[Federal Register Volume 89, Number 158 (Thursday, August 15, 2024)]
[Notices]
[Pages 66510-66541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18186]



[[Page 66509]]

Vol. 89

Thursday,

No. 158

August 15, 2024

Part II





Federal Reserve System





-----------------------------------------------------------------------





Federal Deposit Insurance Corporation





-----------------------------------------------------------------------





Guidance for Resolution Plan Submissions of Foreign Triennial Full 
Filers; Notice

  Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 / 
Notices  

[[Page 66510]]


-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

[Docket No. OP-1817]

FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-ZA38


Guidance for Resolution Plan Submissions of Foreign Triennial 
Full Filers

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

ACTION: Final guidance.

-----------------------------------------------------------------------

SUMMARY: The Board and the FDIC (together, the agencies) are adopting 
this final guidance for the 2025 and subsequent resolution plan 
submissions by certain foreign banking organizations (FBOs). The final 
guidance is meant to assist these firms in developing their resolution 
plans, which are required to be submitted under 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 final guidance is foreign triennial full 
filers (specified firms or firms), which are foreign Category II and 
III banking organizations, and the guidance supersedes the joint 
Guidance for Resolution Plan Submissions of Certain Foreign-Based 
Covered Companies. The final guidance describes the agencies' 
expectations, depending on the resolution strategy chosen by the firm, 
regarding a number of key vulnerabilities in plans for an orderly 
resolution under the U.S. Bankruptcy Code (i.e., group resolution plan; 
capital; liquidity; governance mechanisms; operational; legal entity 
rationalization and separability; branches; and insured depository 
institution (IDI) resolution, if applicable). The final guidance 
modifies and clarifies certain aspects of the proposed guidance based 
on the agencies' consideration of comments to the proposal, additional 
analysis, and further assessment of the business and risk profiles of 
the firms.

DATES: The final guidance is available on August 15, 2024.

FOR FURTHER INFORMATION CONTACT: 
    Board: Catherine Tilford, Deputy Associate Director, (202) 452-
5240, Elizabeth MacDonald, Assistant Director, (202) 475-6316, Tudor 
Rus, Manager, (202) 475-6359, Mason Laird, Senior Financial Institution 
Policy Analyst II, (202) 912-7907, Caroline Elkin, Senior Financial 
Institution Policy Analyst, (202) 263-4888, Division of Supervision and 
Regulation; or Jay Schwarz, Deputy Associate General Counsel, (202) 
452-2970; Andrew Hartlage, Special Counsel, (202) 452-6483; Brian 
Kesten, Counsel, (202) 843-4079; or Sarah Podrygula, Senior Attorney, 
(202) 912-4658, 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; Mark E. 
Haley, Chief, (917) 320-2911, Patrick R. Bittner, Senior Policy 
Specialist, (202) 898-6571, Division of Complex Financial Institution 
Supervision and Resolution; Celia Van Gorder, Assistant General Counsel 
(Acting), (202) 898-6749; Dena S. Kessler, Counsel, (202) 898-3833; 
Gregory J. Wach, Counsel, (202) 898-6972, Legal Division.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
    A. Background
    B. Connection to Other Rulemakings
    C. Proposed Guidance
II. Overview of Comments
III. Final Guidance
    A. Scope of Application
    B. Transition Period
    C. Interaction With Group Resolution Plan
    D. Capital
    E. Liquidity
    F. Governance Mechanisms
    G. Operational
    H. Legal Entity Rationalization and Separability
    I. Insured Depository Institution Resolution
    J. Derivatives and Trading Activities
    K. Branches
    L. Format and Structure of Plans; Assumptions
    M. Additional Comments
IV. Paperwork Reduction Act
V. Text of the Final Guidance

I. Introduction

A. Background

    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\ The terms ``covered company'' and 
``triennial full filer'' have the meanings given in the Rule, as do 
other, similar terms used throughout this final guidance document.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 5365(d).
    \2\ 12 CFR parts 243 and 381.
    \3\ 12 CFR 243.4 and 381.4.
---------------------------------------------------------------------------

    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 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\
---------------------------------------------------------------------------

    \4\ 12 CFR 243.4(b) and 381.4(b).
    \5\ 12 CFR 243.5 and 381.5.
    \6\ 12 CFR 243.6(b) and 381.6(b).
    \7\ 12 CFR 243.11(c) and 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/.
---------------------------------------------------------------------------

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, issued 
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 in their resolution plans. To date, 
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 FBOs that

[[Page 66511]]

are triennial full filers.\10\ The agencies have not, however, thus far 
issued guidance to domestic triennial full filers and the additional 
FBOs that make up the remainder of the triennial full filers.
---------------------------------------------------------------------------

    \9\ Guidance for section 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 U.S. 
GSIB Guidance).
    \10\ Guidance for Resolution Plan Submissions of Certain 
Foreign-Based Covered Companies 2020 FBO Guidance, 85 FR 83557 (Dec. 
22, 2020) (2020 FBO Guidance).
---------------------------------------------------------------------------

    Several developments inform the final guidance:
     The agencies' consideration of comments to the proposed 
guidance (as defined below);
     The agencies' review of foreign triennial full filers' 
2021 resolution plans and the issuance of individual letters 
communicating the agencies' feedback on those submitted plans;
     The agencies' recent experience with UBS Group AG's 
acquisition of Credit Suisse Group AG (CS) and, with respect to 
specified firms with large subsidiary IDIs, the resolutions of Silicon 
Valley Bank (SVB), Signature Bank (SB), and First Republic Bank (First 
Republic), and related stress experienced by a range of other financial 
institutions; and
     The agencies' analysis of the current risk profiles of the 
foreign triennial full filers.
    The preamble to the 2019 revisions to the Rule indicated that the 
agencies would make any future resolution guidance available for 
comment,\11\ and on August 29, 2023, the agencies invited comments on 
proposed guidance for the 2024 and subsequent resolution plan 
submissions by foreign triennial full fillers (proposed guidance or 
proposal).\12\
---------------------------------------------------------------------------

    \11\ Resolution Plans Required, 84 FR 59194, 59204 (Nov. 1, 
2019) (2019 Federal Register Rule Publication).
    \12\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230829b.htm; https://www.fdic.gov/news/press-releases/2023/pr23067.html. See also Guidance for Resolution Plan Submissions of 
Foreign Triennial Full Filers, 88 FR 64641 (Sept. 19, 2023).
---------------------------------------------------------------------------

    The Rule requires triennial full filers to submit their resolution 
plans on or before July 1 of each year in which a resolution plan is 
due.\13\ At the time the agencies issued the proposed guidance, the 
foreign triennial full filers were required to submit their next 
resolution plans on or before July 1, 2024. In the proposal, the 
agencies requested comment about whether the agencies should provide 
more than six months for firms to take into consideration the 
expectations in the finalized guidance. Several comments discussed the 
timing of the next resolution plan submission and its relationship to 
the final guidance. Most requested extensions, with several requesting 
at least a year and one stating six months would be adequate. One 
stated a maximum of six months from publication of the final guidance 
to the first submission would be adequate, though it did not 
specifically ask for an extension.
---------------------------------------------------------------------------

    \13\ 12 CFR 243.4(b)(3) and 381.4(b)(3).
---------------------------------------------------------------------------

    On January 17, 2024,\14\ the agencies announced an extension of the 
resolution plan submission deadline for the triennial full filers from 
July 1, 2024, to March 31, 2025. At this time, the agencies are further 
extending the 2025 resolution plan submission deadline for triennial 
full filers to October 1, 2025, to provide the firms with sufficient 
time to develop their full resolution plans in light of the final 
guidance. The agencies are also clarifying that all triennial full 
filers' subsequent resolution plan submission, a targeted resolution 
plan, are due on or before July 1, 2028, and that future resolution 
plan submissions will be due every three years after that, alternating 
between full and targeted resolution plans, pursuant to the Rule,\15\ 
unless the agencies exercise their authority under the Rule to alter 
the submission date for future resolution plan submissions.\16\
---------------------------------------------------------------------------

    \14\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20240117a.htm; https://www.fdic.gov/news/press-releases/2024/pr24002.html.
    \15\ 12 CFR 243.4(b) and 381.4(b).
    \16\ 12 CFR 243.4(d)(2) and 381.4(d)(2).
---------------------------------------------------------------------------

Resolution Plan Strategy
    Foreign-based covered companies subject to the Rule have adopted 
one of two resolution strategies for their U.S. operations: (1) a 
single point of entry (SPOE) strategy where only the top tier U.S. 
material entity holding company enters resolution through a bankruptcy 
proceeding; or (2) a multiple point of entry (MPOE) strategy where 
multiple U.S. material entities enter separate resolution proceedings, 
including any top tier U.S. material entity holding company enters 
bankruptcy, any U.S. material entity IDI subsidiary enters resolution 
pursuant to the Federal Deposit Insurance Act of 1950, as amended (the 
FDI Act), and other entities enter the appropriate resolution regimes 
or are wound down. The U.S. SPOE and U.S. MPOE resolution strategies 
that firms have chosen present different risks and entail different 
types of planning and development of capabilities; accordingly, the 
proposal contained content applicable to U.S. SPOE resolution 
strategies and separate content applicable to U.S. MPOE resolution 
strategies.
    Commenters supported inclusion of expectations for both U.S. MPOE 
and U.S. SPOE resolution strategies, and supported firms' ability to 
choose either strategy. However, some commenters questioned whether the 
agencies were expecting or encouraging firms to adopt a U.S. SPOE 
resolution strategy and recommended that the agencies disclose publicly 
whether they prefer a particular resolution strategy and engage in 
notice and comment rulemaking if they do. For firms that change 
resolution strategies, some commenters requested that the agencies 
provide a transition period and made statements about the preferred 
length of such a transition period, and one asked for an explanation 
for how a firm that is changing strategies can satisfy the agencies' 
expectations, and others requested that the agencies not issue any 
findings regarding a firm's first resolution plan that adopts a 
different resolution strategy.
    The agencies do not prescribe a specific resolution strategy for 
any firm. This guidance, similarly, does not suggest that any firm 
should change its resolution strategy, nor are the agencies identifying 
a preferred strategy for a specific firm or set of firms. The selection 
of a preferred strategy, including U.S. MPOE or U.S. SPOE as a 
preferred resolution strategy, should reflect the characteristics of 
the firm and its business operations, and support the goal of the 
resolution plan to substantially mitigate serious adverse effects of 
the firm's failure on financial stability in the United States. Each 
firm remains free to choose the resolution strategy it believes would 
most effectively facilitate a rapid and orderly resolution.
    The agencies are providing separate guidance for a U.S. SPOE 
resolution strategy and a U.S. MPOE resolution strategy in 
acknowledgment that firms are free to adopt the resolution strategy 
that best suits their operations and organizations. Further, the 
agencies note there may be resolution strategies other than U.S. SPOE 
and U.S. MPOE that could facilitate a rapid and orderly resolution. The 
specified firms should continue to submit resolution plans using the 
resolution strategies they believe would be most effective in achieving 
an orderly resolution of their firms. Regardless of strategy, a 
resolution plan should address the key vulnerabilities, support the 
underlying assumptions required to successfully execute the chosen 
resolution strategy, and demonstrate the adequacy of the capabilities 
necessary to execute the selected strategy.
    Moreover, because the agencies do not prescribe resolution 
strategies, firms may voluntarily change their preferred strategy in 
the future. However, reflecting the voluntary nature of

[[Page 66512]]

resolution strategy changes, the agencies do not anticipate providing a 
transition period during which a firm would be free from potential 
findings under the Rule while it effectuates a change in resolution 
strategy, whether from U.S. MPOE to U.S. SPOE, or to any other 
resolution strategy. A firm controls the timing of when it submits its 
first plan with a different strategy; accordingly, it can take the time 
it needs to put in place the resources and capabilities needed to 
submit a plan that satisfies the standard in section 165(d) of the 
Dodd-Frank Act and the Rule. The standard of review for a resolution 
plan submission of a firm that transitions to a new strategy is 
therefore the same as for any firm subject to the Rule.\17\
---------------------------------------------------------------------------

    \17\ See 12 CFR 243.8 and 381.8.
---------------------------------------------------------------------------

B. Connection to Other Rulemakings

Long-Term Debt Proposal
    The agencies, as well as the Office of the Comptroller of the 
Currency (together with the agencies, the Federal banking agencies), 
issued in August 2023 a proposed rule for comment that would require 
certain large 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.\18\ 
The agencies have received comments on the LTD proposal, and will 
consider all comments received in context of the LTD rulemaking. The 
agencies requested comments on the proposed guidance that take the LTD 
proposal into consideration.
---------------------------------------------------------------------------

    \18\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230829a.htm; https://www.fdic.gov/news/press-releases/2023/pr23065.html. See also Long-Term Debt Requirements for Large Bank 
Holding Companies, Certain Intermediate Holding Companies of Foreign 
Banking Organizations, and Large Insured Depository Institutions, 88 
FR 64524 (Sept. 19, 2023) (LTD proposal).
---------------------------------------------------------------------------

    One commenter recommended that, for purposes of their resolution 
plans, firms should only assume their existing outstanding LTD and not 
the projected LTD that would be in place once the firm has achieved 
full compliance with the LTD proposal. Another commenter argued that 
the agencies should consider the interaction between the proposed 
guidance and LTD proposal, with a goal of having them work together to 
improve the resolvability of applicable banking organizations and avoid 
duplicative or contradictory requirements. The commenter also asserted 
that calibration of an IDI's internal LTD requirement could lead 
banking organizations using a U.S. MPOE resolution strategy to adopt a 
U.S. SPOE resolution strategy because of the costs of compliance with 
such internal LTD issuance.
    The Federal banking agencies have not finalized the LTD rulemaking 
as of the issuance of this final guidance. The agencies recognize that 
LTD issued and maintained by a specified firm could affect the firm's 
strategic analysis of the funding, liquidity, and capital needs of, and 
resources available to, the covered company and its material 
entities.\19\ However, the agencies believe that the finalization of a 
requirement to maintain a specified amount of LTD would not affect this 
guidance in any material way. Any final LTD rule will address the 
manner in which its requirements will be implemented. This final 
guidance is intended to convey the agencies' expectations regarding the 
content of resolution plan submissions, and not to contradict, modify, 
or accelerate a company's obligations under other laws or regulations. 
As provided in the final guidance, firms should develop their 
resolution plans in accordance with the current state of the applicable 
legal and policy frameworks. The agencies also recognize, however, that 
there may be phase-in periods during which rules become effective. 
Should the LTD rule be finalized in advance of October 1, 2025, the 
agencies will not expect firms to incorporate the requirements of the 
rule into their 2025 resolution plan submissions. This should provide 
firms covered by the LTD rule with reasonable time to consider any 
final LTD rule in a future resolution plan submission. Further, and as 
noted above, the agencies are not recommending that any specified firm 
adopt any particular strategy in response to this guidance or the LTD 
proposal.
---------------------------------------------------------------------------

    \19\ See 12 CFR 243.5(c)(1)(iii) and 381.5(c)(1)(iii).
---------------------------------------------------------------------------

Basel III End Game Proposal and the GSIB Capital Surcharge Proposal
    The Federal banking agencies also issued in July 2023 a proposed 
rule for comment to substantially revise the capital requirements 
applicable to large banking organizations and to banking organizations 
with significant trading activity.\20\ The Board also issued a proposed 
rule for comment to amend the Board's rule that identifies and 
establishes risk-based capital surcharges for GSIBs.\21\ The latter 
proposal would also amend the Systemic Risk Report (FR Y-15), which is 
the source of inputs to the implementation of the GSIB framework under 
the capital rule.
---------------------------------------------------------------------------

    \20\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230727a.htm; https://www.fdic.gov/news/press-releases/2023/pr23055.html. See also Regulatory Capital Rule: Large Banking 
Organizations and Banking Organizations With Significant Trading 
Activity, 88 FR 64028 (Sept. 18, 2023) (Capital proposal).
    \21\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230727a.htm. See also Regulatory Capital Rule: Risk-Based 
Capital Surcharges for Global Systemically Important Bank Holding 
Companies; Systemic Risk Report (FR Y-15), 88 FR 60385 (Sept. 1, 
2023) (GSIB Capital Surcharge proposal).
---------------------------------------------------------------------------

    One commenter asserted that the issuance of multiple rulemaking and 
guidance proposals limited the commenter's ability to evaluate and 
comment on the proposed guidance. The commenter also recommended that 
the Federal banking agencies conduct an analysis of the costs and 
benefits of these proposals together. In addition, the commenter 
recommended providing the public more time to consider the interactions 
of the various proposals. Another commenter contended that the agencies 
should provide additional flexibility to firms that become triennial 
full filers as a result of the GSIB Capital Surcharge proposal and its 
associated changes to the Systemic Risk Report (FR Y-15). The commenter 
argued that such triennial full filers should have an extended 
transition period of two years before taking into account the final 
guidance.
    The Federal banking agencies have not finalized the LTD rulemaking, 
Capital rulemaking, or GSIB Capital Surcharge rulemaking as of the 
issuance of this final guidance, and comments on those proposed rules 
are currently under consideration. The final guidance does not rely on 
or presume the finalization of these rulemakings and instead states, as 
proposed, that a resolution plan should be based on the current state 
of the applicable legal and policy frameworks.\22\ The agencies note 
that the Federal banking agencies extended the comment period on the 
LTD rulemaking,\23\ the Capital rulemaking,\24\ and the GSIB Capital 
Surcharge rulemaking \25\ to allow interested parties more time to 
analyze relevant issues and prepare their comments. In addition, staff 
of the agencies met with members of the

[[Page 66513]]

public--including those who asked for additional time to review the 
various proposals--at the request of those persons after the close of 
the comment period. Moreover, the Board collected data from the banks 
affected by the Capital rulemaking to further clarify the estimated 
effects of the proposal.\26\ The FBO guidance proposal also included an 
analysis of potential burden of the proposal pursuant to the Paperwork 
Reduction Act.\27\ As discussed below, the agencies did not receive any 
comment on that section of the proposal.\28\
---------------------------------------------------------------------------

    \22\ See infra section V.X of this document.
    \23\ Long-Term Debt Requirements for Large Bank Holding 
Companies, Certain Intermediate Holding Companies of Foreign Banking 
Organizations, and Large Insured Depository Institutions; Extension 
of Comment Period, 88 FR 83364 (Nov. 19, 2023).
    \24\ Regulatory Capital Rule: Large Banking Organizations and 
Banking Organizations with Significant Trading Activity; Extension 
of Comment Period, 88 FR 73770 (Oct. 27, 2023).
    \25\ Risk-Based Capital Surcharges for Global Systemically 
Important Bank Holding Companies; Systemic Risk Report (FR Y-15); 
Extension of Comment Period, 88 FR 73772 (Oct. 27, 2023).
    \26\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20231020b.htm.
    \27\ See proposed guidance at 88 FR 64648-49.
    \28\ See infra section IV of this document.
---------------------------------------------------------------------------

    The agencies also note that the Rule establishes a transition 
period for new covered companies that become triennial full filers.\29\ 
As discussed elsewhere in this document, a specified firm is only 
expected to take into account the guidance for the resolution plan 
submission that is due at least 12 months after the date the firm 
becomes a specified firm.\30\
---------------------------------------------------------------------------

    \29\ See 12 CFR 243.4(b)(5) and 381.4(b)(5).
    \30\ See infra section III.B of this document.
---------------------------------------------------------------------------

FDIC IDI Resolution Plan Proposal
    The agencies received two comments on the connection between the 
proposal and the IDI Rule.\31\ The FDIC published proposed revisions to 
the IDI Rule on September 19, 2023,\32\ and published final revisions 
on July 9, 2024.\33\ One commenter recommended coordinating aspects of 
the proposed guidance and the Proposed IDI Rule, including having 
consistent terms and concepts, and permitting cross-referencing to 
section 165(d) resolution plans under the Proposed IDI Rule. Another 
commenter suggested aligning the Rule and the IDI Rule to reduce the 
combined compliance burden.
---------------------------------------------------------------------------

    \31\ 12 CFR 360.10 (IDI Rule).
    \32\ Resolution Plans Required for Insured Depository 
Institutions With $100 Billion or More in Total Assets; 
Informational Filings Required for Insured Depository Institutions 
With at Least $50 Billion But Less Than $100 Billion in Total 
Assets, 88 FR 64579 (Sept. 19, 2023) (Proposed IDI Rule).
    \33\ Resolutions Plans Required for Insured Depository 
Institutions with $100 Billion or More in Total Assets; 
Informational Filings Required for Insured Depository Institutions 
With at Least $50 Billion but Less Than $100 Billion in Total 
Assets, 89 FR 56620 (July 9, 2024).
---------------------------------------------------------------------------

    The Rule requires a covered company to submit a resolution plan 
that would allow for the rapid and orderly resolution of the firm under 
the Bankruptcy Code in the event of material financial distress or 
failure. The final guidance clarifies the agencies' expectations 
regarding certain topics and provides direction as to how a covered 
company may demonstrate its compliance with its statutory obligation 
under section 165(d) of the Dodd-Frank Act to develop a resolution plan 
allowing for its rapid and orderly resolution. The IDI Rule serves a 
different purpose: the IDI Rule assists the FDIC in preparing to manage 
the resolution of a covered insured depository institution. While these 
two rules may be complementary, they are not the same. Additionally, 
whether to align the Proposed IDI Rule with the Rule or permit cross-
referencing to section 165(d) resolution plans under the IDI Rule is 
outside the scope of this guidance.

