#BankingRegulation #FinancialCrisis #LivingWills
Banking Regulators Slam Citigroup, JPMorgan Chase, Goldman Sachs, and Bank of America Over Living Will Plans
Banking regulators have dealt a significant blow to four major American banks, including Citigroup, JPMorgan Chase, Goldman Sachs, and Bank of America, citing shortcomings in their resolution plans, known as living wills. The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) expressed concerns over how these banks planned to unwind their substantial derivatives portfolios, which are financial contracts linked to various assets.
The evaluation revealed that Citigroup's ability to unwind such contracts under different conditions was insufficient and had material limitations, according to regulators. The FDIC deemed Citigroup's deficiency as more severe, impacting the bank's ability for an orderly resolution under U.S. bankruptcy rules. In contrast, the Federal Reserve rated it as having a less serious shortcoming.
Citigroup, in response, stated its commitment to addressing regulatory concerns and acknowledged the need for accelerated work in certain areas. Despite this, the bank expressed confidence in its ability to navigate resolution without a systemic impact or requiring taxpayer intervention.
These resolution plans are essential regulatory requirements established after the 2008 financial crisis. The large U.S. banks must submit these plans every two years to demonstrate their capability to orderly wind down in case of severe issues. Banks like JPMorgan, Goldman Sachs, and Bank of America were found to have shortcomings in their plans, highlighting the need for improvement.
Original Article: https://www.cnbc.com/2024/06/21/living-wills-citigroup-jpmorgan-chase-goldman-sachs-hit-by-regulators.html
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