[Federal Register Volume 88, Number 180 (Tuesday, September 19, 2023)]
[Notices]
[Pages 64641-64658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19268]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1817]

FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-ZA38


Guidance for Resolution Plan Submissions of Foreign Triennial 
Full Filers

AGENCY: Board of Governors of the Federal Reserve System (Board) and 
Federal Deposit Insurance Corporation (FDIC).

ACTION: Proposed guidance; request for comments.

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SUMMARY: The Board and the FDIC (together, the agencies) are inviting 
comments on proposed guidance for the 2024 and subsequent resolution 
plan submissions by certain foreign banking organizations. The proposed 
guidance is meant to assist these firms in developing their resolution 
plans, which are required to be submitted pursuant to the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, as amended (the Dodd-
Frank Act), and the jointly issued implementing regulation (the Rule). 
The scope of application of the proposed guidance would be foreign-
based triennial full filers (specified firms or firms), which are 
foreign-based Category II and III banking organizations, and the 
guidance, if finalized, would supersede the joint Guidance for 
Resolution Plan Submissions of Certain Foreign-Based Covered Companies 
(85 FR 83557 (Dec. 22, 2020) (2020 FBO Guidance)). The proposed 
guidance is based on the agencies' review of the specified firms' 2021 
and prior resolution plan submissions, as well as the agencies' 
experiences dealing with stress events in the international and 
domestic banking systems, and would describe the agencies' expectations 
regarding several aspects of the specified firms' plans for an orderly 
resolution under the U.S. Bankruptcy Code. The agencies invite public 
comment on all aspects of the proposed guidance.

DATES: Comments must be received by November 30, 2023.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to both agencies. Comments should be directed to:
    Board: You may submit comments, identified by Docket No. OP-1817, 
by any of the following methods:
    <bullet> Agency Website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#e193848692cf828e8c8c848f9592a18784858493808d93849284939784cf868e97"><span class="__cf_email__" data-cfemail="a1d3c4c6d28fc2ceccccc4cfd5d2e1c7c4c5c4d3c0cdd3c4d2c4d3d7c48fc6ced7">[email protected]</span></a>. Include docket 
number in the subject line of the message.
    <bullet> Fax: (202) 452-3819 or (202) 452-3102.
    <bullet> Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    In general, all public comments will be made available on the 
Board's website at www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, and will not be modified to remove 
confidential, contact or any identifiable information. Public comments 
may also be viewed electronically or in paper in Room M-4365A, 2001 C 
St. NW, Washington, DC 20551, between 9:00 a.m. and 5:00 p.m. during 
federal business weekdays.
    FDIC: You may submit comments, identified by RIN 3064-ZA38, by any 
of the following methods:
    <bullet> FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for submitting 
comments on the FDIC's website.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#3c5f5351515952484f7c5a58555f125b534a"><span class="__cf_email__" data-cfemail="197a7674747c776d6a597f7d707a377e766f">[email protected]</span></a>. Include ``RIN 3064-ZA38'' on the 
subject line of the message.
    <bullet> Mail: James P. Sheesley, Assistant Executive Secretary, 
Attention: Comments--RIN 3064-ZA38, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.
    <bullet> Hand Delivery/Courier: Comments may be hand delivered to 
the guard station at the rear of the 550 17th Street NW building 
(located on F Street NW) on business days between 7 a.m. and 5 p.m.
    Public Inspection: Comments received, including any personal 
information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. 
Commenters should submit only information that the commenter wishes to 
make available publicly. The FDIC may review, redact, or refrain from 
posting all or any portion of any comment that it may deem to be 
inappropriate for publication, such as irrelevant or obscene material. 
The FDIC may post only a single representative example of identical or 
substantially identical comments, and in such cases will generally 
identify the number of identical or substantially identical comments 
represented by the posted example. All comments that have been 
redacted, as well as those that have not been posted, that contain 
comments on the merits of this document will be retained in the public 
comment file and will be considered as required under all applicable 
laws. All comments may be accessible under the Freedom of Information 
Act.

FOR FURTHER INFORMATION CONTACT: 
    Board: Catherine Tilford, Deputy Associate Director, (202) 452-
5240, Elizabeth MacDonald, Assistant Director, (202) 475-6316, Tudor 
Rus, Lead Financial Institution Analyst, (202) 475-6359, Division of 
Supervision and Regulation; or Jay Schwarz, Assistant General Counsel, 
(202) 452-2970; Andrew Hartlage, Special Counsel, (202) 452-6483; Sarah 
Podrygula, Senior Attorney, (202) 912-4658; or Brian

[[Page 64642]]

Kesten, Senior Attorney, (202) 843-4079, Legal Division, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue NW, Washington, DC 20551. For users of TTY-TRS, please call 711 
from any telephone, anywhere in the United States.
    FDIC: Robert C. Connors, Senior Advisor, (202) 898-3834, Division 
of Complex Financial Institution Supervision and Resolution; Celia Van 
Gorder, Senior Counsel, (202) 898-6749; Esther Rabin, Counsel, (202) 
898-6860, <a href="/cdn-cgi/l/email-protection#16736477747f785670727f7538717960"><span class="__cf_email__" data-cfemail="b0d5c2d1d2d9def0d6d4d9d39ed7dfc6">[email protected]</span></a>, Legal Division.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Overview of the Proposed Guidance
III. Paperwork Reduction Act
Appendix: Text of the Proposed Guidance