C. Proposed Guidance

    On August 29, 2023, the agencies invited public comment on proposed 
guidance for how foreign triennial full filers' resolution plans could 
address key challenges in resolution, which was proposed to apply 
beginning with the subject firms' 2024 resolution plan submissions.\34\ 
The proposal identified the banking organizations to which the guidance 
would apply and articulated several areas of guidance: group resolution 
plan; capital; liquidity; governance mechanisms; operational; legal 
entity rationalization and separability; branches; and IDI resolution, 
if applicable. The proposed guidance described the agencies' proposed 
expectations for each of these areas. Most substantive topics were 
bifurcated, with separate guidance for a U.S. SPOE resolution strategy 
and a U.S. MPOE resolution strategy. The proposed guidance concluded 
with information about the format and structure of a plan that applied 
equally to plans contemplating either a U.S. SPOE resolution strategy 
or a U.S. MPOE resolution strategy.
---------------------------------------------------------------------------

    \34\ Supra note 12.
---------------------------------------------------------------------------

    The proposed guidance for firms that adopt a U.S. SPOE resolution 
strategy was generally based on the 2020 FBO Guidance or the associated 
proposal.\35\ The proposed guidance for firms that adopt a U.S. MPOE 
resolution strategy was based upon the 2020 FBO Guidance but modified 
to be pertinent to U.S. MPOE resolution strategies. The agencies also 
proposed to clarify their expectations for specified firms that adopt a 
U.S. MPOE resolution strategy that includes the resolution of a 
material entity that is a U.S. IDI.
---------------------------------------------------------------------------

    \35\ Guidance for Resolution Plan Submissions of Certain 
Foreign-Based Covered Companies, 85 FR 15449 (March 18, 2020) (2020 
Proposed FBO Guidance).
---------------------------------------------------------------------------

    The agencies invited comments on all aspects of the proposed 
guidance. The agencies also specifically requested comments on a number 
of issues, including the utilization of a U.S. SPOE resolution strategy 
by FBOs, the interaction of resolution guidance with a final long-term 
debt rule, the interaction between U.S. and global resolution 
strategies, the amount of time between the publication of the final 
guidance and the firms' next resolution plans, the appropriateness of 
guidance on IDI resolution, and whether to issue derivatives and 
trading expectations.

II. Overview of Comments

    The agencies received and reviewed eight comment letters on the 
proposed guidance. Commenters included various financial services trade 
associations and two public interest groups. In addition, the agencies 
met with representatives of a banking organization that would be a 
specified firm and trade associations that represents banking 
organizations at their request to discuss issues relating to the 
proposed guidance.\36\ This section provides an overview of the general 
themes raised by commenters. The comments received on the proposed 
guidance are further discussed below in the sections describing the 
final guidance (and, in some cases, previously in section I), including 
any changes that the agencies have made to the proposed guidance in 
response to comments.
---------------------------------------------------------------------------

    \36\ Summaries of those meetings and copies of the comments can 
be found on each agency's website. https://www.federalreserve.gov/apps/foia/ViewComments.aspx?doc_id=OP-1817&doc_ver=1; https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-guidance-resolution-plan-submissions-foreign-triennial-3064-za38.html.
---------------------------------------------------------------------------

Differentiating Expectations Based on Size, Complexity, and Risk

    Most commenters contended that the proposed guidance did not 
sufficiently differentiate expectations among firms subject to 
resolution planning guidance. Several commenters argued that the 
specified firms have reduced their activities in the United States, 
resulting in a reduced risk and financial stability profile, and that 
expectations be adjusted accordingly. Some commenters also recommended 
that foreign triennial full filers without intermediate holding 
companies (IHCs) should not be covered by the guidance or should be the 
subject of guidance tailored to their risk profiles. In contrast, one 
commenter contended that the proposed guidance favors the U.S. MPOE 
resolution strategy by including fewer expectations for firms that 
adopt that strategy and recommended that the guidance for such firms be 
more aligned with

[[Page 66514]]

guidance for resolution plan filers using a U.S. SPOE resolution 
strategy.
    In addition, some commenters argued that section 165 of the Dodd-
Frank Act requires the agencies to tailor application of prudential 
standards issued pursuant to that section, such as resolution planning 
guidance; contended that the proposal was too similar to the 2019 U.S. 
GSIB Guidance or 2020 Proposed FBO Guidance; and encouraged 
expectations in the final guidance to be further differentiated based 
on size, risk and other factors. Several commenters also objected to 
expectations in the proposal that were proposed in the 2020 Proposed 
FBO Guidance but not finalized in the 2020 FBO Guidance--including 
guidance on group resolution plans, resolution capital adequacy and 
positioning requirements (RCAP), resolution liquidity adequacy and 
positioning (RLAP), governance mechanisms, and separability--and 
contended that the agencies did not adequately explain their rationale 
for adopting expectations different from those in the 2020 FBO 
Guidance.

Resolution Strategy and Transition Period

    Several commenters supported the proposal's inclusion of 
expectations for both U.S. MPOE and U.S. SPOE resolution strategies and 
the agencies' statement that firms have the ability to choose their 
preferred strategy. However, as noted above, some commenters questioned 
whether the agencies were expecting or encouraging firms to adopt a 
U.S. SPOE resolution strategy. For firms that change resolution 
strategies, some commenters requested that the agencies provide a 
transition period during which the agencies would not make credibility 
findings in connection with a plan review, and one commenter requested 
that the agencies explain how a firm that is changing strategies can 
satisfy the agencies' expectations.

Interaction Between U.S. and Group Resolution Planning

    Some commenters disagreed with the proposed guidance relating to 
the interaction of the U.S. and the global resolution plans. Commenters 
claimed that global resolution plans are sometimes written by home 
authorities and FBOs may not always have full visibility into the 
details of those plans' assumptions, strategies, and necessary 
capabilities. These commenters also asserted that, in some countries, 
home country regulators may consider aspects of the group plan to be 
confidential supervisory information and, accordingly, the global 
resolution plan is not shared with the firm beyond very general terms. 
In addition, one commenter contended that the proposal did not specify 
with sufficient detail what information from a group resolution plan 
should be included in the U.S. resolution plan. Commenters urged the 
agencies to coordinate with home country authorities and to use Crisis 
Management Groups (CMGs), which are designed for collaboration between 
international regulators, to obtain this type of information.

Capital and Liquidity

    The agencies received a number of comments on the capital and 
liquidity sections of the proposed guidance. With regard to the capital 
section of the proposed guidance, most commenters argued that the 
proposal included expectations that are duplicative of existing capital 
requirements and suggested removing the guidance on RCAP from the final 
guidance; one commenter, however, supported including RCAP expectations 
in final guidance. One commenter suggested that RCAP expectations would 
increase the complexity of the resolution planning process and another 
commenter expressed concern that RCAP expectations could result in 
excessive capital placement in the U.S., which could prevent firms from 
effectively positioning capital in times of stress.
    With regard to the liquidity section of the proposed guidance, 
commenters suggested there is redundancy between the proposal and 
certain regulatory requirements and also recommended removing the 
guidance on RLAP from the final guidance; one commenter, however, 
supported including RLAP expectations in final guidance. One commenter 
expressed concern that RLAP expectations could make it more difficult 
for the specified firm's parent to deploy liquidity resources most 
effectively in stress. In addition, one commenter requested that the 
final guidance strengthen expectations for liquidity in resolution by 
including a procedure or protocol for liquidity related decisions, 
irrespective of resolution strategy.

IDI Resolution Analysis

    The agencies received a number of comments on the proposed guidance 
related to the resolution of a subsidiary material entity U.S. IDI. 
Multiple commenters requested clarity on how the firm's plan should 
address the expectations regarding the FDIC's statutory least-cost 
requirement and questioned whether there is sufficient information 
available for firms to effectively evaluate whether a proposed 
resolution plan would satisfy the least-cost analysis expectations. 
These commenters also questioned whether the least-cost analysis would 
be of value to FDIC in an actual resolution and argued that the 
guidance should be aligned with the requirements of the IDI Rule. One 
stated sufficient time should be given for firms to conduct new 
analyses and seek additional guidance from the agencies and that 
aspects of this section of the proposal should not be finalized.
    One commenter asked the agencies to consider the compliance burden 
of the guidance, while another commenter argued that firms should not 
be expected to demonstrate that their preferred strategy would be 
consistent with the FDIC's statutory least-cost requirement. Another 
commenter suggested that the agencies should require firms to develop 
resolution strategies involving bridge depository institutions (BDIs) 
and recommended that the guidance address the value of assets 
transferred to such a BDI, how the resolution plan would address the 
IDI's franchise value, and how the preferred resolution strategy would 
result in a least-costly resolution.

Derivatives and Trading

    Some commenters supported not including derivatives and trading 
expectations, stating it was appropriate to exclude such guidance 
because the specified firms have limited derivatives and trading 
portfolios, particularly relative to the U.S. G-SIB banking 
organizations covered by such guidance. However, some other commenters 
supported including such expectations in the final guidance, contending 
that derivatives activity for foreign triennial full filers may 
increase in the future and proposed applying such guidance to firms 
with net derivatives exceeding a given threshold.

Connection to Other Rules

    The agencies received a number of comments about the interaction of 
the proposed guidance with several other rulemaking initiatives by the 
Federal banking agencies. For example, some commenters recommended 
coordinating the FDIC's Proposed IDI Rule revisions with the resolution 
plan rule and final guidance for the specified firms. Several 
commenters also suggested that the agencies consider the interaction 
between the proposed guidance and the LTD proposal to ensure the two 
proposals work together to improve the resolvability of applicable 
banking organizations and avoid duplicative or

[[Page 66515]]

contradictory requirements. Some commenters expressed concern that 
including certain expectations in the final guidance, such as those 
relating to capital, would be premature before finalizing the Capital 
proposal and LTD proposal, which impact firms' capital planning. 
Further, some commenters recommended that the Federal banking agencies 
analyze the costs and benefits of these proposals together.

Timing of Next Resolution Plan

    Several comments discussed the timing of the next resolution plan 
submission and its relationship to this final guidance. Some commenters 
recommended providing at least one year between issuing final guidance 
and the deadline for foreign triennial full filers' next resolution 
plan submissions. However, other commenters suggested that six months 
from publication of the final guidance to the first resolution plan 
submission would be adequate for firms to take into account the 
guidance.

III. Final Guidance

    After considering the comments, conducting additional analysis, and 
further assessing the business and risk profiles of foreign triennial 
full filers, the agencies are issuing final guidance that includes 
certain modifications and clarifications from the proposal. In 
particular, the capital, group resolution plan, operational, 
assumptions, and IDI resolution sections of the final guidance reflect 
changes from the proposed guidance. In addition, as was noted in the 
proposal,\37\ the final guidance consolidates all prior resolution 
planning guidance for the firms in one document and clarifies that any 
prior guidance not included in the final guidance has been superseded. 
Further, as was noted in the proposal,\38\ the final guidance is not 
intended to override the obligation of an individual firm to respond in 
its next resolution plan submission to pending items of individual 
feedback or any shortcomings or deficiencies jointly identified or 
determined by the agencies in that firm's prior resolution plan 
submissions. The guidance is drafted to reflect the current conditions 
in the industry and institutions as they exist today.
---------------------------------------------------------------------------

    \37\ See proposed guidance at 88 FR 64644.
    \38\ See id.
---------------------------------------------------------------------------

    As discussed below,\39\ several commenters asserted that the 
proposal did not adequately differentiate among covered companies based 
on their size, complexity, and risk to financial stability. The 
guidance, however, takes into account the size and complexity of firms, 
their resolution strategy, and whether they are based in the United 
States or in a foreign jurisdiction. In addition, the final guidance is 
not meant to limit firms' consideration of additional vulnerabilities 
or obstacles that might arise based on a firm's particular structure, 
operations, or resolution strategy.
---------------------------------------------------------------------------

    \39\ See infra section III.M of this document.
---------------------------------------------------------------------------

    The agencies also note that commenters described certain 
expectations that are set forth in the guidance as ``requirements.'' As 
the agencies indicated in the proposed guidance and are now 
reaffirming, the final guidance does not have the force and effect of 
law. Rather, the final guidance outlines the agencies' supervisory 
expectations regarding each subject area covered by the final 
guidance.\40\ The final guidance includes language reflecting this 
position.\41\
---------------------------------------------------------------------------

    \40\ See 12 CFR 262.7 and appendix A to 12 CFR part 262; 12 CFR 
part 302.
    \41\ See infra section V.I of this document.
---------------------------------------------------------------------------

    Finally, the agencies made several minor, non-substantive changes 
from the proposal, including to align the wording of guidance directed 
at firms that adopt an SPOE resolution strategy and firms that adopt an 
MPOE resolution strategy.

A. Scope of Application

    The agencies proposed applying the guidance to all foreign-based 
triennial full filers and invited comment on all aspects of the 
proposed scope of the guidance. Multiple commenters argued that foreign 
triennial full filers without IHCs should not be covered by the 
guidance or should be the subject of guidance tailored to their risk 
profiles. In making this suggestion, one commenter stated that, unlike 
domestic firms, the resolution of U.S. operations of FBOs is 
anticipated to occur as part of the home country resolution and the IHC 
threshold represents a materiality threshold for understanding the 
importance of the U.S. operations and for resolution planning. The 
commenter also stated that separate guidance could be proposed for 
foreign triennial full filers without an IHC. Several commenters 
further argued that the specified firms are already subject to enhanced 
requirements in both the U.S. and their home jurisdictions, and that 
the firms are smaller, better capitalized, and present a much-reduced 
risk to U.S. financial stability relative to category I firms. One 
commenter also contended that imposing additional resolution planning 
expectations would undermine these firms' ability to support U.S. 
capital markets while another commenter argued that the guidance should 
place greater reliance on cooperation among international regulators.
    After review and consideration of these comments, the agencies are 
finalizing this section of the guidance as proposed. The agencies are 
issuing expectations to these firms to help them further strengthen 
their resolution plans based on the agencies' recent experience with 
UBS Group AG's acquisition of CS and, with respect to specified firms 
with large subsidiary IDIs, the resolutions of SVB, SB, and First 
Republic. Like CS, many of the specified firms are foreign GSIBs with a 
large presence in the United States. The guidance covers large FBOs 
both with and without a U.S. IHC and covers the entirety of their U.S. 
operations. The final guidance will strengthen these firms' resolution 
plans for their U.S. operations, while allowing flexibility based on 
the characteristics of individual firms and their respective resolution 
strategies. The agencies note that some aspects of the guidance may not 
be relevant to banking organizations without a U.S. IHC and do not 
expect firms to include in their resolution plans information about 
topics that do not relate to the structure of their operations. More 
generally, the level of detail in firms' resolution plans about 
specific topics and vulnerabilities should reflect the importance of 
those activities to the firm and whether they relate to or support any 
identified critical operations or core business lines or are material 
to the execution of the resolution strategy.
    In many cases, the preferred resolution outcome for U.S. operations 
would be successful execution of the home country's global resolution 
strategy and the agencies have developed guidance to clarify the 
interactions between firms' U.S. and global resolution strategies. The 
home country resolution planning requirements do not make the guidance 
unnecessary for these firms. The Rule requires FBOs to submit plans 
providing for the rapid and orderly resolution of their U.S. 
subsidiaries and operations \42\ under the Bankruptcy Code in the event 
of their failure. The agencies are issuing guidance to assist FBO firms 
in enhancing the resolution plans required under U.S. law.
---------------------------------------------------------------------------

    \42\ See 12 CFR 243.5(a)(2)(i) and 381.5(a)(2)(i).
---------------------------------------------------------------------------

B. Transition Period

    The proposed guidance did not describe how the guidance would be 
applied to FBOs that become covered by its scope, but it did request 
comment on all aspects of the proposed scope of

[[Page 66516]]

application. To provide certainty to FBOs, the final guidance states 
that when an FBO becomes a specified firm, the final guidance will 
apply to the firm's next resolution plan submission with a submission 
date that is at least 12 months after the time the firm becomes a 
specified firm.\43\ If a specified firm ceases to be a foreign 
triennial full filer, it will no longer be considered a specified firm, 
and the guidance will no longer be applicable to that firm as of the 
date the firm ceases to be a foreign triennial full filer.
---------------------------------------------------------------------------

    \43\ The plan type for that next submission remains as specified 
by the Rule, i.e., a full or targeted resolution plan. See 12 CFR 
243.4 and 381.4.
---------------------------------------------------------------------------

C. Interaction With Group Resolution Plan

    The agencies recognize that the preferred resolution outcome for 
many specified firms is a successful home country resolution using a 
global SPOE resolution strategy that does not involve the placement of 
any U.S. material entities into resolution. However, by law, section 
165(d) resolution planning provisions require relevant FBOs to 
contemplate their resolution in the United States. U.S. operations of 
an FBO are often highly interconnected with the broader, global 
operations of the financial institution. To clarify the interaction 
between U.S. and global resolution strategies, the proposal outlined 
expectations that specified firms should describe the impact of 
executing the firm's global, group-wide resolution plan on the firm's 
U.S. operations and detail the extent to which resolution planning 
under the Rule relies on different assumptions, strategies, and 
capabilities from the global plan. The group resolution plan section of 
the proposed guidance differed from a similarly named section of the 
2020 Proposed FBO Guidance by focusing on how U.S. resolution planning 
is integrated into a FBO's global resolution planning efforts, in 
addition to describing the impact on U.S. operations of executing the 
global plan. In 2020, the agencies declined to finalize that aspect of 
the 2020 Proposed FBO Guidance, stating that the item was addressed by 
the Rule and that the agencies would collaborate with home country 
regulators to better understand the impact on U.S. operations of 
executing a firm's group resolution plan.\44\ However, recent events 
have underscored the need to better understand group resolution plans, 
and particularly the impact of executing the home plan on U.S. 
operations. These events, combined with prior resolution plan 
submissions from the specified firms that did not provide consistent 
and sufficient details regarding the integration of U.S. resolution 
planning with the firm's group resolution planning process, prompted 
the agencies to issue additional guidance. Moreover, the final guidance 
differs from the 2020 Proposed FBO Guidance in several ways by further 
clarifying the Rule expectation and focusing on the reliance between 
U.S. and group resolution plans based on information available to the 
firm, as described below.
---------------------------------------------------------------------------

    \44\ See 2020 FBO Guidance at 85 FR 83567.
---------------------------------------------------------------------------

    The agencies received several comments regarding this section of 
the proposal. Commenters claimed that global plans are sometimes 
written by home authorities and FBOs may not always have full 
visibility into the details of those plans' assumptions, strategies, 
and capabilities. Commenters also asserted that, in some countries, the 
global resolution plan is not shared with the firm beyond very general 
terms and that home country regulators may consider aspects of the 
group plan to be confidential supervisory information. In addition, one 
commenter contended that the proposal did not specify with sufficient 
detail what information from a group resolution plan should be included 
in the U.S. resolution plan. Commenters urged the agencies to 
coordinate with home country authorities and to use CMGs, which are 
designed for collaboration between international regulators, to obtain 
this type of information.
    After consultation with certain home authorities and in response to 
these comments, the agencies are finalizing this section of the 
guidance with revisions. First, the agencies recognize that not all 
firms have access to the group-wide resolution plan for that financial 
institution. Accordingly, the final guidance clarifies that firms are 
not expected to provide information that they do not possess and does 
not include an expectation that firms specifically identify the extent 
to which resolution planning under the Rule relies on different 
assumptions, strategies, and capabilities from the global plan. 
Furthermore, the agencies note that while CMGs have been and continue 
to be a useful forum for collaboration between home and host 
authorities regarding resolution related topics, centralizing 
information about group resolution plans in resolution plans submitted 
under the Rule could help the agencies prepare for a range of outcomes 
and supplement ongoing coordination with home country authorities.
    Accordingly, the final guidance provides that a plan should 
describe the extent of reliance on U.S. operations for executing the 
global resolution strategy and any reliance on the home or parent 
operations for executing the U.S. resolution strategy. A description of 
capabilities relied on to execute the U.S. resolution strategy that 
differ from capabilities to execute the global resolution strategy 
should also be included in a plan. The agencies also have retained 
language from the proposal that a specified firm's broader 
resolvability framework is expected to consider the objectives of both 
the group-wide resolution strategy and the U.S. resolution strategy 
pursuant to the Rule, with complementary efforts to enhance 
resolvability across plans. The agencies do not believe that inclusion 
of this type of information about group resolution plans in U.S. 
resolution planning poses confidentiality issues, and the agencies will 
collaborate with home authorities to address any outstanding issues 
regarding the confidentiality of group resolution plans. The agencies 
encourage specified firms to bring specific confidentiality concerns to 
the attention of the agencies and their respective home authorities.

