Banking Blog

Finance Blogs » Banking » Liquidation plans for critical banks?

Liquidation plans for critical banks?

By Marcie Geffner · Bankrate.com
Thursday, December 5, 2013
Posted: 9 am ET

The Federal Deposit Insurance Corp. has made significant progress toward implementing its authority to "resolve," or liquidate, troubled banks that are crucial to the healthy functioning of the U.S. financial system.

That's according to the FDIC inspector general's office, which recently issued a 39-page audit report, "The FDIC's Progress in Implementing Systemic Resolution Authorities under the Dodd-Frank Act."

So far, the FDIC has issued a joint regulation and met its deadlines to review resolution plans submitted by systemically crucial companies; entered into agreements to promote cooperation with its counterparts in other countries; and developed a strategy for the orderly liquidation of systemically crucial companies in certain circumstances.

These accomplishments are "notable," but more work needs to be done, the report states.

Tasks still on the to-do list include discussing the logistics, responsibilities, activities and resources that would be needed to execute the plans with the companies, tying projects and performance measures more tightly to long-term goals and priorities, and more effectively measuring progress toward readiness to act if necessary.

The inspector general also recommended that the FDIC take other actions to improve its progress and ensure that "priority attention" is given to the necessary activities.

In a memorandum, included as an appendix to the report, FDIC Chairman Martin J. Gruenberg concurred with all of the recommendations and outlined steps to be taken to implement them.

The FDIC has the authority and responsibility to liquidate troubled and systemically crucial financial companies if such a drastic step becomes necessary.

"The ability to implement those authorities, if needed, is critical to fulfilling the FDIC's primary mission of upholding public confidence in the nation's financial system," the audit stated.

The inspector general will continue to review the FDIC progress.

Follow me on Twitter: @marciegeff

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.