On April 16, 2019, the Federal Deposit Insurance Corporation (“FDIC”) announced its approval of an Advance Notice of Proposed Rulemaking (“ANPR”) inviting comment on ways to improve its rule requiring insured depository institutions with $50 billion or more in total assets (“Covered Insured Depository Institutions” or “CIDIs”) to submit periodic resolution plans to the FDIC (the “IDI Rule”).  In a statement accompanying the ANPR, FDIC Chairman Jelena McWilliams noted that “[a]fter several years of reviewing the IDI plans that firms submit, we are interested to learn how we can make this process more tailored and targeted, while continuing to advance the FDIC’s important resolution readiness efforts.”

The FDIC proposed the IDI Rule in 2010, prior to enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), to address challenges identified during the 2008 financial crisis, particularly relating to the resolution of insured depository institutions in the event of insolvency under the Federal Deposit Insurance Act (“FDI Act”).  The IDI Rule, which became effective in 2012, requires CIDIs periodically to submit plans (“Resolution Plans”) to the FDIC that include information concerning a CIDI’s structure, operations, business practices, financial responsibilities, and risk exposure.  The IDI Rule aims to ensure that the FDIC has the information it needs to resolve a CIDI under the FDI Act in a manner that protects insured depositors and the Deposit Insurance Fund, while minimizing any losses realized by creditors of the CIDI.

The IDI Rule is intended to complement the resolution plan requirement under Section 165(d) of the Dodd-Frank Act, which applies to bank holding companies with total consolidated assets of $50 billion or more and certain nonbank financial companies.

The ANPR presents two alternative approaches to the revision of the IDI Rule, both of which involve streamlining the Resolution Plan requirements for large, complex institutions and removing the submission requirements for smaller, less complex institutions:

  • The first alternative anticipates a tiered approach in which CIDIs would be divided into three groups: (A) the largest, most complex, internationally active CIDIs; (B) larger, more complex regional CIDIs; and (C) smaller, less complex regional CIDIs. The Resolution Plan content requirements for Group A CIDIs would be streamlined compared to the current IDI Rule, and the content requirements for Group B CIDIs would be further streamlined compared to those for Group A CIDIs.  Group C CIDIs would not be required to submit a Resolution Plan.
  • The second alternative anticipates a two-group tiered approach in which Group A and Group B CIDIs (“Larger CIDIs”) would be grouped together. Under the second alternative, there would be no predetermined informational requirements for Larger CIDIs’ Resolution Plans.  Rather, Larger CIDIs would be subject to a “continuum of disclosure obligations,” with streamlined content requirements individually targeted to each CIDI based on factors such as size, complexity, and other factors related to resolvability.  As in the first alternative, Group C CIDIs would not be required to submit a Resolution Plan.
  • Under both alternatives, CIDIs in Groups A, B, and C would be required (i) to periodically engage with the FDIC regarding resolution planning matters (e.g., providing feedback on the FDIC’s resolution strategy for the particular CIDI), and (ii) to undergo periodic capabilities testing to verify the accuracy of the Resolution Plan information provided (for those CIDIs required to submit Resolution Plans) and to assess the ability of the CIDI to promptly provide critical information in exigent circumstances.

The ANPR specifically invites comments on the following revisions under consideration, which are not mutually exclusive:

  • Revising the IDI Rule’s $50 billion asset size threshold.
  • Creating tiered groups based upon institution size, complexity, and other factors, and tailoring Resolution Plan requirements to those tiered groups.
  • Revising the frequency for submission of Resolution Plans, including the elimination of plan submissions for a category of smaller and less complex CIDIs.
  • Revising and streamlining the content requirements of the IDI Rule.
  • Improving the process for periodic engagement between the FDIC and all CIDIs subject to the IDI Rule on matters related to resolution planning.

The comment period ends 60 days after publication in the Federal Register.