The Federal Reserve Board and the Federal Deposit Insurance Corporation on Thursday announced that the resolution plans of four foreign-based banks had weaknesses, but did not have "deficiencies," which are weaknesses severe enough to result in additional prudential requirements if not corrected. The agencies determined that the plans of the four firms--Barclays (BCS), Credit Suisse (CS), Deutsche Bank (DB), and UBS (UBS)--have "shortcomings," which are less severe weaknesses that require additional work in their next plan. These shortcomings in the four firms' plans include weaknesses in how each firm communicates and coordinates between its U.S. operations and its foreign parent in stress. Credit Suisse also had a shortcoming related to estimating the liquidity needs of its U.S. intermediate holding company in a resolution. Resolution plans, required by the Dodd-Frank Act and commonly known as living wills, must describe the company's strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company. For foreign banking organizations, resolution plans are focused on their U.S. operations; however, the agencies acknowledge that the preferred outcome for these four foreign-based banks is a successful home country resolution using a single point of entry resolution strategy. The agencies sent feedback letters to each firm detailing the shortcomings and specific actions that can be taken to address them. The firms must address the shortcomings in their next resolution plans, which are due July 1, 2020, and are expected to implement certain resolution projects in the interim.
