The living wills are a key Federal Reserve and FDIC exercise mandated in the aftermath of the 2008 global financial crisis.
Banking regulators on Friday disclosed that they found weaknesses in the resolution plans of four of the eight largest American lenders.
Regulators found fault with the way each of the banks planned to unwind their massive derivatives portfolios; derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.The Federal Reserve and the Federal Deposit Insurance Corporation said that the so-called living wills — plans for unwinding huge institutions in the event of distress or failure — of
For example, when asked to quickly test Citigroup's ability to unwind its contracts using different inputs than those chosen by the bank, the firm came up short,to the regulators. That part of the exercise appears to have snared all the banks that struggled with the exam. The living wills are a key regulatory exercise mandated in the aftermath of the 2008 global financial crisis. Every other year, the largest US. banks must submit their plans to credibly unwind themselves in the event of catastrophe. Banks with weaknesses have to address them in the next wave of living will submissions due in 2025.
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