Regulators' rejection of the wind-down plans of five of the nation's largest banks has some industry experts expressing frustration with the "living will" process. "The process could be significantly improved if regulators would make their expectations more clear upfront since a more transparent process would serve everyone's interest," said Tim Pawlenty, FSR president and CEO.
Citigroup, which has reduced its size 26% since 2007, was the only big bank whose "living will" passed the review of both the Federal Reserve and the Federal Deposit Insurance Corp. Wells Fargo, which has increased its size more than 37% since 2008, was told by regulators to revise its plan in a reversal from the previous "living will" review.
The Federal Reserve and the Federal Deposit Insurance Corp. have told Wells Fargo that, with some revisions, they can accept the bank's "living will" plan for wind-down in case of bankruptcy. Wells Fargo's living will details step-by-step plans to sell off units and put other units in bankruptcy as needed.
Regulators have released a template aimed at helping banks with at least $50 billion in assets, but less than $100 billion, write an initial "living will" by Dec. 31. More than 130 banks are affected, including U.S. Bancorp and SunTrust Banks. The Federal Reserve and the Federal Deposit Insurance Corp. issued the 27-page template, which banks are not required to use.
The legality of President Barack Obama's 2012 recess appointment of Richard Cordray to lead the Consumer Financial Protection Bureau is in question after the U.S. Court of Appeals ruled that similar appointments to the National Labor Relations Board were not proper.