On May 12, the Federal Deposit Insurance Corporation (FDIC) released a proposed rule that would require insured depository institutions (IDIs) that are subsidiaries of large and complex financial parent companies to submit to the FDIC analysis, information and contingent resolution plans that demonstrate such institution's ability to be separated from its parent and wound down or resolved in an orderly fashion (Proposed Rule). Such plans would assist the FDIC in its development of a reasonable strategy for the orderly resolution of such institution.
Depository institutions subject to this planning requirement are defined as those with greater than $10 billion in total assets that are owned or controlled by a parent company with more than $100 billion in total consolidated assets.
According to the accompanying release, the Proposed Rule is necessary because "opaque structures" have prevented the FDIC from "gaining access to information that is essential to the FDIC's assessment of its risks as insurer and to its ability to resolve the IDI in a cost-effective and timely fashion as receiver, in the event of failure."
The Proposed Rule also sets forth the elements which are required in a contingent resolution plan. These elements include descriptions of the following: organizational structure; business activities, relationships and counterparty exposures; capital structure; intra-group funding, transactions, accounts, exposures and concentrations; systemically important functions; material events; and cross-border elements.
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