D. Capital

    For specified firms using a U.S. SPOE resolution strategy, the 
agencies proposed capital expectations substantially similar to those 
in the 2020 Proposed FBO Guidance. The ability to provide sufficient 
capital to material entities without disruption from creditors is 
essential to a U.S. SPOE resolution strategy's objective to ensure that 
material entities can continue to maintain operations as the firm is 
resolved. The proposal described 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 (RCAP). 
The proposal also described 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 received numerous comments on the capital section of 
the proposed guidance. One commenter supported including RCAP 
expectations in the final guidance. Several commenters, though, 
asserted that RCAP would be duplicative of existing capital 
requirements, such as total loss absorbing capacity (TLAC) provisions, 
and recommended that the agencies

[[Page 66517]]

remove RCAP from the final guidance. These commenters also contended 
that the agencies did not sufficiently explain why the agencies 
proposed guidance on capital, including RCAP, when the agencies 
previously considered adopting RCAP expectations in the 2020 Proposed 
FBO Guidance but omitted these expectations from the 2020 FBO Guidance. 
A commenter argued that existing capital requirements are sufficient 
for the size and complexity of the firms subject to this guidance 
without RCAP expectations, which, the commenter asserted, add more 
complexity to the resolution planning process. Another commenter 
expressed concern that RCAP expectations could result in excessive 
capital placement in the U.S., and that this could prevent firms from 
effectively positioning capital in times of stress.
    One commenter contended that as the majority of IHCs subject to 
guidance are required to hold local resources for the recapitalization 
of their U.S. operations under U.S. TLAC requirements, the agencies 
should not issue additional requirements related to local bail-in-able 
resources. A commenter argued that the risk characteristics of U.S. 
IHCs do not justify requiring pre-positioning of capital for U.S. IHC 
subsidiaries and urged that, at a minimum, the agencies should not 
implement both IDI-level LTD requirements and RCAP expectations for 
firms that select a U.S. SPOE resolution strategy.
    One commenter also asserted that including expectations in this 
guidance regarding the positioning of capital is premature given that 
finalization of the Capital proposal and the LTD proposal may impact 
firms' capital planning. A commenter specifically pointed to language 
in the LTD proposal in which the agencies cite RCAP as one of the 
reasons why IDI-level LTD requirements are not necessary for the IDI 
subsidiaries of U.S. GSIBs.
    After reviewing these comments, the agencies are finalizing this 
section of the guidance largely as proposed, with one clarification 
concerning RCEN. Whereas the proposed guidance provided that to the 
extent a firm's U.S. resolution strategy relies on the recapitalization 
of U.S. non-branch material entities, such recapitalization should be 
to a level that allows for an orderly resolution of the U.S. non-branch 
material entities, the final guidance specifies that the 
recapitalization should allow U.S. non-branch material entities to 
operate or be wound down in an orderly manner. This change is intended 
to provide more detail to firms to help them develop their plans.
    Although the agencies previously pointed to TLAC requirements 
applicable to U.S. IHCs as part of the rationale for not including RCAP 
expectations in the 2020 FBO Guidance,\45\ the agencies believe RCAP 
expectations are important for FBOs adopting a U.S. SPOE resolution 
strategy in order to ensure the appropriate positioning of capital and 
other loss-absorbing instruments among the U.S. IHCs and all of their 
material entity subsidiaries and to effectively execute a U.S. SPOE 
resolution strategy. Specifically, TLAC requirements apply to the IHC, 
while RCAP expectations under the guidance are applicable not just at 
the IHC level, but between the U.S. IHC and its material entity 
subsidiaries. Further, resources required to be held at the IHC 
consistent with TLAC requirements may differ from the firm's expected 
resource needs to execute a U.S. SPOE resolution strategy at specific 
material entities. Plans submitted by the specified firms would benefit 
from the firm's own assessment of its resource positioning and the 
resolution needs among its material entities, not just the IHC or the 
IDI.
---------------------------------------------------------------------------

    \45\ See 2020 FBO Guidance at 85 FR 83563.
---------------------------------------------------------------------------

    Further, the stress experienced by and the failure of several large 
banking organizations in March 2023 highlighted the fast-moving nature 
of stress events, as several banking organizations entered resolution 
proceedings rapidly. These events also highlighted the potential for 
the failure of a large regional banking organization to affect 
financial stability. Successful execution of a U.S. SPOE resolution 
strategy--including the need to ensure that individual material 
entities have adequate capital to maintain operations as the firm is 
resolved--is unlikely to be successful under a short time frame without 
advance planning. Appropriate positioning of capital and other loss-
absorbing instruments among the firm's material entities is an 
important element of this advanced planning to reduce uncertainty and 
enable timely recapitalization consistent with a U.S. SPOE resolution 
strategy. Accordingly, the agencies are finalizing guidance that 
includes RCAP expectations, despite not including those expectations in 
the final 2020 FBO guidance, to support the successful execution of the 
U.S. SPOE resolution strategy.
    Finalizing RCAP expectations is not premature in light of 
outstanding proposals such as the LTD rulemaking and other pending 
rules because the RCAP expectations can be achieved with or without the 
LTD contemplated in the LTD proposal. The Federal banking agencies have 
not finalized the LTD rulemaking proposal as of the issuance of this 
final guidance, and comments on that proposed rule are currently under 
consideration. Specifically, the final guidance does not rely on or 
presume the finalization of pending rules and instead states, 
consistent with the proposal, that a resolution plan should be based on 
the current state of the applicable legal and policy frameworks.\46\ 
The guidance is intended to assist firms in developing their resolution 
plans, which are required to be submitted pursuant to the Dodd-Frank 
Act and the Rule. While other capital and resolution-related rules may 
establish minimum standards applicable to firms submitting resolution 
plans, this guidance is designed to facilitate a firm's own analysis of 
the firm's expected needs in resolution across that firm's material 
entities.
---------------------------------------------------------------------------

    \46\ See infra section V.X of this document.
---------------------------------------------------------------------------

    Regarding the comment that RCAP expectations would result in 
excessive capital placement in the United States, RCAP is not a 
regulatory requirement, but rather a potential element of an effective 
SPOE resolution strategy. The specified firms are not required to adopt 
a U.S. SPOE resolution strategy. To the extent a specified firm selects 
a U.S. SPOE resolution strategy, any reduction in flexibility would be 
balanced by benefits prepositioning provides in reducing uncertainty 
and enabling timely recapitalization of material entities. Furthermore, 
the agencies' reference to RCAP in the LTD preamble as one reason for 
not proposing IDI-level LTD requirements for U.S. GSIBs does not 
provide a rationale for excluding RCAP expectations from this guidance. 
First, in addition to RCAP expectations, the U.S. GSIBs are different 
in profile from these firms, and are subject to the most stringent 
capital, liquidity, and other prudential standards of all banking 
organizations that operate in the United States. Second, as noted 
above, the goals of this guidance would be complemented by additional 
LTD issued by specified firms, and the guidance is practicable in the 
absence of an LTD requirement.
    For firms that adopt a U.S. MPOE resolution strategy, the agencies 
did not propose further expectations concerning capital and asked a 
question about whether capital-related expectations should be applied. 
In response, one commenter agreed with the proposal that additional 
expectations are not warranted for firms using a U.S. MPOE resolution 
strategy, arguing that such expectations would serve no purpose.

[[Page 66518]]

However, another commenter contended that it is not prudent to assume 
that material entities within a holding company structure can be 
discontinued in an orderly manner and that, at a minimum, capital plans 
are needed for each material entity to preserve its value during the 
transition period between a firm's failure and when it can be sold or 
closed in an orderly way. The commenter asked the agencies to 
reconsider expectations for firms that adopt a U.S. MPOE resolution 
strategy and align them with expectations for firms that adopt a U.S. 
SPOE resolution strategy.
    The agencies have determined that additional capital expectations 
for firms selecting a U.S. MPOE resolution strategy are not necessary 
at this time. Under a U.S. MPOE resolution strategy, most material 
entities do not continue as going concerns upon the firm's entry into 
resolution proceedings and are likely to have already depleted existing 
capital requirements. Accordingly, the agencies are finalizing this 
section of the guidance as proposed.

E. Liquidity

    For firms that adopt a U.S. SPOE resolution strategy, the agencies 
proposed liquidity expectations substantially similar to those in the 
2020 Proposed FBO Guidance. A firm's ability to reliably estimate and 
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 subsidiaries to continue 
to operate while the firm is being resolved in accordance with the 
firm's resolution strategy. For firms that adopt a U.S. MPOE resolution 
strategy, the agencies proposed that a firm should have the liquidity 
capabilities necessary to execute its resolution strategy, and its plan 
should include analysis and projections of a range of liquidity needs 
during resolution.
    The agencies received numerous comments on the liquidity section of 
the proposed guidance. One commenter supported including RLAP 
expectations in the final guidance for firms that adopt a U.S. SPOE 
resolution strategy.
    Several commenters, however, requested that the agencies remove 
RLAP expectations from the final guidance, claiming that the 
expectation is redundant to certain liquidity requirements, such as the 
Liquidity Coverage Ratio (LCR) and Internal Liquidity Stress Testing 
(ILST). Several commenters also argued FBOs have reduced their 
activities in the United States, resulting in a reduced risk and 
financial stability profile, and that liquidity requirements set forth 
in existing regulatory requirements, and not RLAP, should set the 
binding constraint on the firms. In addition, one commenter expressed 
concern that RLAP expectations could make it more difficult for the 
global firm to deploy liquidity resources most effectively in stress. 
Several commenters also asserted that the agencies did not sufficiently 
explain the rationale for including RLAP expectations that the agencies 
had previously considered but omitted from the 2020 FBO Guidance.
    Another commenter requested that for firms that adopt a U.S. MPOE 
resolution strategy, the guidance strengthen expectations for liquidity 
in resolution by including a procedure or protocol for liquidity 
related decisions, irrespective of resolution strategy. The commenter 
argued that the guidance should identify the importance of overcoming 
barriers to moving liquidity across material legal entities and clarify 
which types of transfers of liquidity are permissible for material 
entities in resolution.
    After reviewing these comments, the agencies are finalizing this 
section of the guidance as proposed.\47\ While the agencies previously 
did not adopt RLAP expectations in the 2020 FBO Guidance, the agencies' 
recent experiences highlighted the fast-moving nature of bank failure 
and resolution and underscored the need to maintain sufficient and 
appropriately positioned liquidity across the IHC and its subsidiaries 
to be prepared for a successful U.S. SPOE resolution strategy. The 
agencies also believe that RLAP expectations are appropriate in light 
of recent events demonstrating that liquidity pressures on these firms 
can change dramatically over a short period of time. Having sufficient 
and appropriately positioned liquidity at the time of failure increases 
the probability that operating subsidiaries will have enough liquidity 
to be able to continue to operate while the firm is being resolved, and 
the RLAP expectations help achieve this goal.
---------------------------------------------------------------------------

    \47\ The agencies are clarifying one aspect of RLAP guidance 
that could be construed to impose a requirement on the specified 
firms.
---------------------------------------------------------------------------

    RLAP expectations are not addressed by ILST and other regulatory 
requirements. Maintaining sufficient and appropriately positioned 
liquidity is critical to executing a U.S. SPOE resolution strategy, 
regardless of the size and complexity of the banking organization. The 
LCR and ILST requirements that commenters referenced serve a different 
purpose--to promote resilience of firms' funding profiles--and are not 
focused on resolution planning.
    RLAP expectations also would not hinder a specified firm's global 
parent from deploying liquidity resources most effectively in stress. 
Unlike ILST and other regulatory requirements, RLAP is not a regulatory 
requirement, but rather an example of a decision-making framework for 
liquidity needs and positioning in support of an effective SPOE 
resolution strategy that could be consistent with effective resolution 
planning. As discussed elsewhere, the guidance is not a legally binding 
enforceable requirement and is therefore not a binding constraint, and 
the specified firms are not required to adopt a U.S. SPOE resolution 
strategy or develop RLAP capabilities. To the extent a specified firm 
adopts a U.S. SPOE resolution strategy and uses RLAP, any reduction in 
flexibility would be balanced against the benefits prepositioning 
provides in enabling subsidiaries to continue to operate while the firm 
is being resolved.
    Finally, the agencies are not establishing expectations for 
procedures or protocols for liquidity related decisions and clarifying 
the types of transfers of liquidity that are permissible for material 
entities in resolution for firms that adopt a U.S. MPOE strategy. The 
Rule already includes requirements for firms to include detailed 
descriptions of funding and liquidity needs and resources of material 
entities, and to identify interconnections and interdependencies 
related to liquidity arrangements.\48\ Beyond the assumptions specified 
in the final guidance related to liquidity, additional details of how 
each firm provisions liquidity in the lead up to and during resolution 
are not needed at this time. Furthermore, firms should follow 
procedures and protocols that are aligned with their larger liquidity 
management frameworks to facilitate their preferred resolution 
strategies.
---------------------------------------------------------------------------

    \48\ 12 CFR 243.5(c)(1)(iii) and (g) and 381.5(c)(1)(iii) and 
(g).
---------------------------------------------------------------------------

F. Governance Mechanisms

    The agencies proposed separate governance mechanisms expectations 
based on a firm's preferred resolution strategy. Specified firms that 
use an SPOE resolution strategy would have been expected to develop an 
adequate governance structure with triggers that identify the onset, 
continuation, and increase of financial stress to ensure that

[[Page 66519]]

there is sufficient time to prepare for resolution-related actions. For 
specified firms that adopt a U.S. MPOE resolution strategy, the 
agencies proposed providing governance mechanisms expectations to 
ensure communication and coordination between the governing body of the 
U.S. operations and the foreign parent.
    The agencies requested comment on whether to apply additional 
governance mechanisms expectations to firms contemplating a U.S. MPOE 
resolution strategy. One commenter called for the agencies to apply 
similar expectations regardless of a firm's preferred resolution 
strategy, arguing that many aspects of resolution planning are the same 
or similar for U.S. MPOE and U.S. SPOE resolution strategies. The 
commenter also encouraged the agencies to adopt expectations that firms 
articulate their internal legal strategy, processes for making key 
decisions, and roles and responsibilities leading up to and after 
bankruptcy. Another commenter argued in favor of not providing any 
governance mechanisms guidance to firms adopting a U.S. MPOE resolution 
strategy.
    Other commenters called on the agencies to limit the expectations 
for firms adopting a U.S. SPOE resolution strategy. These commenters 
contended that expectations should not apply to a specified firm that 
does not rely on foreign support or transfer of prepositioned resources 
during runway or resolution, and that the expectations as proposed were 
too prescriptive or burdensome. One commenter requested that the 
agencies clarify why expectations (for foreign parent support, 
triggers, and support within the United States) in the 2020 Proposed 
FBO Guidance but were not finalized were included in the proposed 
guidance for FBOs that adopt a U.S. SPOE resolution strategy.
    The agencies are finalizing this section of the guidance as 
proposed.\49\ For firms that adopt a U.S. MPOE resolution strategy, the 
governance mechanisms guidance already includes expectations regarding 
the role of U.S. board and senior management under the U.S. resolution 
strategy as well as expectations regarding triggers and other internal-
decision-making processes relating to the decision to implement the 
strategy. Adopting expectations for the processes for making key 
decisions, internal legal strategy, and roles and responsibilities 
would be duplicative. In addition, under a U.S. MPOE resolution 
strategy, certain material entities' entry into resolution is typically 
determined by or dependent on the actions of supervisory and resolution 
authorities. As a result, additional expectations similar to those 
included for a U.S. SPOE resolution strategy (additional triggers, 
playbooks, foreign parent support, and support within the United 
States) would not meaningfully improve the resolvability of specified 
firms adopting a U.S. MPOE resolution strategy.
---------------------------------------------------------------------------

    \49\ As noted above, the agencies made several minor, non-
substantive changes from the proposal, including to align the 
wording of guidance directed at firms that adopt a U.S. SPOE 
resolution strategy and firms that adopt a U.S. MPOE resolution 
strategy. The agencies also provided one minor clarifying example of 
an external stakeholder that could be relevant for purposes of a 
governance playbook.
---------------------------------------------------------------------------

    Governance mechanisms expectations for firms adopting a U.S. SPOE 
resolution strategy are reasonable in light of the events of March 
2023. The stress experienced by and the failure of several large 
banking organizations in March 2023 highlighted the potentially fast-
moving nature of bank resolution, as several banking organizations 
entered resolution proceedings rapidly. These events also highlighted 
the potential for the failure of a large regional banking organization 
to affect financial stability. Successful execution of a U.S. SPOE 
resolution strategy--including the timely escalation of information to 
both U.S. IHC and foreign parent governing bodies in order to mitigate 
vulnerabilities and take corresponding actions, and the transmission of 
resources to and within an FBO's U.S. material entity subsidiaries--is 
unlikely to be successful within a short time frame without advance 
planning, appropriate governance structures and processes, and 
assessment of possible impediments, legal or otherwise. Accordingly, in 
contrast to the 2020 FBO Guidance, this final guidance contains 
governance mechanisms expectations related to foreign parent support, 
triggers, and support within the United States for specified firms 
adopting a U.S. SPOE resolution strategy. Because the Rule requires 
firms to contemplate resolution under the Bankruptcy Code, resolution-
specific triggers facilitating communication and coordination are 
appropriate to promote resolvability even if a firm monitors and 
controls capital and liquidity and operations in business-as-usual 
(BAU) and if the preferred strategy of an FBO is a successful home 
country resolution. The agencies note that firms' BAU processes and 
procedures may be relevant to, and could inform, such resolution 
capabilities.
    In addition, while a firm may understand the current legal risks 
associated with its preferred resolution strategy under the Bankruptcy 
Code, commercial and bankruptcy law and precedent evolve, and it is 
important that a firm's plan reflect an up-to-date assessment of 
possible legal challenges and potential mitigants. The expectation that 
a resolution plan includes such an analysis of potential challenges 
does not constrain firms' ability to determine the particular form and 
structure of the framework developed to support its particular 
resolution strategy and needs. The agencies also note that the guidance 
only relates to an analysis of planned support; there are no 
expectations that a plan should provide for such support.
    Regarding the provision of foreign support or transfer of 
prepositioned resources during runway or resolution, it should be noted 
that neither the final guidance nor the Rule endorses a specific 
mechanism for the provision of such support. Instead, a firm that 
adopts a U.S. SPOE resolution strategy should explain in its resolution 
plan how it will meet its U.S. resource needs, such as through 
prepositioning, parent support, and other options.

