of financial and risk data that would 
be required to execute the preferred resolution strategy and how 
frequently the firm would need to produce the information, with the 
appropriate level of granularity. The firm should have the 
capabilities to produce the following types of information in a 
timely manner and describe these capabilities in the Plan:
     Financial statements for each material entity (at least 
monthly);
     External and inter-affiliate credit exposures, both on- 
and off-balance sheet, by type of exposure, counterparty, maturity, 
and gross payable and receivable;
     Gross and net risk positions with internal and external 
counterparties;
     Guarantees, cross holdings, financial commitments and 
other transactions between material entities;
     Data to facilitate third-party valuation of assets and 
businesses, including risk metrics;
     Key third-party contracts, including the provider, 
provider's location, service(s) provided, legal entities that are a 
party to or a beneficiary of the contract, and key contractual 
rights (for example, termination and change in control clauses);
     Legal agreement information, including parties to the 
agreement and key terms and interdependencies (for example, change 
in control, collateralization, governing law, termination events, 
guarantees, and cross-default provisions);
     Service level agreements between affiliates, including 
the service(s) provided, the legal entity providing the service, 
legal entities receiving the service, and any termination/
transferability provisions;
     Licenses and memberships to all exchanges and value 
transfer networks, including FMUs;
     Key management and support personnel, including dual-
hatted employees, and any associated retention agreements;
     Agreements and other legal documents related to 
property, including facilities, technology systems, software, and 
intellectual property rights. The information should include 
ownership, physical location, where the property is managed and 
names of legal entities and lines of business that the property 
supports; and
     Updated legal records for domestic and foreign 
entities, including entity type and purpose (for example, holding 
company, bank, broker dealer, and service entity), jurisdiction(s), 
ownership, and regulator(s).
    Shared and Outsourced Services. The firm should maintain a fully 
actionable implementation plan to ensure the continuity of shared 
services that support identified critical operations or core 
business lines and robust arrangements to support the continuity of 
shared and outsourced services, including, without limitation 
appropriate plans to retain key personnel relevant to the execution 
of the firm's strategy. For example, specified firms should evaluate 
internal and external dependencies and develop documented strategies 
and contingency arrangements for the continuity or replacement of 
the shared and outsourced services that are necessary to maintain 
identified critical operations or core business lines. Examples may 
include personnel, facilities, systems, data warehouses, and 
intellectual property. Specified firms also should maintain current 
cost estimates for implementing such strategies and contingency 
arrangements.
    The firm should (A) maintain an identification of all shared 
services that support identified critical operations or core 
business lines; \21\ (B) maintain a mapping of how/where these 
services support its core business lines and identified critical 
operations; (C) incorporate such mapping into legal entity 
rationalization criteria and implementation efforts; and (D) 
mitigate identified continuity risks through establishment of 
service-level agreements (SLAs) for all shared services that support 
identified critical operations or core business lines.
---------------------------------------------------------------------------

    \21\ This should be interpreted to include data access and 
intellectual property rights.
---------------------------------------------------------------------------

    SLAs should fully describe the services provided, reflect 
pricing considerations on an arm's-length basis where appropriate, 
and incorporate appropriate terms and conditions to (A) prevent 
automatic termination upon certain resolution-related events and (B) 
achieve continued provision of such services during resolution. The 
firm should also store SLAs in a central repository or repositories 
in a searchable format, develop and document contingency strategies 
and arrangements for replacement of critical shared services, and 
complete re-alignment or restructuring of activities within its 
corporate structure. In addition, the firm should ensure the 
financial resilience of internal shared service providers by 
maintaining working capital for six months (or through the period of 
stabilization as required in the firm's preferred strategy) in such 
entities sufficient to cover contract costs, consistent with the 
preferred resolution strategy.
    The firm should identify all critical service providers and 
outsourced services that support identified critical operations or 
core business lines and identify any that could not be promptly 
substituted. The firm should (A) evaluate the agreements governing 
these services to determine whether there are any that could be 
terminated despite continued performance upon the parent's 
bankruptcy filing, and (B) update contracts to incorporate 
appropriate terms and conditions to prevent automatic termination 
upon commencement of any resolution proceeding and facilitate 
continued provision of such services. Relying on entities projected 
to survive during resolution to avoid contract termination is 
insufficient to ensure continuity. In the Plan, the firm should 
document the amendment of any such agreements governing these 
services.
    Qualified Financial Contracts. The Plan should reflect how the 
early termination of qualified financial contracts triggered by the 
parent company's bankruptcy filing could impact the resolution of 
the firm's operations, including potential termination of any 
contracts that are not subject to statutory, contractual or 
regulatory stays of direct default or cross-default rights. A Plan 
should explain and support the firm's strategy for addressing the 
potential disruptive effects in resolution of early termination 
provisions and cross-default rights in existing qualified financial 
contracts at both the parent company and material entity 
subsidiaries. This discussion should address, to the extent relevant 
for the firm, qualified financial contracts that include limitations 
of standard contractual direct default and cross default rights by 
agreement of the parties.

