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 After the 2007-09 financial crisis, the banks were required to
submit so-called "living wills" each year to show how they would
proceed through bankruptcy during a crisis without quietly relying
on government support to avoid putting the entire financial system
at risk.
But the Federal Reserve and the Federal Deposit Insurance
Corporation last year said they were unhappy with the quality of the
plans and urged banks to improve them by giving more details and
using more realistic assumptions, or face tough sanctions including
being broken up.
The 2010 Dodd-Frank Act gave the regulators the power to carve up
the banks if they deem the living wills "not credible," though that
is only the starting point of a lengthy procedure giving banks
several chances to improve.
Last year there was no such joint determination because while the
FDIC did use the term, the Fed did not. It is not clear when the
regulators will issue their verdict on this year's round of
submissions, the fourth.
Banks say the refiled plans, the third time they've been revised,
show they have massively improved their resilience to withstand
shocks, bulking up on shareholder capital to shield creditors, and
earmarking certain bonds as susceptible to losses in return for a
higher yield.
"Our (plan) would effectively resolve the firm within a reasonable
timeframe, without systemic disruption, without extraordinary
governmental support and without exposing taxpayers to risk of
loss," a JPMorgan spokesman said.
The plans contained far more detail than those from last year.
Citigroup <C.N>, for instance, submitted a 102-page document, more
than three times as much as the 2014 plan.
Some banks showed which parts of their business could be disposed of
through public stock offerings from businesses that would be sold
privately should a crisis hit.
For example, Citigroup said that after stabilizing its banking
operations, it would offer its U.S. consumer banking operations for
sale in an IPO while international operations would be sold in
private transactions.
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Goldman Sachs Group Inc included a table that showed it would
consider selling its domestic and international asset management
businesses, as well as its J. Aron commodities trading unit, in the
event that the group failed.
Morgan Stanley said it would ultimately sell its wealth management
business, as well as major parts of both its investment management
unit and its trading business in Japan, which is a joint venture
with Mitsubishi UFJ Group.
And Britain's Barclays said it is planning to shrink the size of its
U.S. unit to $185-215 billion by July 2016, from $248 billion at the
end of 2014.
What is published on the regulators' websites is only the public
portion of the plans. The actual documents are thousands of pages
and contain detailed instruction including mundane facts such as how
to access computer systems.
The banks involved are Bank of America, Bank of New York Mellon,
Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs,
JPMorgan Chase, Morgan Stanley, State Street, UBS and Wells Fargo.
(Reporting by Douwe Miedema, additional reporting by David Henry and
Lauren Tara LaCapra in New York; Editing by Alan Crosby)
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