G. Operational

    For firms that adopt a U.S. SPOE resolution strategy, the agencies 
proposed adopting portions of the operational expectations of the 2020 
FBO Guidance, 2020 Proposed FBO Guidance, and SR letter 14-1,\50\ with 
modifications based on the specific characteristics and complexities of 
the specified firms. The proposal contained expectations on payments, 
clearing, and settlement activities (PCS); managing, identifying, and 
valuing collateral; management information systems; shared and 
outsourced services; and qualified financial contracts (QFC). For firms 
that adopt a U.S. MPOE resolution strategy, the agencies proposed 
expectations based on SR letter 14-1 and the 2020 FBO Guidance that are 
most relevant to a U.S. MPOE resolution strategy. As noted in the 
proposal, 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. The failure of several large 
banking organizations in March 2023 highlighted the importance of firm 
capabilities to generate timely and accurate data on a material entity 
basis. For example, having the ability to

[[Page 66520]]

produce a list of key management and support employees at the legal 
entity level is critical both to continue operations pursuant to a U.S. 
SPOE resolution strategy and to facilitate the work of resolution 
authorities in a U.S. MPOE resolution strategy. As a result, in a 
change from the 2020 FBO Guidance, the agencies proposed and are now 
finalizing management information systems guidance for both U.S. SPOE 
and U.S. MPOE resolution strategies. The agencies also proposed, in a 
change from the 2020 FBO Guidance, and are now finalizing guidance on 
QFCs for the U.S. SPOE resolution strategy, as not all firms subject to 
the final guidance are subject to the QFC stay rules of the Board, 
Office of the Comptroller of the Currency, and the FDIC.\51\
---------------------------------------------------------------------------

    \50\ 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.
    \51\ See 12 CFR part 47 (Office of the Comptroller of the 
Currency); 12 CFR part 252, subpart I (Board); and 12 CFR part 382 
(FDIC).
---------------------------------------------------------------------------

    The Agencies received three comments on the proposed guidance. One 
commenter suggested that the proposed guidance related to management 
information systems, qualified financial contracts, and shared and 
outsourced services should help strengthen the specified firms' 
operational readiness. Another commenter argued that the proposed 
guidance's expectation that MPOE firms remediate vendor arrangements to 
support continuity of shared and outsourced services is overbroad. The 
commenter asserted that this expectation is inappropriate for MPOE 
firms that mostly receive external services through its IDI because 
termination of such vendor contracts due to ipso facto clauses would be 
stayed by the FDI Act,\52\ and as many firms include resolution-
resilient terms in vendor contracts when those contracts undergo 
periodic review and renewal. The commenter recommended that the 
Agencies specify that this expectation would apply only to contracts 
not covered by the FDI Act stay. Another commenter contended that firms 
with limited PCS activities, such as firms without identified critical 
operations related to those activities, should not have to develop the 
same capabilities as firms with more complex PCS activities.
---------------------------------------------------------------------------

    \52\ See 12 U.S.C. 1821(e)(13)(A).
---------------------------------------------------------------------------

    After review and consideration of these comments, the agencies are 
finalizing this area of the guidance with one clarification applicable 
only to firms that adopt a U.S. SPOE strategy, and one modification 
applicable to firms with either U.S. resolution strategy. The proposed 
guidance for firms that adopt a U.S. SPOE strategy stated that a firm 
should maintain a fully actionable implementation plan to ensure the 
continuity of shared services that support identified critical 
operations or core business lines. Implied in the concept of supporting 
identified critical operations or core business lines is the notion 
that a firm would need to be able to execute its resolution strategy. 
Accordingly, the final guidance for firms that adopt a U.S. SPOE 
strategy explicitly states that a firm's implementation plan to ensure 
continuity of shared services should include those services that are 
material to the execution of the firm's resolution strategy.
    The agencies recognize that firms anticipate relying on external 
parties for the execution of some aspects of the resolution strategy, 
and the proposal included and the final guidance maintains the 
expectation that a firm identify and support the continuity of 
outsourced services that support critical operations or are material to 
the execution of the U.S. resolution strategy. Such outsourced services 
that firms may rely on could be employing outside bankruptcy counsel 
and consultants to help prepare documents needed to file for 
bankruptcy, and to represent the firm during the course of the 
bankruptcy proceedings. The agencies expect that covered companies 
engage in advance planning to help facilitate their ability to complete 
all filings, motions, supporting declarations and other documents to 
prepare for and file an orderly resolution in bankruptcy. In 
recognition of this expectation, the final guidance clarifies that--
regardless of strategy--those professionals' services could be material 
to the execution of a firm's U.S. resolution strategy and, if so, 
should be accounted for in the firm's resolution plan. Accordingly, the 
agencies expect that firms should prepare during business-as-usual to 
ensure they can complete and file all documents needed to initiate 
their preferred resolution strategy.
    The other aspects of this section of the guidance are being 
finalized as proposed. The comment addressing contract remediation 
correctly observes that the FDI Act permits the FDIC as receiver of a 
failed IDI to enforce contracts with that IDI notwithstanding any 
provisions in the contract permitting termination due to insolvency or 
appointment of the receiver. However, it is advantageous for contracts 
that support identified critical operations or that are material to the 
execution of the resolution strategy to not purport to permit 
termination. Counterparties may not be aware of the receiver's 
authority under the FDI Act to enforce such agreements, potentially 
requiring the receiver to seek authority from a court to compel the 
counterparty's performance, which could lead to interruption of 
identified critical operations and capabilities needed to execute the 
resolution strategy. Further, counterparties located overseas may not 
recognize the authority afforded the receiver to compel the performance 
of contracts. The agencies recognize that contract remediation is an 
ongoing process and encourage firms to make such changes proactively.
    Regarding PCS activities, as discussed elsewhere,\53\ the Agencies 
note that the level of detail provided in a firm's plan should be both 
consistent and commensurate with the firm's risk and activities.
---------------------------------------------------------------------------

    \53\ See infra section III.M of this document.
---------------------------------------------------------------------------

H. Legal Entity Rationalization and Separability

    For foreign banking organizations that adopt a U.S. SPOE resolution 
strategy, the agencies proposed substantively adopting legal entity 
rationalization (LER) expectations from the 2020 FBO Guidance and 
separability expectations from the 2020 FBO Proposed Guidance. The LER 
expectations stated that firms should maintain a structure that 
facilitates orderly resolution of their operations, including by 
developing and describing criteria that consider the best alignment of 
legal entities and business lines and facilitate resolvability of U.S. 
operations. The separability expectations provided that firms should 
identify discrete U.S. operations that could be sold or transferred in 
resolution under a range of potential failure scenarios. The agencies 
declined to finalize the separability expectations in the 2020 Proposed 
FBO Guidance, stating that the agencies had found that the separability 
options within the United States were few, their inclusion in 
resolution plans had yielded limited new insights, and the agencies 
expected that such information would be obtainable through 
international collaboration with home country regulators.
    For FBOs that adopt a U.S. MPOE resolution strategy, the agencies 
proposed adopting LER expectations that were reduced relative to the 
2020 FBO Guidance and separability expectations that were similarly 
reduced relative to the 2020 FBO Proposed Guidance. The LER 
expectations clarified that these firms should have legal entity 
structures that support their U.S. resolution strategy and describe 
these structures in their

[[Page 66521]]

plans, as well as discuss their rationale for the legal entity 
structure in cases where a material entity IDI relies on other 
affiliates during resolution. The separability expectations requested 
that firms include options for the sale, transfer, or disposal of 
significant assets, portfolios, legal entities, or business lines in 
resolution.
    The agencies received two comments on the separability guidance for 
foreign banking organizations. One commenter contended that 
separability analysis is inappropriate for businesses and legal 
entities that would be wound down in resolution, as it may not be 
feasible to sell or otherwise transfer such businesses, and that 
separability analysis would not enhance resolvability. The commenter 
further noted that many elements of the separability analysis may not 
be appropriate for firms that are not active in the investment banking 
space or lack large mergers and acquisitions teams. Another commenter 
called on the agencies not to reimpose separability expectations that 
had been proposed in 2020 but removed from the final 2020 FBO Guidance, 
instead suggesting that the agencies obtain separability insights 
through collaboration with home country regulators.
    After review and consideration of the comments, the agencies are 
finalizing this guidance as proposed. The application of LER and 
separability expectations to FBOs, whether they adopt an SPOE or MPOE 
strategy, remains appropriate because these firms have significant non-
bank or cross-national activities, as well as interconnections among 
U.S. IHC subsidiaries, U.S. branches, and the foreign parent. The 2023 
bank failures highlighted the benefit of understanding the separability 
options of U.S. operations of FBOs, particularly for the purpose of 
informing discussions with foreign regulatory authorities regarding the 
potential restructuring of an FBO's U.S. operations in resolution. 
While the agencies continue to discuss firm separability and other 
topics with home country regulators, identification of separability 
options for U.S. operations and inclusion of supporting analysis in 
resolution plans provides important information to complement and 
enhance ongoing international coordination.
    Finally, the agencies moved expectations on LER governance 
processes from the separability section to the LER section of the 
guidance text.

I. Insured Depository Institution Resolution

Background

    In the proposal, the agencies provided clarifying expectations as 
to how a firm adopting a U.S. MPOE resolution strategy with a material 
entity IDI should explain how the IDI can be resolved under the FDI Act 
in a manner that is consistent with the overall objectives of the 
resolution plan. In particular, the proposed expectations for IDI 
resolution were designed to support the resolution plans' effectiveness 
in substantially mitigating 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 legal requirements of the FDI 
Act without relying on the assumption that the systemic risk exception 
will be invoked in connection with the resolution of the firm. For 
example, the agencies proposed clarifying that if a firm adopting a 
U.S. MPOE resolution strategy selects an IDI resolution strategy other 
than a payout liquidation, the firm's plan should provide information 
supporting the feasibility of the firm's selected strategy, although 
such a feasibility analysis need not consist of a full FDI Act least-
cost requirement analysis. The agencies proposed that a firm could 
instead provide a more limited analysis. The proposal noted that the 
same expectations would not be applicable to firms adopting an SPOE 
resolution strategy because the U.S. IDI subsidiaries of such firms 
would not be expected to enter resolution.
    The agencies received a number of comments on the proposed guidance 
related to the resolution of a subsidiary material entity U.S. IDI. 
Some commenters requested additional clarity on how the firm's plan 
should address the expectation that the plan include an analysis of how 
the resolution strategy could potentially meet the FDIC's statutory 
least-cost requirement. One commenter suggested that the agencies 
should require firms to develop resolution strategies involving BDIs. 
This commenter recommended that the guidance address how firms could 
describe and quantify the value of the firm's assets transferred to 
such a BDI, and that the agencies should provide guidance so that firms 
would address how the resolution plan would incorporate the value of 
the IDI's assets and liabilities, including its franchise value, and 
how the preferred resolution strategy would result in a least-costly 
resolution. The commenter also recommended that firms and regulators 
reach agreement on certain assumptions regarding valuations.
    Another commenter argued that firms adopting a U.S. MPOE strategy 
should not be expected to demonstrate that their preferred strategy 
would be consistent with the FDIC's statutory least-cost requirement. 
This commenter stated that efforts to conduct a hypothetical least-cost 
requirement analysis, or a proxy for that analysis, would be of no or 
minimal value to the FDIC in an actual resolution event. The commenter 
claimed that it would not be possible to conduct a least-cost test 
requirement analysis in a resolution plan submission in the absence of 
actual bids from actual buyers. Instead, the commenter recommended that 
the guidance provide expectations for how firms selecting a U.S. MPOE 
strategy could demonstrate their valuation capabilities. The commenter 
also suggested that because a least-cost requirement analysis is not a 
component of the Proposed IDI Rule, it also should not be a component 
of the guidance. This commenter requested sufficient time to address 
any finalized guidance that provides expectations for including least-
cost requirement analysis.
    Several commenters suggested that the Proposed IDI Rule is a better 
forum to address how the IDI subsidiary of a specified firm selecting a 
U.S. MPOE strategy can be resolved under the FDI Act in a manner that 
is consistent with the FDI Act. Several commenters also suggested that 
the agencies' expectations for resolution plan submissions under the 
Rule should align with the requirements of the FDIC's IDI Rule plan 
submissions.
    One commenter questioned whether firms have sufficient information 
about how the FDIC would conduct a least-cost test analysis in order 
for a firm to conduct an analysis of whether its preferred strategy 
could meet the FDIC's statutory least-cost requirement. This commenter 
stated that meeting the expectations in the proposal would involve 
significantly more detail and comparative analysis than the IDI Rule, 
and that, in order to prevent inconsistency and undue burden, the 
guidance should instead follow the IDI Rule so that firms can reference 
their IDI Rule submissions when preparing and submitting resolution 
plans under the guidance to reduce duplication and increase 
consistency.
    When an IDI fails and the FDIC is appointed receiver, the FDIC 
generally must use the resolution option for the failed IDI that is 
least costly to the DIF of all possible methods (the least-cost

[[Page 66522]]

requirement).\54\ A resolution plan that contemplates the separate 
resolution of a U.S. IDI that is a material entity and the appointment 
of the FDIC as receiver for that IDI should explain how the resolution 
could be achieved in a manner that adheres to applicable law, including 
the FDI Act, and that would achieve the overall objectives of the 
resolution plan. Prior resolution plans that have addressed the 
resolution of the IDIs in MPOE strategies have sometimes included 
resolution mechanics that are not consistent with the FDI Act, 
including inappropriate assumptions that uninsured deposits could 
automatically be transferred to a BDI.
---------------------------------------------------------------------------

    \54\ See 12 U.S.C. 1823(c)(4)(A). 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). An exception to this 
requirement exists when 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. See 
12 U.S.C. 1823(c)(4)(G). A specified firm should not assume the use 
of this systemic risk exception to the least-cost requirement in its 
resolution plan.
---------------------------------------------------------------------------

    Separate and distinct from the Rule, the FDIC has a regulation, the 
IDI Rule, requiring certain IDIs (covered IDIs or CIDIs) to submit to 
the FDIC resolution plans providing information about how the CIDI can 
be resolved under the FDI Act. Contemporaneous with publication of the 
proposed guidance, the FDIC published in the Federal Register the 
Proposed IDI Rule, a proposed rulemaking to amend and restate the IDI 
Rule, which has since been finalized and was published in the Federal 
Register on July 9, 2024.
    The IDI Rule and the Rule each have different goals, and, 
accordingly, the expected content of the respective resolution plans is 
different. The purpose of the IDI Rule is to ensure that the FDIC has 
access to the information it needs to resolve a CIDI efficiently in the 
event of its failure, including an understanding of the CIDI's ability 
to produce the information the FDIC would need to conduct a least-cost 
determination under a wide range of circumstances.
    The Rule serves a different purpose. The Rule requires a covered 
company to submit a resolution plan that would allow rapid and orderly 
resolution of the subsidiaries and operations of a foreign covered 
company that are domiciled in the United States under the Bankruptcy 
Code in the event of material financial distress or failure. The 
regional bank failures in March 2023 demonstrated that banking 
organizations of size and complexity similar to that of the specified 
firms--or even smaller and less complex banking organizations--can be 
disruptive to U.S. financial stability. In the case of Silicon Valley 
Bank and Signature Bank, uninsured depositors would have faced the 
potential for significant losses had the least costly approach to 
resolution, a payout liquidation, been adopted. The potential for 
contagion from the deposit runs at the firms that failed, as well as 
related potential for risks to the economy and financial stability, led 
the Secretary of the Treasury, in consultation with the President and 
after a written recommendation from the FDIC's Board of Directors and 
the Board, to invoke the systemic risk exception to enable the FDIC to 
resolve these institutions in a way that would avoid or mitigate 
serious adverse effects on economic conditions or financial stability. 
Though a specified firm would be conducting its analysis without input 
in the form of actual bids from potential buyers, the agencies expect 
firms to use available information to estimate the value of its 
franchise for purposes of conducting the limited least-cost analysis 
articulated in the guidance.
    If a firm's resolution plan under the Rule that includes a U.S. 
MPOE strategy calls for resolving an IDI using a strategy other than 
payout liquidation, the plan should explain how the requirements of the 
FDI Act could be met without depending upon extraordinary government 
support. Even though this analysis is not binding in an actual 
resolution scenario, an analysis showing that the firm's preferred 
resolution strategy could satisfy requirements of the FDI Act could 
help the firm demonstrate that the resolution plan's preferred strategy 
could be executed in a manner consistent with applicable law. If a 
resolution plan does not provide such an explanation, it may be 
appropriate to conclude that the strategy would not satisfy the FDI 
Act's relevant provisions, such as the least-cost requirement, which 
could represent a weakness in the plan. As a general matter, the 
agencies followed this practice in reviewing previous full resolution 
plan submissions.
    Guidance. In response to commenters, the agencies are providing 
additional detail to help address commenters' questions related to the 
FDI Act's least-cost requirement and how it relates to the expectations 
in this final guidance. The final guidance does not express a change in 
the agencies' expectations. Instead, the final guidance provides more 
detail on approaches a firm can use to explain how the resolution of 
its IDI subsidiary can be achieved in a manner that substantially 
mitigates the risk that the firm's failure would have serious adverse 
effects on U.S. financial stability while also complying with the 
statutory and regulatory requirements governing IDI resolution. The 
final guidance lists a number of different common strategies for 
resolving an IDI and describes the kind of information that a firm 
could provide to explain how a resolution using one of the example 
strategies could be consistent with the least-cost requirement. The 
final guidance also provides information about calculating the value of 
an IDI's assets and its franchise value. Finally, the final guidance 
explicitly notes that the agencies are not expecting a firm to provide 
a complete least-cost analysis.