MPOE

    Payment, Clearing and Settlement (PCS) Capabilities. Firms are 
expected to have and describe capabilities to understand, for each 
material entity, its obligations and exposures associated with PCS 
activities, including contractual obligations and commitments. For 
example, firms should be able to:
     As users of PCS services:
    [cir] Track the following items by: (i) material entity; and 
(ii) with respect to customers, counterparties, and agents and 
service providers, location and jurisdiction:
    [ssquf] PCS activities, with each activity mapped to the 
relevant material entities, identified critical operations, and core 
business lines;
    [ssquf] Customers and counterparties for PCS activities, 
including values and volumes of various transaction types, as well 
as used and unused capacity for all lines of credit;
    [ssquf] Exposures to and volumes transacted with FMUs, nostro 
agents, and custodians; and
    [ssquf] Services provided and service level agreements, as 
applicable, for other current agents and service providers (internal 
and external).
    [cir] Assess the potential effects of adverse actions by FMUs, 
nostro agents, custodians, and other agents and service providers,

[[Page 64638]]

including suspension or termination of membership or services, on 
the firm and its customers and counterparties;
    [cir] Develop contingency arrangements in the event of such 
adverse actions; and
    [cir] Quantify the liquidity needs and operational capacity 
required to meet all PCS obligations, including intraday 
requirements.
     As providers of PCS services:
    [cir] Identify their PCS clients and the services they provide 
to these clients, including volumes and values of transactions;
    [cir] Quantify and explain time-sensitive payments; and
    [cir] Quantify and explain intraday credit provided.
    Managing, Identifying and Valuing Collateral. The firm should 
have appropriate capabilities related to managing, identifying, and 
valuing the collateral that it receives from and posts to external 
parties and its affiliates, including tracking collateral received, 
pledged, and available at the CUSIP level and measuring exposures.
    Management Information Systems. The firm should have the 
management information systems (MIS) capabilities to readily produce 
data on a legal entity basis and have controls to ensure data 
integrity and reliability. The firm also should perform a detailed 
analysis of the specific types of financial and risk data that would 
be required to execute the preferred resolution strategy. The firm 
should have the capabilities to produce the following types of 
information, as appropriate for its resolution strategy, in a timely 
manner and describe these capabilities in the Plan:
     Financial statements for each material entity (at least 
monthly);
     External and inter-affiliate credit exposures, both on- 
and off-balance sheet, by type of exposure, counterparty, maturity, 
and gross payable and receivable;
     Gross and net risk positions with internal and external 
counterparties;
     Guarantees, cross holdings, financial commitments and 
other transactions between material entities;
     Data to facilitate third-party valuation of assets and 
businesses, including risk metrics;
     Key third-party contracts, including the provider, 
provider's location, service(s) provided, legal entities that are a 
party to or a beneficiary of the contract, and key contractual 
rights (for example, termination and change in control clauses);
     Legal agreement information, including parties to the 
agreement and key terms and interdependencies (for example, change 
in control, collateralization, governing law, termination events, 
guarantees, and cross-default provisions);
     Service level agreements between affiliates, including 
the service(s) provided, the legal entity providing the service, 
legal entities receiving the service, and any termination/
transferability provisions;
     Licenses and memberships to all exchanges and value 
transfer networks, including FMUs;
     Key management and support personnel, including dual-
hatted employees, and any associated retention agreements;
     Agreements and other legal documents related to 
property, including facilities, technology systems, software, and 
intellectual property rights. The information should include 
ownership, physical location, where the property is managed and 
names of legal entities and lines of business that the property 
supports; and
     Updated legal records for domestic and foreign 
entities, including entity type and purpose (for example, holding 
company, bank, broker dealer, and service entity), jurisdiction(s), 
ownership, and regulator(s).
    Shared and Outsourced Services. The firm should maintain robust 
arrangements to support the continuity of shared and outsourced 
services that support any identified critical operations or are 
material to the execution of the resolution strategy, including 
appropriate plans to retain key personnel relevant to the execution 
of the firm's strategy. For example, specified firms should evaluate 
internal and external dependencies and develop documented strategies 
and contingency arrangements for the continuity or replacement of 
the shared and outsourced services that are necessary to maintain 
identified critical operations or are material to the execution of 
the resolution strategy. Examples may include personnel, facilities, 
systems, data warehouses, and intellectual property. Specified firms 
also should maintain current cost estimates for implementing such 
strategies and contingency arrangements.
    The firm should: (A) maintain an identification of all shared 
services that support identified critical operations or are material 
to the execution of the resolution strategy; and (B) mitigate 
identified continuity risks through establishment of SLAs for all 
shared services supporting identified critical operations or are 
material to the execution of the resolution strategy. SLAs should 
fully describe the services provided and incorporate appropriate 
terms and conditions to: (A) prevent automatic termination upon 
certain resolution-related events; and (B) achieve continued 
provision of such services during resolution.
    The firm should identify all critical service providers and 
outsourced services that support identified critical operations or 
are material to the execution of the resolution strategy. Any of 
these services that cannot be promptly substituted should be 
identified in a firm's Plan. The firm should: (A) evaluate the 
agreements governing these services to determine whether there are 
any that could be terminated despite continued performance upon the 
parent's bankruptcy filing; and (B) update contracts to incorporate 
appropriate terms and conditions to prevent automatic termination 
and facilitate continued provision of such services through 
resolution. Relying on entities projected to survive during 
resolution to avoid contract termination is insufficient to ensure 
continuity. In the Plan, the firm should document the amendment of 
any such agreements governing these services.

