US regulators: Banks' failure plans inadequate


Save Story
Leer en español

Estimated read time: 1-2 minutes

This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.

WASHINGTON (AP) — Federal regulators have told the biggest banks in the U.S. that their plans for unwinding their operations in case of failure are inadequate to prevent the sort of financial disaster that struck in 2008 and led to a massive government bailout.

The Federal Reserve and the Federal Deposit Insurance Corp. on Tuesday criticized as "not credible" the so-called "living wills" that the 11 largest banks were required to submit under the 2010 law overhauling financial regulation. The banks, with $50 billion or more in assets, include Bank of America, JPMorgan Chase, Citigroup and Morgan Stanley.

The regulators said the banks' plans make unrealistic assumptions about likely developments in case of failure. The regulators gave the banks until July 2015 to come up with improved plans or face possible stricter regulation.

The plans "demonstrate little ability to cope adequately with failure without some form of government support. The economy would almost surely go into crisis," Thomas Hoenig, the FDIC's vice chairman, said in a statement.

The "living wills" plans are part of the effort to avoid another taxpayer bailout of Wall Street banks in a crisis and to end the marketplace perception that the government would step in and rescue them. Under the 2010 law, the FDIC has the authority to seize and dismantle big financial firms that could collapse and threaten the broader system. The banks' "living wills" could serve as guidelines for possible breakups.

Fed Chair Janet Yellen has said that the largest U.S. banks may need to hold additional capital to withstand periods of financial stress.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Most recent Business stories

Related topics

Business
The Associated Press

    STAY IN THE KNOW

    Get informative articles and interesting stories delivered to your inbox weekly. Subscribe to the KSL.com Trending 5.
    By subscribing, you acknowledge and agree to KSL.com's Terms of Use and Privacy Policy.

    KSL Weather Forecast