US watchdog calls in experts to draft 'living wills' for banks
Regulator wants to have plans ready to rescue or wind up institutions in future crises
Sunday 24 April 2011
US regulators will draft "living wills" for the country's biggest banks before the institutions provide their own versions of the worst case economic survival plans.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was introduced to prevent another financial meltdown, banks will have to draw up the plans over the next two years. Living wills provide recovery and resolution plans: the former details ways of saving institutions when under severe economic stress, the latter is a guide to winding down the business without causing a shock to the economy.
However, the Federal Deposit Insurance Corporation (FDIC) is taking no chances that the banks will provide sufficiently detailed wills. It has invited corporate advisory firms to pitch to join a panel that will draw up early versions of the wills, to give the regulator a benchmark with which to measure the detail of the banks' plans.
KPMG, Deloitte, PricewaterhouseCoopers, Oliver Wyman, and FTI Consulting are among those that are thought to have been approached by the FDIC. Appointments are expected some time this quarter.
"The request for proposals is looking for a panel of firms to do an independent approach to how the wills might be written," said a source whose firm is looking to get on the panel.
British advisers will get drawn into helping devise any drafts. The banks that are being forced into establishing the wills have assets of $50bn or more, while the other financial institutions included are those considered systemically important to the US economy. Inevitably, much of the work these massive corporations conduct takes place in London. The source added: "All of these institutions have sizeable London offices and London is the derivatives capital of the world."
FDIC chairman Sheila Bair has welcomed her organisation's beefed-up powers, arguing that the ability to either wind-down a bank or lead it to sell-off assets to ensure survival will ensure economic stability. She recently said: "The powers to implement an FDIC liquidation of a systemic financial company during a future crisis give us the tools to end Too Big to Fail and eliminate future bailouts."
In a report earlier this month, the FDIC insisted that had these "wind-down" powers existed when Lehman Brothers collapsed in 2008 there would have been a far less severe impact on the global financial system.
There are critics. Billionaire financier George Soros has described living wills as "not convincing".
In Britain, the Financial Services Authority instructed six banks to draft living wills, which the regulator is still examining. HSBC, Barclays, Royal Bank of Scotland, Standard Chartered, Lloyds and Santander all submitted wills. Accountants Deloitte, KPMG, and Ernst & Young are advising at least one bank each.
- 1 'Kidnapped boy may have been abused and murdered by VIP paedophile ring,' say police
- 2 Ridley Scott on Exodus, Gods and Kings casting: 'I'm not going to get it financed if my lead actor is Mohammad so-and-so from such-and-such'
- 3 Girl, 7, gets Tesco to remove 'stupid' sign suggesting superheroes are 'for boys'
- 4 This letter from a reader explains why women can’t play football
- 5 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Black Friday 2014: Opening times for Asda, John Lewis, GAME, PC World and Argos
Miss Honduras Maria Jose Alvarado's stylist Luis Alfredo Garcia is found stabbed to death
Dr Lam Hoe Yeoh: Voyeur doctor jailed for eight years after using network of hidden cameras to film patients, colleagues and friends on the toilet
'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Scientists predict green energy revolution after incredible new graphene discoveries
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Exclusive: UK approved £7m Israeli arms sales in six months before Gaza conflict
iJobs Money & Business
£6000 - £60000 per annum + Bonus and Benefits: Ampersand Consulting LLP: UI De...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
Negotiable: h2 Recruit Ltd: A rapidly expanding, global Software/ SaaS Vendor ...
£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...