Strategies for Resolving an IDI

    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.\55\ This transaction form, termed a purchase and 
assumption or P&A transaction, has often been the resolution approach 
that is least costly to the DIF, and is usually considered the easiest 
for the FDIC to execute and the 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).
---------------------------------------------------------------------------

    \55\ See generally https://www.fdic.gov/resources/resolutions/bank-failures/ for background about the resolution of IDIs by the 
FDIC.
---------------------------------------------------------------------------

    The limited size and operational complexity present in most small-
bank failures have been significant factors in allowing the FDIC to 
execute P&A transactions with a single acquirer on numerous occasions. 
Resolving an IDI via a P&A transaction over the closing weekend, 
however, has not always been 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. The acquiring banks must also have sufficient excess capital 
to absorb the failed IDI's assets and deposit franchise, sufficient 
expertise to manage business integration, and the ability to comply

[[Page 66523]]

with several legal requirements. Larger failed banks can pose 
significant, and potentially systemic, challenges in resolutions that 
make a P&A transaction less viable. These challenges include: a more 
limited pool of potential acquirers as a failed IDI increases in size; 
operational complexities that require lengthy advance planning on the 
part of the IDI and the FDIC; the development of certain expertise; 
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.
    Alternative Resolution Strategies. 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.
    Payout Liquidation. 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. A payout liquidation is 
often the most costly and disruptive resolution strategy because of 
this destruction of franchise value and the FDIC's direct payment of 
insured deposits.
    Bridge Depository Institution. If the FDIC determines that 
temporarily continuing the operations of the failed IDI is less costly 
than a payout liquidation, the FDIC may organize a BDI to purchase 
certain assets and assume certain liabilities of the failed IDI.\56\ 
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 BDI leadership. In addition to providing depositors 
continued 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 exit and 
termination of 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.\57\ 
While utilizing a BDI can avoid the negative effects of a payout 
liquidation, such as destruction of franchise value, 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.
---------------------------------------------------------------------------

    \56\ 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 demonstrates separately 
that the conditions for chartering the BDI have been satisfied.
    \57\ 12 U.S.C. 1821(n)(10).
---------------------------------------------------------------------------

    Though one commenter suggested that the guidance should require 
firms to develop resolution strategies involving BDIs, the agencies do 
not maintain an expectation that firms will develop resolution 
strategies involving BDIs. The expectations provided in this guidance 
are also intended to be helpful to firms that have chosen to involve a 
BDI in their resolution strategy.
    Least-Cost Analysis for Resolution Plans. The final guidance does 
not include an expectation that firms provide in their resolution plans 
a complete least-cost analysis. Such an analysis would, for example, 
include a comparison of the preferred strategy for resolving an IDI 
that is a material entity against every other possible resolution 
method. While a firm may choose to provide a complete least-cost 
analysis, this guidance discusses expectations regarding a limited 
least-cost analysis that would explain how the firm's preferred U.S. 
strategy is not more costly than a payout liquidation and, if 
applicable, an insured-only BDI.
    One commenter suggested that the agencies should provide guidance 
for how firms should address the valuation of an IDI's assets and 
liabilities, including its franchise value. In this final guidance, the 
agencies are providing additional explanation for how firms can develop 
and support the valuation of the IDI's assets and liabilities in an IDI 
resolution. This guidance includes a description of how firms can 
assess the franchise value of a firm's business.
    Example. The following example should be read in conjunction with 
section VIII of the guidance text, Insured Depository Institution 
Resolution. This example is only intended to provide firms with an 
illustration of the types of considerations and calculations that could 
be included in a firm's analysis explaining how its preferred strategy 
would be less costly than a payout liquidation and, if applicable, an 
insured-only BDI. This example is not intended to serve as a template 
for firms or to provide guidelines for reasonable valuations of a 
firm's assets or liabilities. The valuations described in this example 
are intended to be illustrative and are not guidance about the likely 
values of a firm's assets and liabilities in an individual resolution 
plan or in resolution.
    Bank A has $500 billion in total assets, consisting of $250 billion 
loans; $75 billion cash and equivalents; $125 billion in investment 
securities; and other assets totaling $50 billion. The bank's initial 
funding structure consists of $400 billion in deposits; $25 billion in 
various unsecured payables and debt; $25 billion in secured funding; 
and $50 billion in capital instruments. For this example, the bank 
assumes it would encounter idiosyncratic events at a time when severely 
adverse economic conditions are present and this combination of events 
would cause the bank to be closed by the chartering authority and the 
FDIC appointed as receiver. The illustrative tables below reflect 
values as of the appointment of the FDIC as receiver.
    The initial events combine to cause immediate losses of $25 billion 
recognized as direct operating charges and $15 billion through write-
downs/provision expense for the loan portfolio, and $60 billion of 
deposit runoff occurs.
     For purposes of conducting the analysis, the firm's 
management assumes that additional value diminution is present in the 
loan portfolio. Accordingly, after thoroughly analyzing the quality of 
its loan portfolio and determining the potential for additional credit 
losses, as well as considering the market value of the loan portfolio 
based upon the type of loans it holds in comparison with comparable 
sales transactions, and after further considering sensitivity testing, 
management supports an estimate near $175 billion for the loan 
portfolio.
     In developing its Resolution Plan, the firm's management 
further supports that $40 billion of additional deposit runoff would 
occur in addition to the initial $60 billion. At the time of failure, 
Bank A's remaining $300 billion of deposits are 60 percent insured and 
40

[[Page 66524]]

percent uninsured. The ratio of insured deposits to uninsured deposits 
is used to calculate the pro rata recovery of depositors and the losses 
imposed on the DIF as a result.\58\
---------------------------------------------------------------------------

    \58\ See infra note 60.
---------------------------------------------------------------------------

     The deposit runoff is assumed to be met by using $50 
billion of cash and selling $50 billion of investment securities. The 
remaining $75 billion investment portfolio is entirely invested in 
short-term U.S. Treasury securities with an estimated value of $70 
billion.
     The other assets are implicated in the initial 
idiosyncratic loss. These other assets include fixed assets, foreclosed 
property, intellectual property, and miscellaneous items with a market 
value of $25 billion.
     As shown in table 1, the Plan provides an analysis of the 
payout liquidation strategy. This strategy includes an expected loss to 
the DIF of $18 billion.
---------------------------------------------------------------------------

    \59\ Calculation: (1) $295 billion asset value less secured 
claim of $25 billion = $270 billion available to depositors and 
junior claims; (2) $270 billion available spread pro-rata across 
$300 billion depositor class; 60 percent insured deposits and 40 
percent uninsured deposits; (3) $270 billion x .6 = $162 billion 
paid to insured depositors; $270 billion x .4 = $108 billion paid to 
uninsured depositors.

                        Table 1--Illustration of Bank A Payout Liquidation--Cost Estimate
                                              [dollars in billions]
----------------------------------------------------------------------------------------------------------------
             Liquidation market value                  Payout liquidation liability claim and amount recovered
----------------------------------------------------------------------------------------------------------------
             Category                    Value             Category             Claim         Recovery/(loss)
----------------------------------------------------------------------------------------------------------------
Loans.............................            $175  Secured Claims.......             $25  $25/($0)
Securities........................              70  Deposits Insured.....             180  $162/($18)
----------------------------------------------------------------------------------------------------------------
Cash..............................              25    FDIC incurs the loss for the insured deposits so that all
Other.............................              25                insured deposits are fully repaid.
                                   -----------------------------------------------------------------------------
    Total.........................             295  Deposits Uninsured...             120  $108/($12)
                                                    Unsecured Claims/Debt              25  $0/($25)
                                                    Equity Holders.......  ..............  No recovery
----------------------------------------------------------------------------------------------------------------
Loss to Deposit Insurance Fund (to make whole insured depositors) = $18 billion \59\
Losses to uninsured depositors = $12 billion.

     However, the Plan also asserts and supports that the 
payout liquidation approach fails to reflect the franchise value of the 
combined deposit and loan relationships stemming from considerations 
such as the low administrative costs associated with servicing large 
deposits, the elimination of significant customer acquisition costs, 
the stable fee income stream associated with the accounts due to 
barriers to entry for certain products, and the importance and value of 
integrating the loan and deposit products.
     The Plan calculates, and provides the analysis supporting 
the calculation, that the economic benefit of packaging these benefits 
together in an all-deposit BDI is $20 billion, which is reflected as a 
bid premium to liquidation pricing in table 2.
     The result is that the all-deposit BDI is less costly to 
the DIF than liquidation because of the inclusion of the bid premium.

                        Table 2--Illustration of Bank A Preferred Strategy--Cost Estimate
                                              [dollars in billions]
----------------------------------------------------------------------------------------------------------------
          All deposit bridge market value           All deposit bridge bank liability claim and amount recovered
----------------------------------------------------------------------------------------------------------------
             Category                    Value             Category             Claim         Recovery/(loss)
----------------------------------------------------------------------------------------------------------------
Loans.............................            $175  Secured Claims.......             $25  $25/($0)
Securities........................              70  Deposits Insured.....             180  $174/($6)
----------------------------------------------------------------------------------------------------------------
Cash..............................              25    FDIC incurs the loss for the insured deposits so that all
Other.............................              25                insured deposits are fully repaid.
                                                   -------------------------------------------------------------
Sub Total.........................             295  Deposits Uninsured...             120  $116/($4)*
Bid Premium.......................              20  Unsecured Claims/Debt              25  $0/($25)
                                   -----------------------------------------------------------------------------
    Total.........................             315  Equity Holders.......  ..............  No recovery
----------------------------------------------------------------------------------------------------------------
Loss to Deposit Insurance Fund (to make whole insured and uninsured depositors) = $10 billion, which is less
  than the payout liquidation loss.\60\
* Losses to uninsured depositors total $4 billion and are absorbed by the DIF.

J. Derivatives and Trading Activities
---------------------------------------------------------------------------

    \60\ Calculation: (1) $315 billion asset value less secured 
claim of $25 billion = $290 billion available to depositors and 
junior claims; (2) $290 billion available spread pro-rata across 
$300 billion depositor class; 60 percent insured deposits and 40 
percent uninsured deposits; (3) $290 billion x .6 = $174 billion 
paid to insured depositors; $290 billion x .4 = $116 billion paid to 
uninsured depositors.
---------------------------------------------------------------------------

    The agencies requested comment on whether to provide derivatives 
and trading activities guidance for specified firms that adopt a U.S. 
SPOE or MPOE resolution strategy. Some commenters argued that no 
derivatives and trading guidance is needed for foreign triennial full 
filers because they have limited derivatives and trading portfolios, 
particularly relative to the U.S. GSIB banking organizations covered by 
such guidance. These commenters also noted that not all of the biennial 
filers, which are Category I firms, are subject to this type of 
guidance. These commenters also argued that if the agencies adopt

[[Page 66525]]

guidance on this topic, the agencies should be careful to avoid 
extraterritorial application of the guidance and should use the 
derivatives and trading expectations in the 2020 FBO Guidance for 
certain FBOs as a model, rather than the expectations in the 2020 
Proposed FBO Guidance.
    Other commenters supported providing such guidance to foreign 
triennial full filers, despite observing that these firms engage in 
less activity than the biennial filers. One commenter cautioned that 
derivatives activities for foreign triennial full filers may increase 
in the future and proposed the inclusion of an orderly-wind-down 
analysis for firms with net derivatives exceeding a given threshold. 
Another commenter recommended that the guidance include expectations 
for: roles and responsibilities in derivatives unwind, plan reporting 
regarding derivatives exposures, plan risk assessments in cross-border 
activity, barriers to swift unwind of derivatives activities booked 
outside the United States, and capabilities to generate detailed 
derivative reports. This commenter also argued that firms should 
specify plans to wind-down between affiliates and external 
counterparties, as well as describe potential sale of some trading 
positions.
    After reviewing the comments and considering the scope of 
derivatives and trading activities of foreign triennial full 
filers,\61\ the agencies determined that the banking organizations that 
would be specified firms have limited derivatives and trading 
operations compared to the subset of Category I firms that are the 
subject of derivatives and trading guidance. The agencies also note 
that the Rule includes certain requirements regarding derivatives and 
trading activities with which all covered companies--including foreign 
triennial full filers--must comply, as well as the overall requirement 
to provide a strategic analysis describing the covered company's plan 
for orderly resolution.\62\ The agencies believe that for this set of 
covered companies (including the two firms that are in scope of the 
2020 FBO guidance), given their current activities, the topic of 
derivatives and trading activities is sufficiently addressed by the 
Rule. The agencies are therefore finalizing the guidance without 
including expectations on derivatives and trading activity for the 
specified firms.
---------------------------------------------------------------------------

    \61\ See FR Y-15 Systemic Risk Report, 2nd quarter 2023 data. 
Publicly available at the National Information Center, https://www.ffiec.gov/NPW. See also Quarterly Report on Bank Trading and 
Derivatives Activities--Third Quarter 2023. Publicly available at 
https://www.occ.gov/publications-and-resources/publications/quarterly-report-on-bank-trading-and-derivatives-activities/index-quarterly-report-on-bank-trading-and-derivatives-activities.html.
    See 12 CFR 243.2 and 381.2; 12 CFR 243.5(c) and (e)(6)-(7), and 
381.5(c) and (e)(6)-(7).
    \62\ Id.
---------------------------------------------------------------------------

    The agencies also recognize that derivatives activity or risk for 
foreign triennial full filers may change in the future. The agencies 
may consider the need for firm-specific derivatives and trading 
expectations in the future for specified firms that substantially 
increase their derivatives and trading activities or change in a way 
such that having a strategy to wind-down their derivatives portfolios 
is critical to their resolvability.

K. Branches

    The agencies received no comments regarding the branches section of 
the proposed guidance. The agencies are finalizing the section as 
proposed.

L. Format and Structure of Plans; Assumptions

    This section of the proposal described the agencies' preferred 
presentation regarding the format, assumptions, and structure of 
resolution plans. Under the proposal, plans would have been expected to 
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 
were generally similar to those in the 2020 FBO Guidance, except that 
the proposed guidance reflected the expectations that (a) 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 clarified expectations around such assumptions, and (b) 
a firm 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 a U.S. 
MPOE resolution strategy, the proposal included the expectation that a 
plan should demonstrate and describe how the failure event(s) results 
in material financial distress of the firm's U.S. operations, including 
consideration of the likelihood of the diminution the firm's liquidity 
and capital levels prior to bankruptcy.
    The final guidance also includes an expectation contained in the 
2019 U.S. GSIB Guidance and 2020 FBO Guidance regarding the parameters 
of economic forecasting in resolution plan submission. Those guidance 
documents stated that a resolution plan should assume the Dodd-Frank 
Act Stress Test (DFAST) severely adverse scenario for the first quarter 
of the calendar year in which a resolution is submitted is the domestic 
and international economic environment at the time of the firm's 
failure and throughout the resolution process.\63\ While this 
assumption is similar to a provision in the Rule,\64\ the agencies 
believe it is important to provide guidance to firms about the timing 
of the required assumption in the Rule. The Board provides DFAST 
scenario information to the specified firms through the Board's public 
website. As such, the information is available to specified firms who 
themselves or their IHC subsidiaries are not subject to stress testing 
requirements.\65\
---------------------------------------------------------------------------

    \63\ 2019 U.S. GSIB Guidance at 84 FR 1459; 2020 FBO Guidance at 
85 FR 83578.
    \64\ 12 CFR 243.4(h)(1) and 381.4(h)(1).
    \65\ https://www.federalreserve.gov/publications/dodd-frank-act-stress-test-publications.htm.
---------------------------------------------------------------------------

    The agencies received one comment in response to a question posed 
regarding assumptions related to lending facilities, including the 
Discount Window. The commenter supported the proposed assumptions 
guidance regarding these facilities and recommended that the agencies 
consider providing additional guidance on the assumptions related to 
the amount, timing, and limitations of liquidity that might become 
available from these sources. However, the additional guidance 
requested by the commenter is unnecessary, and the agencies are 
finalizing this section of the guidance as proposed with one 
clarification. Specifically, the proposed guidance regarding the 
relevant assumption already includes references to timing and 
limitations of liquidity commensurate with the activities of firms 
subject to the guidance.
    As a clarification, the agencies have added a reference to Federal 
Home Loan Banks (FHLBs) as a type of borrowing for which firms should 
provide support in their resolution plans if they assume access during 
the period immediately prior to entering bankruptcy. The agencies' 
experiences in 2023 showed that many IDIs depend heavily on FHLB 
funding in times of stress and, accordingly, the agencies expect firms 
to be prepared to support any assumptions around such reliance for 
resolution planning purposes.
    The agencies also received a comment recommending that more of 
firms' resolution plans be disclosed publicly to promote market 
discipline and specifically asking that the public portion of 
resolution plans describe

[[Page 66526]]

potential acquirers of operations in the event of resolution. The Rule 
establishes at a high-level the required content of the public section 
of a resolution plan,\66\ and this final guidance clarifies the 
agencies' expectations with respect to that section. The agencies are 
mindful that the public disclosure of resolution plans, which may 
contain private commercial information, has both benefits and 
drawbacks, and the agencies believe that, at the moment, the Rule--
revisions to which are outside the scope of this guidance--and the 
final guidance appropriately balance transparency with confidentiality.
---------------------------------------------------------------------------

    \66\ 12 CFR 243.11(c) and 381.11(c).
---------------------------------------------------------------------------

    In addition, the agencies received two comments requesting 
clarification of the definition of ``material entity'' as applied to 
certain non-U.S. entities, such as foreign offices, in order to improve 
the alignment of U.S. resolution planning with home country strategies. 
In particular, the commenter contended that an aspect of the proposed 
guidance, which concerned assumptions regarding material entities, was 
inconsistent with the Rule. This was not the agencies' intent, and the 
final guidance modifies the assumption's description of ``material 
entity'' for consistency with the Rule by adopting the language for 
that provision in the final 2020 FBO Guidance.
    The agencies are otherwise finalizing this section of the guidance 
as proposed.\67\ The agencies did not receive any comments in response 
to the proposal's request for comments about answers to frequently 
asked questions, and the agencies have not included those prior answers 
to frequently asked questions because these prior answers were in 
response to questions posed by only a portion of the firms to which 
this guidance is applicable and regarding guidance with certain 
different expectations.
---------------------------------------------------------------------------

    \67\ The agencies also are clarifying one expectation in the 
Financial Statements and Projections subsection of the Format and 
Structure of Plans; Assumptions section of the guidance that could 
be construed to impose a requirement on the specified firms.
---------------------------------------------------------------------------

M. Additional Comments

Differentiating Resolution Plan Guidance
    The agencies received several general comments about whether the 
expectations in the proposal were suitably modified from expectations 
included in past resolution plan guidance and whether the proposal 
appropriately distinguished between different types of triennial full 
filers. Several commenters contended that the proposed guidance did not 
sufficiently differentiate expectations among firms subject to 
resolution planning guidance. Some of these commenters specifically 
claimed because the specified firms have limited operations compared to 
the U.S. GSIBs and have reduced the size and complexity of their U.S. 
operations, they should not be subject to similar resolution planning 
guidance as the U.S. GSIBs. One commenter argued that section 165 of 
the Dodd-Frank Act requires the agencies to differentiate the content 
of the resolution planning guidance; the proposal was too similar to 
the 2019 U.S. GSIB Guidance; and expectations for the specified firms 
should be further differentiated based on size, risk, and other 
factors. Another commenter argued that the proposed guidance favors the 
U.S. MPOE resolution strategy by including fewer expectations for firms 
that adopt that strategy and recommended that the guidance should be 
more aligned with guidance for resolution plan filers using a U.S. SPOE 
resolution strategy.
    While the differentiation requirement in section 165 of the Dodd-
Frank Act does not apply to this non-binding resolution plan guidance, 
the guidance differentiates among covered companies, taking into 
consideration their size, complexity, and other risk-related factors; 
their resolution strategy, whether SPOE or MPOE; and whether they are 
domestic or foreign-based.
    The thresholds and risk-based indicators that form the basis of the 
risk-based category framework used by the Rule are designed to take 
into account an individual firm's particular activities and 
organizational footprint that may present significant challenges to an 
orderly resolution.\68\ The Rule, using those categories, defines 
triennial full filers as one cohort because the failure of a Category 
II or III banking organization could pose a threat to U.S. financial 
stability. Banking organizations in these two categories often have 
similar characteristics, such as organizational structures, and similar 
resolution strategies that benefit from similar resolution guidance. 
Accordingly, the agencies believe the guidance is equally appropriate 
for all foreign Category II and III banking organizations. In addition, 
as discussed above, the regional bank failures in March 2023 
demonstrated that the failure of banking organizations with $100 
billion to $250 billion in total consolidated assets can be disruptive 
to U.S. financial stability. For these reasons, providing the guidance 
to foreign triennial full filers in that asset range is appropriate to 
prevent or mitigate risks to the financial stability of the United 
States.
---------------------------------------------------------------------------