VI. Legal Entity Rationalization & Separability

Legal Entity Rationalization

SPOE

    Legal Entity Rationalization Criteria (LER Criteria). A firm 
should develop and implement legal entity rationalization criteria 
that support the firm's preferred resolution strategy and minimize 
risk to U.S. financial stability in the event of the firm's failure. 
LER Criteria should consider the best alignment of legal entities 
and business lines to improve the firm's resolvability under 
different market conditions. LER Criteria should govern the firm's 
corporate structure and arrangements between legal entities in a way 
that facilitates the firm's resolvability as its activities, 
technology, business models, or geographic footprint change over 
time. Specifically, application of the criteria should:
    (A) Facilitate the recapitalization and liquidity support of 
material entities, as required by the firm's resolution strategy. 
Such criteria should include clean lines of ownership, minimal use 
of multiple intermediate holding companies, and clean funding 
pathways between the parent and material operating entities;
    (B) Facilitate the sale, transfer, or wind-down of certain 
discrete operations within a timeframe that would meaningfully 
increase the likelihood of an orderly resolution of the firm, 
including provisions for the continuity of associated services and 
mitigation of financial, operational, and legal challenges to 
separation and disposition;
    (C) Adequately protect the subsidiary insured depository 
institutions from risks arising from the activities of any nonbank 
subsidiaries of the firm (other than those that are subsidiaries of 
an insured depository institution); and Minimize complexity that 
could impede an orderly resolution and minimize redundant and 
dormant entities.
    These criteria should be built into the firm's ongoing process 
for creating, maintaining, and optimizing its structure and 
operations on a continuous basis.

MPOE

    Legal Entity Structure. A firm should maintain a legal entity 
structure that supports the firm's preferred resolution strategy and 
minimizes risk to U.S. financial stability in the event of the 
firm's failure. The firm should consider factors such as business 
activities; banking group structures and booking models and 
practices; and potential sales, transfers, or wind-downs during 
resolution. The Plan should describe how the firm's legal entity 
structure aligns core business lines and any identified critical 
operations with the firm's material entities to support the firm's 
resolution strategy. To the extent a material entity IDI relies upon 
an affiliate that is not the IDI's subsidiary during resolution, 
including for the provision of shared services, the firm should 
discuss its rationale for the legal entity structure and associated 
resolution risks and potential mitigants.
    The firm's corporate structure and arrangements among legal 
entities should be considered and maintained in a way that 
facilitates the firm's resolvability as its activities, technology, 
business models, or geographic footprint change over time.

