Bank regulators have uncovered faults in living wills provided by major U.S. banks: Bank of America Corp. (NYSE:BAC), Citigroup. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS) and JPMorgan Chase (NYSE:JPM).
What Happened: The Federal Deposit Insurance Corporation and the Federal Reserve Board announced on Friday that they have identified “a shortcoming” in the living will plans administered by the four banks.
The FDIC and the Fed said on Friday that they made these findings after conducting a joint review of eight banks, which submitted their plans for review in July 2023.
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Why It Matters: Financial institutions draft so-called living wills to act as a guide should they ever collapse. They include detailed instructions, such as how assets are to be sold or transferred.
The FDIC determined that Citigroup’s living will, for example, was “not credible.”
It “would not facilitate an orderly resolution” of a living will under the U.S. Bankruptcy Code, regulators explained. As a result, it was considered a “deficiency” — a weakness that could undermine the plan’s feasibility.
“Under the resolution planning rule of the agencies, when one agency finds a shortcoming in a resolution plan and the other agency finds a deficiency, the plan is deemed to have a shortcoming,” the agencies said in a news release.
The agencies previously identified a shortcoming in Citigroup’s 2021 plan, citing data quality and management. That “shortcoming” remains outstanding.
"We are fully committed to addressing the issues identified by our regulators,” Citigroup said in a statement provided to Benzinga.
“While we've made substantial progress on our transformation, we've acknowledged that we have had to accelerate our work in certain areas, including improving data quality and regulatory processes such as resolution planning.”
Citigroup said it has “made substantial enhancements in recent years” and will continue to invest in that effort.
“More broadly, we continue to have confidence that Citi could be resolved without an adverse systemic impact or the need for taxpayer funds,” the bank said.
Goldman Sachs and Bank of America declined to comment on the agencies’ actions. JPMorganChase did not immediately respond to requests for comment.
Both agencies sent letters to the four banks that describe the specific weaknesses resulting in the shortcoming and the remedial actions required by the Fed and the FDIC.
What’s Next: The shortcomings are to be addressed in the next resolution plans due by July 2025.
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