    \68\ See 2019 Federal Register Publication at 84 FR 59197-201.
---------------------------------------------------------------------------

    Guidance for specified firms that adopt a U.S. SPOE resolution 
strategy is differentiated relative to guidance for Category I banking 
organizations (i.e., the 2019 U.S. GSIB Guidance), notably with the 
absence of derivatives and trading expectations, which are applicable 
to most of the U.S. GSIBs, and other operational guidance as well as 
reduced separability expectations. Other aspects of the U.S. SPOE 
guidance are appropriately similar to the 2019 U.S. GSIB Guidance 
because the successful execution of a U.S. SPOE resolution strategy 
benefits from the capabilities discussed in the guidance. The guidance 
for firms that adopt a U.S. MPOE resolution strategy includes 
substantially simpler expectations, relative to U.S. SPOE guidance and 
the 2019 U.S. GSIB Guidance, in the areas of capital, liquidity, 
governance mechanisms, operational, legal entity rationalization and 
separability, derivatives and trading expectations, and PCS. Having 
simpler expectations relative to U.S. SPOE guidance does not 
necessarily mean a firm adopting a U.S. MPOE strategy will encounter 
fewer challenges developing its resolution plans; regardless of the 
strategy chosen, the firm is responsible for providing adequate 
information and analysis to demonstrate its plan will facilitate an 
orderly resolution. Each firm remains free to choose the resolution 
strategy it believes would most effectively facilitate an orderly 
resolution, and the agencies are not suggesting that any firm change 
its resolution strategy, nor do the agencies identify a preferred 
strategy for a specific firm or set of firms.\69\
---------------------------------------------------------------------------

    \69\ See Section I.A Resolution Plan Strategy for further 
discussion about why the agencies are differentiating expectations 
depending on whether a firm adopts a U.S. SPOE or U.S. MPOE 
resolution strategy.
---------------------------------------------------------------------------

    Finally, resolution plan guidance for Category II and III banking 
organizations is adapted to whether a covered company is based in the 
United States or in a foreign jurisdiction, with dedicated guidance 
documents for each type of firm. The Rule differentiates between 
banking organizations based on home jurisdiction,\70\ and whether a 
banking organization is based in the United States can significantly 
impact its resolution strategy, resolution capabilities, and resolution 
planning. Accordingly, expectations for domestic and foreign-based 
triennial full filers are differentiated in the areas of capital, 
liquidity, governance mechanisms,

[[Page 66527]]

shared services, separability, branches, and group-wide resolution 
plans.
---------------------------------------------------------------------------

    \70\ See 12 CFR 243.5(a) and 381.5(a).
---------------------------------------------------------------------------

Relation to the 2020 Proposed FBO Guidance and 2020 FBO Guidance
    Two commenters asserted that the agencies did not adequately 
explain why the proposal contained certain expectations the agencies 
had included in the 2020 Proposed FBO Guidance but declined to adopt in 
the 2020 FBO Guidance. One of these commenters also contended that the 
agencies did not adhere to certain administrative law requirements to 
identify and justify the proposed changes in expectations, particularly 
given that the agencies recently adopted the 2020 FBO Guidance. The 
proposal adequately identified and explained the proposed changes in 
resolution planning expectations,\71\ and the guidance is permissible 
under section 165(d) of the Dodd-Frank Act and the Rule. However, to 
promote transparency in the guidance-making process, the agencies have 
further clarified areas in which and explained why the final guidance 
differs from the 2020 FBO Guidance and adopts certain expectations 
proposed in the 2020 Proposed FBO Guidance.\72\
---------------------------------------------------------------------------

    \71\ See proposed guidance at 88 FR 64641, 64644-45, 47.
    \72\ See sections III.C-L of this document.
---------------------------------------------------------------------------

    The agencies also considered whether the 2020 FBO Guidance 
engendered reliance interests among the banking organizations that were 
the subject of that guidance. The agencies received no comments 
explicitly identifying such reliance interests; the 2020 FBO Guidance, 
like the current guidance, did not have the force and effect of law; 
and the 2020 FBO Guidance was applicable for only one resolution plan 
submission cycle, and only three banking organizations were within the 
scope of application of the 2020 FBO Guidance for the 2021 targeted 
plan submission (and one such banking organization no longer exists). 
Accordingly, the agencies believe that resolvability improvements that 
may arise from issuing this guidance outweigh any reliance interests 
generated by the 2020 FBO Guidance.
General Comments About the Proposal
    The agencies received several general comments about resolution 
planning guidance. The agencies have considered these commenters' input 
but have made no modifications to the final guidance.
    One commenter expressed support for the proposed guidance, in part 
because it reaffirms that bankruptcy is the preferred resolution 
strategy and would improve the quality of resolution plan submissions 
through enhanced information and assumptions, better enabling the 
resolution of a specified firm in an orderly manner. Another commenter 
praised the agencies' proposal for providing needed clarity and 
transparency on expectations for specified firms' resolution plans, and 
for making several improvements that will improve specified firms' 
resolution plans.
    Another commenter recommended that the agencies adopt the content 
of the guidance in the form of a legally binding and enforceable rule, 
in part due to the size and scope of specified firms, the importance of 
resolution planning, and the financial stability implications involved. 
This commenter also suggested that the large bank failures in 2023 
demonstrated the need for improvement in banking organizations' 
resolution planning and the agencies' process for assessing these 
plans.
    Resolution planning is important to U.S. financial stability; 
however, the agencies have not made changes to the guidance in response 
to these comments. The Rule, which is legally enforceable, identifies 
the specific topics that must be addressed in resolution plans. In 
contrast, resolution plan guidance outlines the agencies' supervisory 
expectations and priorities and articulates the agencies' general views 
regarding appropriate resolution planning practices for the specified 
firms. The final guidance provides examples of resolution plan content 
and capabilities that the agencies generally consider consistent with 
effective resolution planning. This approach is consistent with 
resolution planning guidance provided to other covered companies in the 
past, including guidance for Category I banking organizations and 
certain foreign Category II banking organizations.
    A commenter argued that the agencies should allow for an iterative 
process for foreign triennial full filers to develop their strategies 
and capabilities, similar to the gradual maturation of Category I 
banking organizations' resolution plans. This commenter also argued the 
agencies should provide more than one year for firms to incorporate the 
final guidance into their next resolution plan submissions and that the 
guidance should not be the basis for a deficiency.
    By statute and under the Rule, each resolution plan filer must 
submit a plan for orderly resolution under the Bankruptcy Code, and the 
agencies must assess the credibility of each plan. Each firm remains 
free to choose the resolution strategy it believes would most 
effectively facilitate an orderly resolution and the agencies are not 
suggesting that any firm change its resolution strategy, nor do the 
agencies identify a preferred strategy for a specific firm or set of 
firms. The standard of review for a resolution plan submission of a 
firm that transitions to a new strategy is the same as for any firm 
subject to the Rule. The agencies stated in the preamble to the 2019 
revisions to the Rule that they would endeavor to finalize guidance a 
year in advance of the next applicable resolution plan submission date, 
and the agencies are extending the next resolution plan submission 
deadline for these firms to provide at least one year advanced notice 
of general guidance.\73\ The agencies also reaffirm that the guidance 
does not have the force and effect of law, and the agencies do not take 
enforcement actions or issue findings based on resolution planning 
guidance.
---------------------------------------------------------------------------

    \73\ See 2019 Federal Register Publication at 84 FR 59204.
---------------------------------------------------------------------------

    A commenter argued that the various capital and resolution related 
proposals would, when considered holistically, disproportionately 
affect international banks and discourage international bank 
participation in U.S. banking and financial services markets to the 
detriment of U.S. financial stability. This commenter further cautioned 
that additional expectations for the U.S. operations of international 
banks could have unintended consequences and may lead to similar 
demands by other host-country supervisors, which could lead to 
fragmentation and less orderly resolution.
    This guidance does not create additional requirements, but rather 
describes one approach to resolution plan content that could address 
the agencies' expectations. Furthermore, the agencies recognize that 
the specified firms' U.S. operations differ not only in the businesses 
they engage in, but also in their scope, size, and complexity. As such, 
the agencies expect that firms will adapt the guidance expectations in 
a manner commensurate with the risk profile of their U.S. operations. 
Doing so in a proportionate manner does not disadvantage the specified 
firms relative to domestic or foreign peers and the guidance does not 
serve as a deterrent to participating in the U.S. financial market.
    Additionally, the agencies believe the guidance would help 
facilitate orderly resolution of U.S. operations of the specified firms 
in the event an orderly home-country led group-wide resolution is not 
feasible. The agencies note that to date, the existence of guidance for

[[Page 66528]]

certain FBOs has not led to increased fragmentation, but rather has 
enhanced the dialogue among authorities about expectations for those 
FBOs' capabilities and resolution preparedness. The agencies will 
continue to engage with home-country authorities on resolution planning 
for foreign triennial full filers.
Comments About Resolution Planning Generally
    Finally, a commenter asked the agencies to provide more information 
on the inconsistencies and problematic assumptions found in the 2021 
plan submissions, as well as why the UBS Group AG's acquisition of CS 
and the U.S. domestic bank resolutions in 2023 prompted reversals of 
policy.
    The agencies believe the preamble to the proposed guidance 
addresses the findings from the 2021 resolution plan submissions and 
learnings from the 2023 bank resolutions. The agencies would refer the 
commenter to other areas of this preamble for explanation of new areas 
of guidance, including the 2020 FBO Proposed Guidance. No specific 
changes have been made to the final guidance in response to this 
comment.
Comments Outside the Scope of Proposal
    The agencies received several comments outside the scope of the 
proposed guidance. One commenter urged the agencies to shorten the 
length between resolution plan submissions under the Rule, from three 
to two years, and evaluate key aspects of plans annually. This 
commenter also recommended the agencies create an independent committee 
to advise the agencies on resolution planning matters as well as 
require large banking organizations to hold more capital generally. 
Another commenter argued that any LTD requirements should reflect a 
banking organization's preferred resolution strategy and not push a 
banking organization to adopt a particular strategy. That commenter 
also encouraged the FDIC to provide banking organizations at least one 
year to comply with any final IDI Rule and to align aspects of the IDI 
Rule with resolution planning under section 165(d) of the Dodd-Frank 
Act. The agencies have not made any changes to the guidance to address 
these comments.

IV. Paperwork Reduction Act

    Certain provisions of the final guidance contain ``collections of 
information'' within the meaning of the Paperwork Reduction Act (PRA) 
of 1995 (44 U.S.C. 3501-3521). In accordance with the requirements of 
the PRA, the agencies may not conduct or sponsor, and the 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 have requested and OMB has assigned to the 
agencies the respective control numbers shown. The information 
collections contained in the final guidance have been submitted to OMB 
for review and approval by the FDIC under section 3507(d) of the PRA 
(44 U.S.C. 3507(d)) and section 1320.11 of OMB's implementing 
regulations (5 CFR part 1320). The Board reviewed the final guidance 
under the authority delegated to the Board by OMB and has approved 
these collections of information.
    The agencies did not receive any comments related to the PRA.
    The agencies have a continuing interest in the public's opinions of 
information collections. At any time, commenters may submit comments 
regarding the burden estimate, or any other aspect of this collection 
of information, including suggestions for reducing the burden, to the 
addresses listed in the ADDRESSES caption in the proposed guidance 
notice. All comments will become a matter of public record. Written 
comments and recommendations for these information collections also 
should be sent within 30 days of publication of this document to 
www.reginfo.gov/public/do/PRAMain. Find this particular information 
collection by selecting ``Currently under 30-day Review--Open for 
Public Comments'' or by using the search function.
    Collection title: Board: Reporting Requirements Associated with 
Regulation QQ.
    FDIC: Reporting Requirements Associated with Resolution Planning.
    OMB control number: Board 7100-0346; FDIC 3064-0210.
    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, a 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.
    Current actions: The final guidance modifies certain provisions of 
the proposed guidance. For domestic firms, the final guidance 
eliminates expectations related to separability, reducing the average 
burden hours per response by 3,000 for domestic firms using an SPOE 
strategy and 975 for domestic firms using an MPOE strategy. The final 
guidance also clarifies expectations around operational shared services 
for firms using an SPOE resolution strategy and around the IDI 
Resolution Plan/Least-Cost Test for all firms. Regarding operational 
shared services, the guidance clarifies that a firm's implementation 
plan to ensure continuity of shared services should include those that 
are material to the execution of the resolution strategy, such as 
reliance on outside bankruptcy counsel and consultants. Regarding the 
FDI Act's least-cost requirement and how it relates to expectations 
around IDI resolution, the agencies provided additional detail on how 
firms can develop and support the valuation of an IDI's assets and 
liabilities in an IDI resolution. The agencies do not anticipate these 
clarifications impacting the burden estimates.
    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 final revisions, 
there is a proposed net increase in the overall estimated burden hours 
of 14,922 hours for the Board and 14,304 hours for the FDIC. Therefore, 
the total Board estimated burden for its entire information collection 
would be 216,129 hours and the total FDIC estimated burden would be 
210,844 hours.
    The following table presents only the change in the estimated 
burden hours, as amended by the final guidance, broken out by agency. 
The table does not include a discussion of the remaining estimated 
burden hours which remain unchanged.\74\ As shown in the table, the 
triennial full filers' resolution plan submissions would be estimated 
more granularly according to SPOE and MPOE resolution strategies.
---------------------------------------------------------------------------

    \74\ In addition to the revisions to the estimations for 
triennial full filers, the agencies have revised the estimation for 
biennial filers from 40,115 hours per response to 39,550 hours per 
response to align with burden estimation methodology with what was 
used for triennial full filers under the final guidance. 
Specifically, the agencies removed a component for a biennial 
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 66529]]



----------------------------------------------------------------------------------------------------------------
                                                 Estimated       Estimated        Estimated
                    FR QQ                        number of        annual        average hours   Estimated annual
                                                respondents      frequency      per response      burden 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
Final
    Triennial Full:
        FBO SPOE *..........................               2               1            11,848            23,696
        FBO MPOE............................               3               1             5,939            17,817
        Domestic MPOE.......................               3               1             5,285            15,855
                                             -------------------------------------------------------------------
            Final Total.....................  ..............  ..............  ................            57,368
----------------------------------------------------------------------------------------------------------------
                                                  FDIC Burdens
----------------------------------------------------------------------------------------------------------------
Current
    Triennial Full:
        Complex Foreign.....................               1               1             9,777             9,777
        Foreign and Domestic................               6               1             4,667            28,002
                                             -------------------------------------------------------------------
            Current Total...................  ..............  ..............  ................            37,779
Final
    Triennial Full:
        FBO SPOE............................               2               1            11,848            23,696
        FBO MPOE............................               3               1             5,939            17,817
        Domestic MPOE.......................               2               1             5,285            10,570
                                             -------------------------------------------------------------------
            Final Total.....................  ..............  ..............  ................            52,083
----------------------------------------------------------------------------------------------------------------
* There are currently no domestic triennial full filers utilizing an SPOE strategy. Estimated hours per response
  for a domestic SPOE triennial full filer would be 10,535 hours.

V. Text of the Final Guidance

Guidance for Resolution Plan Submissions of Foreign 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. The ``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 foreign 
financial companies required to submit Plans regarding development of 
their respective U.S. strategies to assist their further development of 
a Plan for their 2025 and subsequent Plan submissions. Specifically, 
the guidance applies to any foreign-based covered company that is 
triennial full filer under the Rule \3\ because it is subject to 
Category II or III standards according to its combined U.S. operations 
in accordance with the Board's tailoring rule (specified firms or 
firms).\4\ This guidance supersedes the joint Guidance for Resolution 
Plan Submissions of Certain Foreign-Based Covered Companies.\5\
---------------------------------------------------------------------------

    \3\ See 12 CFR 243.4(b)(1) and 381.4(b)(1).
    \4\ Prudential Standards for Large Bank Holding Companies, 
Savings and Loan Holding Companies, and Foreign Banking 
Organizations, 84 FR 59032 (Nov. 1, 2019).
    \5\ 85 FR 83557 (Dec. 22, 2020).
---------------------------------------------------------------------------

    The Plan for a specified firm would address a scenario where its 
U.S. operations experience material financial distress and the foreign 
parent is unable or unwilling to provide sufficient financial support 
for the continuation of U.S. operations, and at least the top tier U.S. 
IHC files for bankruptcy under title 11, United States Code. Under such 
a scenario, the Plan should provide for the orderly resolution of the 
specified firm's U.S. material entities and operations.
    The document does not have the force and effect of law.\6\ Rather, 
it describes the agencies' expectations and priorities regarding the 
specified firms' Plans 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 their U.S. 
resolution strategy.
---------------------------------------------------------------------------

    \6\ See 12 CFR 262.7 and appendix A to 12 CFR part 262; 12 CFR 
part 302.
---------------------------------------------------------------------------

    When an FBO first becomes a specified firm,\7\ this document will

[[Page 66530]]

apply to the firm's next resolution plan submission that is due at 
least 12 months after the date the firm becomes a specified firm. If a 
specified firm ceases to be subject to Category II or III standards, it 
will no longer be a specified firm, and this document would no longer 
apply to that firm.
---------------------------------------------------------------------------

    \7\ See 12 CFR 252.5(c)-(d).
---------------------------------------------------------------------------

    In general, this document is organized around a number of key 
challenges in resolution (interaction with group resolution plan; 
capital; liquidity; governance mechanisms; operational; branches; legal 
entity rationalization and separability; and insured depository 
institution resolution (IDI), 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 
adopts a U.S. single point of entry (U.S. SPOE) resolution strategy for 
its Plan and expectations for a specified firm that adopts a U.S. 
multiple point of entry (U.S. MPOE) resolution strategy for its 
Plan.\8\
---------------------------------------------------------------------------

    \8\ The agencies recognize that the preferred resolution outcome 
for many specified firms is a successful home country resolution 
using a global SPOE resolution strategy where U.S. material entities 
are provided with sufficient capital and liquidity resources to 
allow them to stay out of resolution proceedings and maintain 
continuity of operations throughout the parent's resolution. 
However, because support from the foreign parent in stress cannot be 
ensured, the Rule provides that the U.S. resolution plan for 
specified firms must specifically address a scenario where the U.S. 
operations experience material financial distress, and the Plan 
cannot assume that the specified firm takes resolution actions 
outside the United States that would eliminate the need for any U.S. 
subsidiaries to enter resolution proceedings. See 12 CFR 243.4(h) 
and 381.4(h).
---------------------------------------------------------------------------

    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. The agencies may 
not take enforcement actions or issue findings based on this guidance.

II. Interaction With Group Resolution Plan

U.S. SPOE and U.S. MPOE

    The agencies recognize that the preferred resolution outcome for 
the specified firms is often a successful SPOE home country resolution. 
Based on information available to the firm, a specified firm's Plan 
should describe: (i) the impact of executing the global resolution plan 
on U.S. operations, (ii) the extent of the specified firm's reliance on 
U.S. operations for execution of the global resolution plan, (iii) the 
extent of the specified firm's reliance on home country entities and 
operations for execution of the Plan, and (iv) any capabilities relied 
on to execute the U.S. resolution strategy that are different from 
those necessary to execute the global strategy. In addition, a 
specified firm's resolvability work in the United States should 
consider both the objectives of the firm's group-wide resolution 
strategy and the Rule. Efforts to enhance the resolvability of U.S. 
operations and entities should be as complementary as practicable to 
the group-wide resolution strategy, while complying with the Rule.