Separability

SPOE

    Separability. The firm should identify discrete operations that 
could be sold or

[[Page 64639]]

transferred in resolution, with the objective of providing 
optionality in resolution under different market conditions.
    A firm's separability options should be actionable, and 
impediments to their execution and projected mitigation strategies 
should be identified in advance. Relevant impediments could include, 
for example, legal and regulatory preconditions, interconnectivity 
among the firm's operations, tax consequences, market conditions, 
and other considerations. To be actionable, divestiture options 
should be executable within a reasonable period of time.
    In developing their options, firms should also consider 
potential consequences for U.S. financial stability of executing 
each option, taking into consideration impacts on counterparties, 
creditors, clients, depositors, and markets for specific assets.
    Firms should have a comprehensive understanding of the entire 
organization and certain baseline capabilities. That understanding 
should include the operational and financial linkages among a firm's 
business lines, material entities, and identified critical 
operations. Additionally, information systems should be robust 
enough to produce the required data and information needed to 
execute separability options.
    The level of detail and analysis should vary based on the firm's 
risk profile and scope of operations. A separability analysis should 
address the following elements:
     Divestiture Options: The options in the Plan should be 
actionable and comprehensive, and should include:
    [cir] Options contemplating the sale, transfer, or disposal of 
significant assets, portfolios, legal entities or business lines.
    [cir] Options that may permanently change the firm's structure 
or business strategy.
     Execution Plan: For each divestiture option listed, the 
separability analysis should describe the steps necessary to execute 
the option. Among other considerations, the description should 
include:
    [cir] The identity and position of the senior management 
officials of the company who are primarily responsible for 
overseeing execution of the separability option.
    [cir] An estimated time frame for implementation.
    [cir] A description of any impediments to execution of the 
option and mitigation strategies to address those impediments.
    [cir] A description of the assumptions underpinning the option.
    [cir] A plan describing the methods and forms of communication 
with internal, external, and regulatory stakeholders.
     Impact Assessment: The separability analysis should 
holistically consider and describe the expected impact of individual 
divestiture options. This should include the following for each 
divestiture option:
    [cir] A financial impact assessment that describes the impact of 
executing the option on the firm's capital, liquidity, and balance 
sheet.
    [cir] A business impact assessment that describes the effect of 
executing the option on business lines and material entities, 
including reputational impact.
    [cir] An identified critical operation impact assessment that 
describes how execution of the option may affect the provision of 
any identified critical operation.
    [cir] An operational impact assessment and contingency plan that 
explains how operations can be maintained if the option is 
implemented; such an analysis should address internal operations 
(for example, shared services, IT requirements, and human resources) 
and access to market infrastructure (for example, clearing and 
settlement facilities and payment systems).
    Further, the firm should have, and be able to demonstrate, the 
capability to populate in a timely manner a data room with 
information pertinent to a potential divestiture of the business 
(including, but not limited to, carve-out financial statements, 
valuation analysis, and a legal risk assessment).
    Within the Plan, the firm should demonstrate how the firm's LER 
Criteria and implementation efforts support meeting the 
separability-related guidance above. The Plan should also provide 
the separability analysis noted above. Finally, the Plan should 
include a description of the firm's legal entity rationalization 
governance process.

MPOE

    A Plan should include options for the sale, transfer, or 
disposal of significant assets, portfolios, legal entities, or 
business lines in resolution that may be executed in a reasonable 
period of time. For each option, supporting analysis should include: 
an execution plan that includes an estimated time frame for 
implementation, a description of any impediments to execution of the 
option, and mitigation strategies to address those impediments; a 
description of the assumptions underpinning the option; a financial 
impact assessment that describes the impact of executing the option; 
and an identified critical operation impact assessment that 
describes how execution of the option may affect the provision of 
any identified critical operation. Information systems should be 
robust enough to produce the required data and information needed to 
execute the options.

