On September 13, 2011, the Federal Deposit Insurance Corporation (the “FDIC”) approved a final rule (the “Final Rules”) to be issued jointly by the FDIC and the Board of Governors of the Federal Reserve System (the “Board”) intended to implement section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”) which requires each non-bank financial company supervised by the Board and each bank holding company with assets of US $50 billion or more (each, a “Covered Company”) to report periodically to the Board, the FDIC and the Financial Stability Oversight Council (the “Council”) the plan of such company for rapid and orderly resolution in the event of material financial distress or failure (a “Resolution Plan”). The Final Rules were issued simultaneously with the approval by the FDIC’s board of directors of a rule that would require insured depository institutions with US $50 billion or more in total assets to submit periodic contingency plans to the FDIC in the event of the depository institution failure.
The Resolution Plan requirement is part of the additional regulations and reporting requirements, referred to as prudential standards, imposed under the Dodd-Frank Act on companies that “could pose a threat to the financial stability of the United States.” The Resolution Plan requirement is intended to provide regulators the ability to conduct advanced resolution planning for a company by requiring a company to prepare a strategic analysis of how it can be resolved under Title 11 of the US Code (the “Bankruptcy Code”) in a way that would not pose systemic risk to the financial system. Additionally, the Resolution Plan is designed to enhance the regulators’ understanding of foreign operations in an effort to develop a comprehensive and coordinated resolution strategy for a crossborder firm.
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