III. Capital

U.S. SPOE

    The firm should have the capital capabilities necessary to execute 
its U.S. 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 U.S. non-branch material entities \9\ could 
be resolved in an orderly manner, the firm's U.S. IHC should have an 
adequate amount of loss-absorbing capacity to execute its U.S. 
resolution strategy. Thus, a firm's U.S. IHC 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 
the U.S. IHC on a consolidated basis (IHC LAC).\10\
---------------------------------------------------------------------------

    \9\ The terms ``material entities,'' ``identified critical 
operations,'' and ``core business lines'' have the same meaning as 
in the Rule. The term ``U.S. material entity'' means any subsidiary, 
branch, or agency that is a material entity and is domiciled in the 
United States. The term ``U.S. non-branch material entity'' means a 
material entity organized or incorporated in the U.S. including, in 
all cases, the U.S. IHC. The term ``U.S. IHC subsidiaries'' means 
all U.S. non-branch material entities other than the U.S. IHC.
    \10\ Total Loss-Absorbing Capacity, Long-Term Debt, and Clean 
Holding Company Requirements for Systemically Important U.S. Bank 
Holding Companies and Intermediate Holding Companies of Systemically 
Important Foreign Banking Organizations, 82 FR 8266 (Jan. 24, 2017); 
Long-Term Debt Requirements for Large Bank Holding Companies, 
Certain Intermediate Holding Companies of Foreign Banking 
Organizations, and Large Insured Depository Institutions, 88 FR 
64524 (Sept. 19, 2023).
---------------------------------------------------------------------------

    Proceeds from a firm's IHC LAC should be appropriately positioned 
between the U.S. IHC and the subsidiaries of the U.S. IHC that are 
material entities (U.S. IHC subsidiaries), consistent with any 
applicable rules requiring prepositioned resources at U.S. 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 IHC LAC should balance the certainty associated with pre-
positioning loss absorbing capacity directly at U.S. IHC subsidiaries 
(internal LAC) with the flexibility provided by holding 
recapitalization resources at the U.S. IHC (contributable resources) to 
meet unanticipated losses at the U.S. IHC subsidiaries. That balance 
should take account of both pre-positioning at U.S. IHC subsidiaries 
and holding resources at the U.S. IHC, and the obstacles associated 
with each. With respect to material entities that are not subject to 
pre-positioning requirements, the firm should not rely exclusively on 
either full pre-positioning or U.S. IHC contributable resources to 
execute its U.S. resolution strategy, unless it has only one U.S. IHC 
subsidiary that is an operating subsidiary. The Plan should describe 
the positioning of internal LAC among the U.S. IHC and the U.S. IHC 
subsidiaries, along with analysis supporting such positioning.
    Finally, to the extent that pre-positioned internal LAC at a U.S. 
IHC subsidiary is in the form of intercompany debt and there are one or 
more entities between the lender and the borrower, the firm should 
structure the instruments so as to ensure that the U.S. IHC subsidiary 
can be recapitalized.
    Resolution Capital Execution Need (RCEN). To the extent 
necessitated by the firm's U.S. resolution strategy, U.S. non-branch 
material entities need to be recapitalized to a level that allows them 
to operate or be wound down in an orderly manner following the U.S. IHC 
bankruptcy filing. The firm should have a methodology for periodically 
estimating the amount of capital that may be needed to support each 
U.S. IHC subsidiary after the U.S. IHC bankruptcy filing (RCEN). The 
firm's positioning of IHC LAC should be able to support the RCEN 
estimates.
    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,\11\ consistent 
with the firm's resolution strategy for its U.S. operations. The

[[Page 66531]]

RCEN methodology should be calibrated such that recapitalized U.S. IHC 
subsidiaries will have sufficient capital to maintain market confidence 
as required under the U.S 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. U.S. IHC subsidiaries 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.
---------------------------------------------------------------------------

    \11\ The resolution period begins immediately after the U.S. IHC 
bankruptcy filing and extends through the completion of the U.S. 
resolution strategy.
---------------------------------------------------------------------------

U.S. MPOE

    N/A.

IV. Liquidity

U.S. SPOE

    The firm should have the liquidity capabilities necessary to 
execute its U.S resolution strategy, including those described below. 
For resolution purposes, these capabilities should include having an 
appropriate model and process for estimating and maintaining sufficient 
liquidity at--or readily available from the U.S. IHC to--U.S. IHC 
subsidiaries, and a methodology for estimating the liquidity needed to 
successfully execute the U.S. resolution strategy, as described below.
    Capabilities. A firm is expected to have a comprehensive 
understanding of funding sources, uses, and risks at material entities 
and identified critical operations, including how funding sources may 
be affected under stress. For example, a firm should have and describe 
its capabilities to:
    (A) Evaluate the funding requirements necessary to perform 
identified critical operations, including shared and outsourced 
services and access to financial market utilities (FMUs); \12\
---------------------------------------------------------------------------

    \12\ 12 CFR 252.156(g)(3).
---------------------------------------------------------------------------

    (B) Monitor liquidity reserves and relevant custodial arrangements 
by jurisdiction and material entity; \13\
---------------------------------------------------------------------------

    \13\ 12 CFR 252.156(g)(2).
---------------------------------------------------------------------------

    (C) Routinely test funding and liquidity outflows and inflows for 
U.S. non-branch material entities at the legal entity level under a 
range of adverse stress scenarios, taking into account the effect on 
intra-day, overnight, and term funding flows between affiliates and 
across jurisdictions;
    (D) Assess existing and potential restrictions on the transfer of 
liquidity between U.S. non-branch material entities; \14\ and
---------------------------------------------------------------------------

    \14\ Id.
---------------------------------------------------------------------------

    (E) Develop contingency strategies to maintain funding for U.S. 
non-branch material entities and identified critical operations in the 
event of a disruption in the specified firm's current funding 
model.\15\
---------------------------------------------------------------------------

    \15\ 12 CFR 252.156(e).
---------------------------------------------------------------------------

    Resolution Liquidity Adequacy and Positioning (RLAP). With respect 
to RLAP, the firm should be able to measure the stand-alone liquidity 
position of each U.S. non-branch material entity--i.e., the high-
quality liquid assets (HQLA) at the U.S. non-branch 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 of the U.S. IHC and risk of each U.S. IHC subsidiary. 
The model should balance the reduction in frictions associated with 
holding liquidity directly at the U.S. IHC subsidiary with the 
flexibility provided by holding HQLA at the U.S. IHC or at a U.S. IHC 
subsidiary available to meet unanticipated outflows at other U.S. IHC 
subsidiaries.\16\ The firm should not rely exclusively on either full 
pre-positioning or U.S. IHC contributable resources to execute its U.S. 
resolution strategy, unless it has only one U.S. IHC subsidiary that is 
an operating subsidiary.
---------------------------------------------------------------------------

    \16\ To the extent HQLA is held at the U.S. IHC or at a U.S. IHC 
subsidiary, the model should consider whether such funds are freely 
available. To be freely available, the HQLA must be free of legal, 
regulatory, contractual, and other restrictions on the ability of 
the material entity to liquidate, sell, or transfer the asset.
---------------------------------------------------------------------------

    The model \17\ should ensure that on a consolidated basis the U.S. 
IHC holds sufficient HQLA to cover net liquidity outflows of the U.S. 
non-branch material entities. The model should also measure the stand-
alone net liquidity positions of each U.S. non-branch material entity. 
The stand-alone net liquidity position of each U.S. non-branch 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 a non-U.S. affiliate should 
be assumed to mature. Finally, the firm should not assume that a net 
liquidity surplus at any U.S. IHC subsidiary that is a depository 
institution could be moved to meet net liquidity deficits at an 
affiliate, or to augment U.S. IHC resources, consistent with Regulation 
W.
---------------------------------------------------------------------------

    \17\ ``Model'' refers to the set of calculations required by 
Regulation YY that estimate the U.S. IHC's liquidity position.
---------------------------------------------------------------------------

    Additionally, the RLAP methodology should take into account for 
each of the U.S. IHC, U.S. IHC subsidiaries, and any branch that is a 
material entity:
    (A) The daily contractual mismatches between their respective 
inflows and outflows;
    (B) Their respective daily flows from movement of cash and 
collateral for all inter-affiliate transactions; and
    (C) Their respective daily stressed liquidity flows and trapped 
liquidity as a result of actions taken by clients, counterparties, key 
FMUs, and foreign supervisors, among others.
    In calculating its RLAP estimate, the U.S. IHC should calculate its 
liquidity position with respect to its foreign parent, branches and 
agencies, and other affiliates (together, affiliates) separately from 
its liquidity position with respect to third parties, and should not 
offset inflows from affiliated parties against outflows to external 
parties. In addition, a U.S. IHC should use cash-flow sources from its 
affiliates to offset cash-flow needs of its affiliates only to the 
extent that the term of the cash-flow source from its affiliates is the 
same as, or shorter than, the term of the cash-flow need of its 
affiliates.\18\
---------------------------------------------------------------------------

    \18\ The U.S. IHC should calculate its cash-flow sources from 
its affiliates consistent with the net internal stressed cash-flow 
need calculation in Sec.  252.157(c)(2)(iv) of Regulation YY.
---------------------------------------------------------------------------

    Resolution Liquidity Execution Need (RLEN). The firm should have a 
methodology for estimating the liquidity needed after the U.S. IHC's 
bankruptcy filing to stabilize any surviving U.S. IHC subsidiaries and 
to allow those entities to operate post-filing, in accordance with the 
U.S. strategy.
    The firm's RLEN methodology should:
    (A) Estimate the minimum operating liquidity (MOL) needed at each 
U.S. IHC subsidiary that is a material entity to ensure those entities 
could continue to operate, to the extent relied upon in the U.S. 
resolution strategy, after implementation of the U.S. resolution 
strategy and/or to support a wind-down strategy;
    (B) Provide daily cash flow forecasts by U.S. IHC subsidiary 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 for the U.S. IHC subsidiaries; and

[[Page 66532]]

    (D) Estimate the minimum amount of liquidity required at each U.S. 
IHC subsidiary to meet the MOL and peak needs noted above, which would 
inform the provision of financial resources from the foreign parent to 
the U.S. IHC, or if the foreign parent is unable or unwilling to 
provide such financial support, any preparatory resolution-related 
actions.
    The MOL estimates should capture U.S. IHC subsidiaries' intraday 
liquidity requirements, operating expenses, working capital needs, and 
inter-affiliate funding frictions to ensure that U.S. IHC subsidiaries 
could operate without disruption during the resolution.
    The peak funding needs estimates should be projected for each U.S. 
IHC subsidiary and cover the length of time the firm expects it would 
take to stabilize that U.S. IHC subsidiary. 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 U.S. IHC subsidiaries could operate through resolution 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 for the U.S. IHC subsidiaries.
    For nonsurviving U.S. IHC subsidiaries, the firm should provide 
analysis and an explanation of how the material entity's resolution 
could be accomplished within a reasonable period of time and in a 
manner that substantially mitigates the risk of serious adverse effects 
on U.S. financial stability. For example, if a U.S. IHC subsidiary that 
is a broker-dealer is assumed to fail and enter resolution under the 
Securities Investor Protection Act, the firm should provide an analysis 
of the potential impacts on funding and asset markets and on prime 
brokerage clients, bearing in mind the objective of an orderly 
resolution.

U.S. MPOE

    The firm should have the liquidity capabilities necessary to 
execute its U.S. resolution strategy. A Plan with a U.S. MPOE 
resolution 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 X, Format and Structure of Plans; 
Assumptions.

V. Governance Mechanisms

U.S. SPOE

    A firm should identify the governance mechanisms that would ensure 
that communication and coordination occur between the governing body of 
the U.S. operations (for example, the boards of the U.S. IHC or a U.S. 
subsidiary) and the foreign parent to facilitate the provision of 
financial support, or if not forthcoming, any preparatory resolution-
related actions to facilitate an orderly resolution.
    Playbooks, Foreign Parent Support, and Triggers. Governance 
playbooks should detail the board and senior management actions of U.S. 
non-branch material entities that would be needed under the firm's U.S. 
resolution strategy. The governance playbooks should also include a 
discussion of:
    (A) The firm's proposed U.S. communications strategy, both internal 
and external; \19\
---------------------------------------------------------------------------

    \19\ External communications include those with U.S. and foreign 
authorities and other external stakeholders, such as any large 
depositors.
---------------------------------------------------------------------------

    (B) The fiduciary responsibilities of the applicable board(s) of 
directors or other similar governing bodies 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;
    (D) Any employee retention policy; and
    (E) Any other limitations on the authority of the U.S. IHC and the 
U.S. IHC subsidiary boards and senior management to implement the U.S. 
resolution strategy. All responsible parties and timeframes for action 
should be identified. Governance playbooks should be updated 
periodically for each entity whose governing body would need to act 
under the firm's U.S. resolution strategy.
    In order to meet liquidity needs at the U.S. non-branch material 
entities, the firm may either fully pre-position liquidity in the U.S. 
non-branch material entities or develop a mechanism for planned foreign 
parent support, of any amount not pre-positioned, for the successful 
execution of the U.S. strategy. Mechanisms to support readily available 
liquidity may include a term liquidity facility between the U.S. IHC 
and the foreign parent that can be drawn as needed and as informed by 
the firm's RLEN estimates and liquidity positioning. To the extent the 
preferred global resolution strategy for the firm is a home country 
SPOE resolution, the mechanism should be designed so as to not 
interfere with the execution of that strategy. The Plan should include 
analysis of how the U.S. IHC/foreign parent facility is funded or 
buffered for by the foreign parent. The sufficiency of the liquidity 
should be informed by the firm's RLAP and RLEN estimates for the U.S. 
non-branch material entities. Additionally, the Plan should include 
analysis of the potential challenges to the planned foreign parent 
support mechanism and associated mitigants. Where applicable, the 
analysis should discuss applicable non-U.S. law and cross-border legal 
challenges (e.g., challenges related to enforcing contracts governed by 
foreign law). The analysis should identify the mitigant(s) to such 
challenges that the firm considers most effective.
    The firm should be prepared to increase communication and 
coordination at the appropriate time in order to mitigate financial, 
operational, legal, and regulatory vulnerabilities. To facilitate this 
communication and coordination, the firm should establish clearly 
identified triggers linked to specific actions for:
    (A) The escalation of information to U.S. senior management, U.S. 
risk committee and U.S. governing bodies to potentially take the 
corresponding actions as the U.S. operations experience material 
financial distress, leading eventually to the decision to implement the 
U.S. resolution strategy. The triggers should:
    i. Identify when and under what conditions the U.S. material 
entities would transition from business-as-usual (BAU) conditions to a 
stress period; and
    ii. Take into consideration changes in the foreign parent's 
condition from BAU conditions through resolution.
    (B) The escalation of information to and discussions with the 
appropriate governing bodies to confirm whether the governing bodies 
are able and willing to provide financial resources to support U.S. 
operations.
    i. Triggers should be based on the firm's methodology for 
forecasting the liquidity and capital needed to facilitate the U.S. 
strategy. For example, triggers may be established that reflect U.S. 
non-branch material entities' financial resources approaching RCEN/RLEN 
estimates, with corresponding actions to confirm the foreign parent's 
financial capability and willingness to provide sufficient support.
    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

[[Page 66533]]

provide for communication, coordination, and confirmation of the 
provision of resources from the foreign parent.
    Support Within the United States. If the Plan provides for the 
provision of capital and liquidity by a U.S. material entity (e.g., the 
U.S. IHC) to its U.S. affiliates prior to the U.S. IHC's bankruptcy 
filing (Support), the Plan should also include a detailed legal 
analysis of the potential state law and bankruptcy law challenges and 
mitigants to providing the 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 U.S. 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.
    Furthermore, the Plan should describe key motions to be filed at 
the initiation of any bankruptcy proceeding related to (as appropriate) 
asset sales and other non-routine matters.

U.S. MPOE

    A firm should identify the governance mechanisms that would ensure 
that communication and coordination occur between the governing body of 
the U.S. operations (for example, the boards of the U.S. IHC or a U.S. 
subsidiary) and the foreign parent to facilitate any preparatory 
resolution-related actions to facilitate an orderly resolution. The 
Plan should also detail the board and senior management actions of U.S. 
material entities that would be needed under the firm's U.S. resolution 
strategy.
    The firm should be prepared to increase communication and 
coordination at the appropriate time in order to mitigate financial, 
operational, legal, and regulatory vulnerabilities. To facilitate this 
communication and coordination, the firm should establish clearly 
identified triggers linked to specific actions for the escalation of 
information to U.S. senior management, U.S. risk committee and U.S. 
governing bodies to potentially take the corresponding actions as the 
U.S. operations experience material financial distress, leading 
eventually to the decision to implement the U.S. resolution strategy. 
The triggers should:
    (A) Identify when and under what conditions the U.S. material 
entities would transition from BAU conditions to a stress period.
    (B) Take into consideration changes in the foreign parent's 
condition from BAU conditions through resolution.

VI. Operational

U.S. 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,\20\ or both, of PCS services. A firm should demonstrate 
capabilities for continued access to PCS services essential to an 
orderly resolution under its U.S. resolution strategy through a 
framework to support such access by:
---------------------------------------------------------------------------

    \20\ 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,\21\ FMUs, and agent banks as key from 
the firm's perspective for the firm's U.S. material entities, 
identified critical operations, and core business lines, using both 
quantitative (volume and value) \22\ and qualitative criteria;
---------------------------------------------------------------------------

    \21\ 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.
    \22\ 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 U.S. material entities, identified critical 
operations, core business lines, and key clients of the firm's U.S. 
operations to both key FMUs and key agent banks; and
     Developing a playbook for each key FMU and key agent bank 
essential to an orderly resolution under its U.S. resolution strategy 
that reflects 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 in the United States, 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, or a firm's U.S. affiliate and branch provision of 
U.S. material entities and key clients of the firm's U.S. operations 
with access to an FMU or agent bank). The framework also should address 
the potential impact of any disruption to, curtailment of, or 
termination of such direct and indirect relationships on the firm's 
U.S. material entities, identified critical operations, and core 
business lines, as well as any corresponding impact on key clients of 
the firm's U.S. operations.
    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 key clients of 
the firm's U.S. operations in maintaining continued access to PCS 
services in the period leading up to and including the firm's 
resolution under its U.S. resolution strategy.
    Each playbook should provide analysis of the financial and 
operational impact to the firm's U.S. material entities and key clients 
of the firm's U.S. operations 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 U.S. material entities, identified critical 
operations and core business lines, and key clients of the firm's U.S. 
operations, while the firm is in resolution under its U.S. resolution 
strategy. The firm is not expected to incorporate a scenario in which 
it loses key FMU or key agent bank access into its U.S. resolution 
strategy or its RLEN and RCEN estimates. The firm should continue to 
engage with key FMUs, key agent banks, and key clients of the firm's 
U.S. operations, 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:

[[Page 66534]]

     Description of the firm's relationship as a user, 
including through indirect access, with the key FMU or key agent bank 
and the identification and mapping of PCS services to the firm's U.S. 
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 under its U.S. resolution strategy,\23\ the operational and 
financial impact of such actions on the firm's U.S. material entities, 
identified critical operations, and core business lines, 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
---------------------------------------------------------------------------

    \23\ 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 
BAU, in stress, and in the resolution period, presented by currency 
type (with U.S. dollar equivalent) and by U.S. material entity.
    [cir] PCS Liquidity Sources: These may include the amounts of 
intraday extensions of credit, liquidity buffer, inflows from FMU 
participants, and prefunded amounts of key clients of the firm's U.S. 
operations 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 all currencies relevant to the firm's 
participation, including placements of firm liquidity at central banks, 
key FMUs, and key agent banks.
    [cir] PCS Liquidity Uses: These may include margin and prefunding 
by the firm and key clients of the firm's U.S. operations, 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.\24\ Individual key 
FMU and key agent bank playbooks should include:
---------------------------------------------------------------------------

    \24\ Where a firm is a provider of PCS services through the 
firm's own operations in the United States, the firm is expected to 
produce a playbook for the U.S. 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 of the firm's U.S. 
operations to maintain continued access to PCS services.
---------------------------------------------------------------------------