VII. Insured Depository Institution (IDI) Resolution

MPOE

    If the Plan includes a strategy that contemplates the separate 
resolution of a U.S. IDI that is a material entity, the Plan should 
demonstrate how this could be achieved in a manner that is 
consistent with the overall objective of the Plan to substantially 
mitigate the risk that the failure of the specified firm would have 
serious adverse effects on financial stability in the United States 
while also complying with the statutory and regulatory requirements 
governing IDI resolution. More specifically,
     If the strategy is other than payout liquidation (e.g., 
a bridge depository institution (BDI)), the Plan should provide 
information supporting the feasibility of this strategy. Under the 
FDI Act, the FDIC generally would complete a least-cost analysis 
when resolving a failed bank at the time of entry into resolution. A 
Plan may use an approach such as one of the following in lieu of 
performing a complete least-cost analysis to demonstrate the 
feasibility of the proposed strategy.\22\
---------------------------------------------------------------------------

    \22\ See 12 U.S.C. 1823(c)(4)(A)(ii) and 1821(n)(2)(A).
---------------------------------------------------------------------------

    [cir] A Plan may demonstrate that a strategy involving an all-
deposit BDI would be permissible under the least-cost test of the 
FDI Act by presenting an analysis which shows that the strategy 
results in no loss to the Deposit Insurance Fund (DIF) by 
demonstrating that the incremental estimated cost to the DIF by 
having the BDI assume all uninsured deposits is offset by the 
preservation of franchise value connected to the uninsured deposits 
after accounting for the amount of any loss-absorbing debt 
instruments and other liabilities subordinate to the depositor class 
that would be left behind in the receivership.
    [cir] A Plan may demonstrate the feasibility of a strategy 
involving a BDI that assumes all insured deposits and a portion of 
uninsured deposits by providing an advance dividend to uninsured 
depositors for a portion of their deposit claim, as well as the 
basis for that dividend, and pursuant to which a loss to the DIF 
occurs, by presenting an analysis comparing the cost of the proposed 
strategy to the cost of payout liquidation and demonstrating:
    [ssquf] The incremental estimated cost to the DIF created by the 
BDI's assumption of the portion of uninsured deposits assumed is 
offset by the franchise value preserved by maintaining the assumed 
uninsured deposits, after accounting for the amount of any long-term 
debt and other liabilities subordinate to the depositor class that 
would be left behind in the receivership; \23\ and
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    \23\ See 12 U.S.C. 1821(d)(11).
---------------------------------------------------------------------------

    [ssquf] The loss to the DIF under the proposed strategy 
(including the amounts paid by the DIF for more favorable treatment, 
relative to a payout liquidation, of a portion of uninsured 
deposits) is less than or equal to the loss to the DIF that would be 
incurred through a payout liquidation of the IDI; and
    [cir] The deposit payout process for any uninsured deposits that 
remain in the receivership may be executed in a manner that 
substantially mitigates the risk of serious adverse effects on U.S. 
financial stability.
     If the Plan's strategy envisions a payout liquidation 
for the IDI, with or without use of a Deposit Insurance National 
Bank or a paying agent, the Plan should demonstrate how the deposit 
payout and asset liquidation process would be executed in a manner 
that substantially mitigates the risk of serious adverse effects on 
U.S. financial stability.
     In all cases, the Plan should show that implementation 
of the resolution, including the impact on depositors whose accounts 
are not transferred in whole or in part to the BDI, would not create 
the risk of serious adverse effects on U.S. financial stability.
    Regardless of the IDI resolution strategy chosen, the Plan 
should assume asset valuations consistent with the severely adverse 
stress economic scenario and the IDI's condition as a failed 
institution, as referenced in ``Guidance regarding Assumptions,'' 
Items 4 and 7 below. The Plan, in light of such conditions, should 
explain the process for determining asset or

[[Page 64640]]

business franchise values, including providing detailed supporting 
descriptions such as references to historical pricing, benchmarks, 
or recognized models; evidence supporting client attrition rates; 
and other relevant information.
    With respect to exit from IDI resolution proceedings, a Plan 
could support the feasibility of an asset liquidation or BDI exit 
strategy by, for example, describing an actionable process, based on 
historical precedent or otherwise supportable projections, that 
winds down certain businesses, includes the sale of assets and 
deposits to multiple acquirers, or culminates in a capital markets 
transaction, such as an initial public offering or a private 
placement of securities.