     Identification and mapping of PCS services to the firm's 
U.S. 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 
of the firm's U.S. operations to whom the firm's U.S. material 
entities, identified critical operations, and core business lines 
provide 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 key clients of the firm's U.S. operations, including the 
viability of transferring activity and any related assets of key 
clients of the firm's U.S. operations, as well as any alternative 
arrangements that would allow the key clients of the firm's U.S. 
operations 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 of the firm's U.S. operations, 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 of the firm's U.S. operations 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 
funds for such obligations in all relevant currencies of key clients of 
the firm's U.S. operations; (ii) delaying or restricting PCS activity 
of key clients of the firm's U.S. operations; and (iii) restricting, 
imposing conditions upon (e.g., requiring collateral), or eliminating 
the provision of intraday credit or liquidity to key clients of the 
firm's U.S. operations; and
     Descriptions of how the firm will communicate to key 
clients of the firm's U.S. operations 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 of the firm's U.S. operations (e.g., due to BAU 
usage of that access and/or related intraday credit or liquidity of the 
key client of the firm's U.S. operations), and the expected timing and 
form of such communication.
    Capabilities. The firm is expected to have and describe 
capabilities to understand, for each U.S. 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) U.S. 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; \25\
---------------------------------------------------------------------------

    \25\ 12 CFR 243.5(e)(12) and 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; \26\
---------------------------------------------------------------------------

    \26\ Id.
---------------------------------------------------------------------------

    [cir] Exposures to and volumes transacted with FMUs, nostro agents, 
and custodians; and \27\
---------------------------------------------------------------------------

    \27\ 12 CFR 252.156(g).
---------------------------------------------------------------------------

    [cir] Services provided and service level agreements, as 
applicable, for other current agents and service providers (internal 
and external); \28\
---------------------------------------------------------------------------

    \28\ 12 CFR 243.5(f)(l)(i) and 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 U.S. operations and customers and counterparties of those U.S. 
operations; \29\
---------------------------------------------------------------------------

    \29\ 12 CFR 252.156(e).
---------------------------------------------------------------------------

     Develop contingency arrangements in the event of such 
adverse actions; \30\ and
---------------------------------------------------------------------------

    \30\ 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

[[Page 66535]]

and describe its capabilities to manage, identify, and value the 
collateral that the U.S. non-branch material entities receive from and 
post 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;
     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.\31\
---------------------------------------------------------------------------

    \31\ The policy may reference subsidiary or related policies 
already in place, as implementation may differ based on business 
line or other factors.
---------------------------------------------------------------------------

    In addition, as of the conclusion of any business day, the firm 
should be able to:
     Identify the legal entity and geographic jurisdiction 
where counterparty collateral is held;
     Document all netting and re-hypothecation arrangements 
with affiliates and external parties, by legal entity; and
     Track and manage collateral requirements associated with 
counterparty credit risk exposures between affiliates, including 
foreign branches.
    At least on a quarterly basis, the firm should be able to:
     Review the material terms and provisions of International 
Swaps and Derivatives Association Master Agreements and the Credit 
Support Annexes, such as termination events, for triggers that may be 
breached as a result of changes in market conditions;
     Identify legal and operational differences and potential 
challenges in managing collateral within specific jurisdictions, 
agreement types, counterparty types, collateral forms, or other 
distinguishing characteristics; and
     Forecast changes in collateral requirements and cash and 
non-cash collateral flows under a variety of stress scenarios.
    Management Information Systems. The firm should have the management 
information systems (MIS) capabilities to readily produce data on a 
U.S. legal entity basis (including any U.S. branch) 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 U.S. 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, as applicable, 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 \32\ or core 
business lines, or are material to the execution of the resolution 
strategy, 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, or are material to the execution of 
the resolution strategy. Examples may include personnel, facilities, 
systems, data warehouses, intellectual property, and counsel and 
consultants involved in the preparation for and filing of bankruptcy. 
Specified firms also should maintain current cost estimates for 
implementing such strategies and contingency arrangements.
---------------------------------------------------------------------------

    \32\ ``Shared services that support identified critical 
operations'' or ``critical shared services'' are those that support 
identified critical operations conducted in whole or in material 
part in the United States.
---------------------------------------------------------------------------

    If a material entity provides shared services that support 
identified critical operations or core business lines, or are material 
to the execution of the resolution strategy, and the continuity of 
these shared services relies on the assumed cooperation, forbearance, 
or other non-intervention of regulator(s) in any jurisdiction, the Plan 
should discuss the extent to which the resolution or insolvency of any 
other group entities operating in that same jurisdiction may adversely 
affect the assumed cooperation, forbearance, or other regulatory non-
intervention. If a

[[Page 66536]]

material entity providing shared services that support identified 
critical operations or core business lines, or are material to the 
execution of the resolution strategy, is located outside of the United 
States, the Plan should discuss how the firm will ensure the 
operational continuity of such shared services through resolution.
    The firm should:
    (A) Maintain an identification of all shared services that support 
identified critical operations or core business lines, or are material 
to the execution of the resolution strategy;
    (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, or are material 
to the execution of the resolution strategy.
    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.\33\
---------------------------------------------------------------------------

    \33\ The firm should consider whether these SLAs should be 
governed by the laws of a U.S. state and expressly subject to the 
jurisdiction of a court in the United States.
---------------------------------------------------------------------------

    The firm should also store SLAs in a central repository or 
repositories located in or immediately accessible from the U.S. at all 
times, including in resolution (and subject to enforceable access 
arrangements) in a searchable format. 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 U.S. resolution strategy) in 
such entities sufficient to cover contract costs, consistent with the 
U.S. resolution strategy. The firm should demonstrate that such working 
capital is held in a manner that ensures its availability for its 
intended purpose.
    The firm should identify all critical service providers and 
outsourced services that support identified critical operations or core 
business lines, or are material to the execution of the resolution 
strategy, 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 upon commencement of any 
resolution despite continued performance, 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 the current 
state of how the early termination of qualified financial contracts 
could impact the resolution of the firm's U.S. operations, including 
potential termination of any contracts that are not subject to 
contractual or regulatory stays of cross-default rights. Specifically, 
the Plan is expected to reflect the firm's progress regarding 
contractual stays in qualified financial contracts as of the date the 
firm submits its Plan or as of a specified earlier date. A firm that 
has adhered to the International Swaps and Derivatives Association's 
(ISDA) 2018 U.S. Resolution Stay Protocol or its antecedent, ISDA's 
2015 Universal Resolution Stay Protocol (together, the Protocols) 
should discuss the extent of the firm's adherence to the Protocols in 
its Plan (and may also discuss the impact on U.S. operations of the 
firm's adherence to ISDA's 2016 Jurisdictional Modular Protocol on its 
non-U.S. operations). A Plan should also explain the firm's processes 
for entering bilateral contracts with third-party entities that do not 
adhere to the Protocols and provide examples of the contractual 
language that is used under those circumstances.

U.S. MPOE

    Payment, Clearing, and Settlement Activities Capabilities. The firm 
is expected to have and describe capabilities to understand, for each 
U.S. material entity, the 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) U.S. 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, 
including suspension or termination of membership or services, on the 
firm's U.S. operations and customers and counterparties of those U.S. 
operations;
    [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 of their U.S operations 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 is expected 
to have and describe its capabilities to manage, identify, and value 
the collateral that the U.S. non-branch material entities receive from 
and post to external parties and 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 
U.S. legal entity basis (including any U.S. branch) 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 U.S. resolution strategy. The 
firm should have the capabilities to produce the following types of 
information, as applicable, 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;

[[Page 66537]]

     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 U.S. 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 
U.S. resolution strategy. Examples may include personnel, facilities, 
systems, data warehouses, intellectual property, and counsel and 
consultants involved in the preparation for and filing of bankruptcy. 
Specified firms also should maintain current cost estimates for 
implementing such strategies and contingency arrangements. If a 
material entity provides shared services that support identified 
critical operations,\34\ or are material to the execution of the U.S. 
resolution strategy, and the continuity of these shared services relies 
on the assumed cooperation, forbearance, or other non-intervention of 
regulator(s) in any jurisdiction, the Plan should discuss the extent to 
which the resolution or insolvency of any other group entities 
operating in that same jurisdiction may adversely affect the assumed 
cooperation, forbearance, or other regulatory non-intervention. If a 
material entity providing shared services that support identified 
critical operations, or are material to the execution of the U.S. 
resolution strategy, is located outside of the United States, the Plan 
should discuss how the firm will ensure the operational continuity of 
such shared services through resolution.
---------------------------------------------------------------------------

    \34\ This should be interpreted to include data access and 
intellectual property rights.
---------------------------------------------------------------------------

    The firm should:
    (A) Maintain an identification of all shared services that support 
identified critical operations or are material to the execution of the 
U.S. 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 U.S. 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.\35\
---------------------------------------------------------------------------

    \35\ The firm should consider whether these SLAs should be 
governed by the laws of a U.S. state and expressly subject to the 
jurisdiction of a court in the United States.
---------------------------------------------------------------------------

    The firm should identify all critical service providers and 
outsourced services that support identified critical operations or are 
material to the execution of the U.S. 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 upon commencement of any 
resolution despite continued performance; 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.

VII. Branches

U.S. SPOE & U.S. MPOE

    Continuity of Operations. If the Plan assumes that federal or state 
regulators, as applicable, do not take possession of any U.S. branch 
that is a material entity, the Plan should support that assumption.
    For any U.S. branch that is a material entity, the Plan should 
describe and demonstrate how the branch would continue to facilitate 
FMU access for identified critical operations and meet funding needs. 
For such a U.S. branch, the Plan should describe how it would meet 
supervisory requirements imposed by state regulators or the appropriate 
Federal banking agency, as appropriate, including maintaining a net due 
to position and complying with heightened asset maintenance 
requirements.\36\ In addition, the Plan should describe how such a U.S. 
branch's third-party creditors would be protected such that the state 
regulator or appropriate Federal banking agency would allow the branch 
to continue operations.
---------------------------------------------------------------------------

    \36\ Firms should take into consideration historical practice, 
by applicable regulators, regarding asset maintenance requirements 
imposed during stress.
---------------------------------------------------------------------------

    Impact of the Cessation of Operations. The Plan should provide an 
analysis of the impact of the cessation of operations of any U.S. 
branch that is a material entity on the firm's FMU access and 
identified critical operations, even if such scenario is not 
contemplated as part of the U.S. resolution strategy. The analysis 
should include a description of how identified critical operations 
could be transferred to a U.S. IHC subsidiary or sold in resolution, 
the obstacles presented by the cessation of shared services that 
support identified critical operations provided by any U.S. branch that 
is a material entity, and mitigants that could address such obstacles 
in a timely manner.

[[Page 66538]]

VIII. Legal Entity Rationalization and Separability

Legal Entity Rationalization

U.S. SPOE
    Legal Entity Rationalization Criteria (LER Criteria). A firm should 
develop and implement legal entity rationalization criteria that 
support the firm's U.S. resolution strategy and minimize risk to U.S. 
financial stability in the event of resolution. LER Criteria should 
consider the best alignment of legal entities and business lines to 
improve the resolvability of U.S. operations under different market 
conditions. LER Criteria should govern the corporate structure and 
arrangements between the U.S. subsidiaries and U.S. branches in a way 
that facilitates resolvability of the firm's U.S. operations as the 
firm's U.S. activities, technology, business models, or geographic 
footprint change over time.
    Specifically, application of the criteria should:
    (A) Ensure that the allocation of activities across the firm's U.S. 
branches and U.S. nonbranch material entities support the firm's U.S. 
resolution strategy and minimize risk to U.S. financial stability in 
the event of resolution;
    (B) Facilitate the recapitalization and liquidity support of U.S. 
IHC subsidiaries, as required by the firm's U.S. resolution strategy. 
Such criteria should include clean lines of ownership and clean funding 
pathways between the foreign parent, the U.S. IHC, and U.S. IHC 
subsidiaries;
    (C) Facilitate the sale, transfer, or wind-down of certain discrete 
operations within a timeframe that would meaningfully increase the 
likelihood of an orderly resolution in the United States, including 
provisions for the continuity of associated services and mitigation of 
financial, operational, and legal challenges to separation and 
disposition;
    (D) Adequately protect U.S. subsidiary IDIs from risks arising from 
the activities of any nonbank U.S. subsidiaries (other than those that 
are subsidiaries of an IDI); and
    (E) Minimize complexity that could impede an orderly resolution in 
the United States and minimize redundant and dormant entities.
    These criteria should be built into the firm's ongoing process for 
creating, maintaining, and optimizing the firm's U.S. structure and 
operations on a continuous basis. Finally, the Plan should include a 
description of the firm's legal entity rationalization governance 
process.
U.S. MPOE
    Legal Entity Structure. A firm should maintain a legal entity 
structure that supports the firm's U.S. resolution strategy and 
minimizes risk to U.S. financial stability in the event of the 
resolution of the firm's U.S. operations. 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 U.S. 
legal entity structure aligns core business lines and any identified 
critical operations with the firm's material entities to support the 
firm's U.S. resolution strategy. To the extent a material entity IDI 
relies upon an affiliate that is not the IDI's subsidiary during 
resolution of its U.S. entities, 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 U.S. 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

U.S. SPOE
     Separability. The firm should identify discrete U.S. operations 
that could be sold or 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 projected mitigation strategies should be identified in 
advance. Firms should 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. The level of detail and analysis should vary based 
on a firm's risk profile and scope of operations. Additionally, 
information systems should be robust enough to produce the required 
data and information needed to execute separability options.
    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 identified separability 
options (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.
U.S. MPOE
    A Plan should include options for the sale, transfer, or disposal 
of U.S. 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.

IX. Insured Depository Institution Resolution

U.S. MPOE

    Least-cost requirement analysis. If the Plan includes a strategy 
that contemplates the separate resolution of a U.S. IDI that is a 
material entity, the Plan should explain how the resolution 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.
    This explanation does not include an expectation that firms provide 
a complete least-cost analysis. A complete least-cost analysis would, 
for example, include a comparison of the preferred strategy for 
resolving an IDI that is a material entity against every other possible 
resolution method available for that IDI.
    To explain how a firm's preferred strategy could potentially enable 
the FDIC to resolve the failed bank in a manner consistent with the 
FDIC's statutory least-cost requirement, the firm could instead compare 
the estimated costs to the DIF of the firm's preferred resolution 
strategy to a payout liquidation and, for strategies involving

[[Page 66539]]

a BDI, explain how the inclusion or exclusion of uninsured deposits 
within the BDI would impact the estimated overall costs to the DIF.
    Firms should address the following matters as applicable to their 
strategy:
     Payout Liquidation: If the Plan envisions a payout 
liquidation for the IDI, with or without use of a Deposit Insurance 
National Bank or a paying agent, the Plan should explain 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.
     P& A Transaction: If the Plan assumes a weekend P& A 
strategy, the plan should first demonstrate the ready availability of 
this option under severely adverse economic scenario, assuming that 
markets are functioning and competitors are in a position to take on 
business. The Plan may demonstrate a weekend P& A strategy is available 
by discussing evidence of several potential buyers supported by 
information indicating that these potential buyers could reasonably be 
expected to have sufficient financial resources to complete the 
transaction in a severely adverse scenario and the expertise to 
incorporate the business of the failed bank. The plan should also 
address how such a merger can be completed with these potential 
acquirers considering any applicable approvals that would be required 
for the proposed transaction. Additionally, a P& A strategy should 
explain how it either (1) results in no loss to the DIF or (2) despite 
its resulting in a loss to the DIF, the loss is less than would be 
incurred through a payout liquidation.
     All-Deposit BDI: If the Plan contemplates a strategy 
involving an all-deposit BDI, the Plan should include an analysis that 
shows that the incremental estimated cost to the DIF of transferring 
all uninsured deposits to the BDI is offset by the preservation of 
franchise value and other benefits connected to the uninsured deposits 
(such as the franchise value derived from retaining full banking 
relationships).
     BDI with Partial Uninsured Deposit Transfers: A Plan may 
demonstrate the feasibility of a strategy involving a BDI that assumes 
(1) all insured deposits or (2) only a portion of uninsured deposits 
(e.g. an advance dividend to uninsured depositors for a portion of 
their deposit claim) by showing that the incremental estimated cost to 
the DIF of transferring the portion of uninsured deposits to the BDI is 
offset by the preservation of franchise value connected to those 
uninsured deposits (such as the franchise value derived from retaining 
full banking relationships).
    In all cases, the Plan should discuss how the implementation of the 
Plan's resolution strategy, including the impact on any depositors 
whose accounts are not transferred in whole or in part to a BDI, would 
not be likely to create the risk of serious adverse effects on U.S. 
financial stability.
    Valuation. Regardless of the strategy chosen, the Plan should 
demonstrate reasonable and well-supported assumptions that support the 
valuation of the failed IDI's assets and business franchise under the 
firm's preferred strategy that are drawn from comparable transactions 
or other inputs observable in the marketplace. A firm's franchise value 
is generally understood to be the value of the bank as an operating 
company relative to the value of the firm's individual assets minus its 
liabilities. In assessing the franchise value of the firm's business, 
the Plan could provide support through relevant inputs such as the 
revenue generated by the account relationships; the efficiencies in 
administrative costs associated with servicing large deposits/large 
relationships; the elimination of barriers to entry or the reduction in 
customer acquisition costs; growth history and prospects for the 
products or business activity; market trading or sales multiples; or 
any other factors the firm believes appropriate. Asset values should be 
representative of the bank's asset mix under the appropriate economic 
conditions and of sufficient distress as to result in failure.
    Exit from BDI. A Plan should include a discussion of the eventual 
exit from the BDI. A Plan could support the feasibility of an 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 the transfer 
of deposits to one or multiple acquirers, or culminates in a capital 
markets transaction, such as an initial public offering or a private 
placement of securities.

X. Format and Structure of Plans; Assumptions

U.S. SPOE & U.S. 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 
U.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.\37\ 
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.
---------------------------------------------------------------------------

    \37\ 12 CFR 243.4(h)(2) and 381.4(h)(2).
---------------------------------------------------------------------------

    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 Plan should assume the Dodd-Frank Act Stress Test (DFAST) 
severely adverse scenario for the first quarter of the calendar year in 
which the Plan is submitted is the domestic and international economic 
environment at the time of the firm's failure and throughout the 
resolution process.
    5. The U.S. resolution strategy may be based on an idiosyncratic 
event or action, including a series of

[[Page 66540]]

compounding events. The firm should justify use of that assumption, 
consistent with the conditions of the economic scenario.
    6. 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).
    7. For a firm that adopts a U.S. MPOE resolution strategy, the Plan 
should demonstrate and describe how the failure event(s) results in 
material financial distress of the U.S. operations.\38\ 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.
---------------------------------------------------------------------------

    \38\ 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.
---------------------------------------------------------------------------

    8. 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.
    9. 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, Federal Home Loan Banks, 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 U.S. 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 should 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 subsidiaries, branches and agencies (collectively, 
Offices), which are significant to the activities 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 Office, wherever located, that is significant to the 
activities of an identified critical operation.
    2. Any Office, wherever located, 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. Any Office, wherever located, that would 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. Any Office, wherever located, that is 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. Any Office, wherever located, engaged in asset custody or asset 
management that are significant to the activities of an identified 
critical operation.
    6. Any Office, wherever located, 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 U.S. resolution strategy, and explain how the Plan addresses the 
actions and forbearances. The Plan should describe the consequences for 
the firm's U.S. resolution strategy if specific actions in each 
jurisdiction were not taken, delayed, or forgone, as relevant.

XI. Public Section

U.S. SPOE & U.S. MPOE

    The purpose of the public section is to inform the public's 
understanding of the firm's U.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

[[Page 66541]]

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 9, 2024.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2024-18186 Filed 8-14-24; 8:45 am]
BILLING CODE 6210-01-P; 6714-01-P