VIII. Format and Structure of Plans; Assumptions

SPOE & MPOE

Format of Plan

    Executive Summary. The Plan should contain an executive summary 
consistent with the Rule, which must include, among other things, a 
concise description of the key elements of the firm's strategy for 
an orderly resolution. In addition, the executive summary should 
include a discussion of the firm's assessment of any impediments to 
the firm's resolution strategy and its execution, as well as the 
steps it has taken to address any identified impediments.
    Narrative. The Plan should include a strategic analysis 
consistent with the Rule. This analysis should take the form of a 
concise narrative that enhances the readability and understanding of 
the firm's discussion of its strategy for an orderly resolution in 
bankruptcy or other applicable insolvency regimes (Narrative).
    Appendices. The Plan should contain a sufficient level of detail 
and analysis to substantiate and support the strategy described in 
the Narrative. Such detail and analysis should be included in 
appendices that are distinct from and clearly referenced in the 
related parts of the Narrative (Appendices).
    Public Section. The Plan must be divided into a public section 
and a confidential section consistent with the requirements of the 
Rule.
    Other Informational Requirements. The Plan must comply with all 
other informational requirements of the Rule. The firm may 
incorporate by reference previously submitted information as 
provided in the Rule.

Guidance Regarding Assumptions

    1. The Plan should be based on the current state of the 
applicable legal and policy frameworks. Pending legislation or 
regulatory actions may be discussed as additional considerations.
    2. The firm must submit a Plan that does not rely on the 
provision of extraordinary support by the United States or any other 
government to the firm or its subsidiaries to prevent the failure of 
the firm.\24\ The firm should not submit a Plan that assumes the use 
of the systemic risk exception to the least-cost test in the event 
of a failure of an IDI requiring resolution under the FDI Act.
---------------------------------------------------------------------------

    \24\ 12 CFR 243.4(a)(4)(ii) and 12 CFR 381.4(a)(4)(ii).
---------------------------------------------------------------------------

    3. The firm should not assume that it will be able to sell 
identified critical operations or core business lines, or that 
unsecured funding will be available immediately prior to filing for 
bankruptcy.
    4. The resolution strategy may be based on an idiosyncratic 
event or action, including a series of compounding events. The firm 
should justify use of that assumption, consistent with the 
conditions of the economic scenario.
    5. Within the context of the applicable idiosyncratic scenario, 
markets are functioning and competitors are in a position to take on 
business. If a firm's Plan assumes the sale of assets, the firm 
should take into account all issues surrounding its ability to sell 
in market conditions present in the applicable economic condition at 
the time of sale (i.e., the firm should take into consideration the 
size and scale of its operations as well as issues of separation and 
transfer.).
    6. For a firm that adopts an MPOE strategy, the Plan should 
demonstrate and describe how the failure event(s) results in 
material financial distress.\25\ In particular, the Plan should 
consider the likelihood that there would be a diminution of the 
firm's liquidity buffer in the stress period prior to filing for 
bankruptcy from high unexpected outflows of deposits and increased 
liquidity requirements from counterparties. Though the immediate 
failure event may be liquidity-related and associated with a lack of 
market confidence in the financial condition of the covered company 
or its material legal entity subsidiaries prior to the final 
recognition of losses, the demonstration and description of material 
financial distress may also include depletion of capital. Therefore, 
the Plan should also consider the likelihood of the depletion of 
capital.
---------------------------------------------------------------------------

    \25\ See Section 11(c)(5) of the FDI Act, codified at 11 U.S.C. 
1821(c)(5), which details grounds for appointing the FDIC as 
conservator or receiver of an IDI.
---------------------------------------------------------------------------

    7. The firm should not assume any waivers of section 23A or 23B 
of the Federal Reserve Act in connection with the actions proposed 
to be taken prior to or in resolution.
    8. The Plan should support any assumptions that the firm will 
have access to the Discount Window and/or other borrowings during 
the period immediately prior to entering bankruptcy. To the extent 
the firm assumes use of the Discount Window and/or other borrowings, 
the Plan should support that assumption with a discussion of the 
operational testing conducted to facilitate access in a stress 
environment, placement of collateral, and the amount of funding 
accessible to the firm. The firm may assume that its depository 
institutions will have access to the Discount Window only for a few 
days after the point of failure to facilitate orderly resolution. 
However, the firm should not assume its subsidiary depository 
institutions will have access to the Discount Window while 
critically undercapitalized, in FDIC receivership, or operating as a 
bridge bank, nor should it assume any lending from a Federal Reserve 
credit facility to a non-bank affiliate.
    Financial Statements and Projections. The Plan should include 
the actual balance sheet for each material entity and the 
consolidating balance sheet adjustments between material entities as 
well as pro forma balance sheets for each material entity at the 
point of failure and at key junctures in the execution of the 
resolution strategy. It should also include statements of projected 
sources and uses of funds for the interim periods. The pro forma 
financial statements and accompanying notes in the Plan must clearly 
evidence the failure trigger event; the Plan's assumptions; and any 
transactions that are critical to the execution of the Plan's 
preferred strategy, such as recapitalizations, the creation of new 
legal entities, transfers of assets, and asset sales and unwinds.
    Material Entities. Material entities should encompass those 
entities, including foreign offices and branches, which are 
significant to the maintenance of an identified critical operation 
or core business line. If the abrupt disruption or cessation of a 
core business line might have systemic consequences to U.S. 
financial stability, the entities essential to the continuation of 
such core business line should be considered for material entity 
designation. Material entities should include the following types of 
entities:
    1. Any U.S.-based or non-U.S. affiliates, including any 
branches, that are significant to the activities of an identified 
critical operation.
    2. Subsidiaries or foreign offices whose provision or support of 
global treasury operations, funding, or liquidity activities 
(inclusive of intercompany transactions) is significant to the 
activities of an identified critical operation.
    3. Subsidiaries or foreign offices that provide material 
operational support in resolution (key personnel, information 
technology, data centers, real estate or other shared services) to 
the activities of an identified critical operation.
    4. Subsidiaries or foreign offices that are engaged in 
derivatives booking activity that is significant to the activities 
of an identified critical operation, including those that conduct 
either the internal hedge side or the client-facing side of a 
transaction.
    5. Subsidiaries or foreign offices engaged in asset custody or 
asset management that are significant to the activities of an 
identified critical operation.
    6. Subsidiaries or foreign offices holding licenses or 
memberships in clearinghouses, exchanges, or other FMUs that are 
significant to the activities of an identified critical operation.
    For each material entity (including a branch), the Plan should 
enumerate, on a jurisdiction-by-jurisdiction basis, the specific 
mandatory and discretionary actions or forbearances that regulatory 
and resolution authorities would take during resolution, including 
any regulatory filings and notifications that would be required as 
part of the preferred strategy, and explain how the Plan addresses 
the actions and forbearances. Describe the consequences for the 
covered company's resolution strategy if specific

[[Page 64641]]

actions in a non-U.S. jurisdiction were not taken, delayed, or 
forgone, as relevant.

IX. Public Section

SPOE & MPOE

    The purpose of the public section is to inform the public's 
understanding of the firm's resolution strategy and how it works.
    The public section should discuss the steps that the firm is 
taking to improve resolvability under the U.S. Bankruptcy Code. The 
public section should provide background information on each 
material entity and should be enhanced by including the firm's 
rationale for designating material entities. The public section 
should also discuss, at a high level, the firm's intra-group 
financial and operational interconnectedness (including the types of 
guarantees or support obligations in place that could impact the 
execution of the firm's strategy).
    The discussion of strategy in the public section should broadly 
explain how the firm has addressed any deficiencies, shortcomings, 
and other key vulnerabilities that the agencies have identified in 
prior plan submissions. For each material entity, it should be clear 
how the strategy provides for continuity, transfer, or orderly wind-
down of the entity and its operations. There should also be a 
description of the resulting organization upon completion of the 
resolution process.
    The public section may note that the Plan is not binding on a 
bankruptcy court or other resolution authority and that the proposed 
failure scenario and associated assumptions are hypothetical and do 
not necessarily reflect an event or events to which the firm is or 
may become subject.

    By order of the Board of Governors of the Federal Reserve 
System.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on August 29, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-19267 Filed 9-18-23; 8:45 am]
BILLING CODE 6210-01-6714-01-P