I. Background

A. The Dodd-Frank Act and the Rule

    Section 165(d) of the Dodd-Frank Act \1\ and the Rule \2\ require 
certain financial institutions to report periodically to the Board and 
the FDIC their plans for rapid and orderly resolution under the U.S. 
Bankruptcy Code (the Bankruptcy Code) in the event of material 
financial distress or failure. The Rule divides covered companies into 
three groups of filers: (a) biennial filers; (b) triennial full filers; 
and (c) triennial reduced filers.\3\
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    \1\ 12 U.S.C. 5365(d).
    \2\ 12 CFR parts 243 and 381.
    \3\ 12 CFR 243.4 and 12 CFR 381.4. The terms ``covered company'' 
and ``triennial full filer'' have the meanings given in the Rule, as 
do other, similar terms used throughout this proposal.
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    Triennial full filers under the Rule are required to file a 
resolution plan every three years, alternating between full and 
targeted resolution plans.\4\ The Rule requires each covered company's 
full resolution plan to include, among other things, a strategic 
analysis of the plan's components, a description of the range of 
specific actions the covered company proposes to take in resolution, 
and a description of the covered company's organizational structure, 
material entities, and interconnections and interdependencies.\5\ 
Targeted resolution plans are required to include a subset of 
information contained in a full plan.\6\ In addition, the Rule requires 
that all resolution plans consist of two parts: a confidential section 
that contains any confidential supervisory and proprietary information 
submitted to the agencies and a section that the agencies make 
available to the public.\7\ Public sections of resolution plans can be 
found on the agencies' websites.\8\
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    \4\ 12 CFR 243.4(b) and 12 CFR 381.4(b).
    \5\ 12 CFR 243.5 and 12 CFR 381.5.
    \6\ 12 CFR 243.6(b) and 12 CFR 381.6(b).
    \7\ 12 CFR 243.11(c) and 12 CFR 381.11(c).
    \8\ The public sections of resolution plans submitted to the 
agencies are available at www.federalreserve.gov/supervisionreg/resolution-plans.htm and www.fdic.gov/regulations/reform/resplans/.
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B. Recent Developments

    Implementation of the Rule has been an iterative process aimed at 
strengthening the resolution planning capabilities of financial 
institutions subject to the Rule. To assist the development of covered 
companies' resolution planning capabilities and plan submissions, the 
agencies have provided feedback on individual plan submissions, 
promulgated guidance to certain groups of covered companies, and issued 
answers to frequently asked questions. The agencies believe that 
guidance can help focus the efforts of similarly situated covered 
companies to improve their resolution capabilities and clarify the 
agencies' expectations for those filers' future progress. The agencies 
have issued guidance to (a) U.S. global systemically important banks 
(GSIBs),\9\ which constitute the biennial filer group, and (b) certain 
large foreign banking organizations (FBOs) that are triennial full 
filers.\10\ The agencies have not, however, issued guidance to the 
domestic firms and additional FBOs that make up the remainder of the 
triennial full filers.
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    \9\ Guidance for Sec.  165(d) Resolution Plan Submissions by 
Domestic Covered Companies applicable to the Eight Largest, Complex 
U.S. Banking Organizations, 84 FR 1438 (Feb. 4, 2019) (2019 GSIB 
Guidance).
    \10\ Guidance for Resolution Plan Submissions of Certain 
Foreign-Based Covered Companies, 85 FR 83557 (Dec. 22, 2020) (2020 
FBO Guidance).
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    As the agencies previously indicated,\11\ they believe that it is 
now appropriate to issue guidance to the specified firms. The agencies' 
review of the 2021 targeted resolution plans submitted by foreign-based 
triennial full filers not already subject to resolution planning 
guidance revealed significant inconsistencies in the amount and nature 
of information they provided on critical informational elements 
required by the Rule. In addition, some resolution plans included 
optimistic assumptions regarding the availability of financial 
resources at the firm at the time of a bankruptcy filing as well as the 
ability of a firm to access financial assistance prior to and during 
resolution. The agencies believe that future resolution plans from 
these firms would benefit from guidance regarding critical 
informational elements required by the Rule as well as appropriate 
assumptions. In addition, the agencies' review of 2021 targeted 
resolution plans submitted by foreign-based triennial full filers 
subject to the 2020 FBO Guidance revealed opportunities for 
improvements to the reliability and timeliness of the generation and 
provision of financial information as well as liquidity- and capital-
related resolution capabilities necessary to successfully executing 
these firms' U.S. resolution strategies. Resolution plans from the 
specified firms also generally lacked detail and clarity on how the 
firm's strategy and capabilities for a resolution under the Rule would 
be complementary to its home country global resolution strategy.
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    \11\ https://www.federalreserve.gov/newsevents/pressreleases/bcreg20220930a.htm.
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    The proposed guidance also reflects the agencies' recent experience 
with UBS Group AG's acquisition of Credit Suisse Group AG (CS) and, 
with respect to specified firms with large subsidiary insured 
depository institutions (IDIs), the resolutions of Silicon Valley Bank 
(SVB), Signature Bank (SB), and First Republic Bank (First Republic). 
The agencies' experience with CS illustrates the complexities that can 
arise in the case of acute stress involving large cross-border firms 
and the importance of resolution planning and coordination with home 
country authorities. Like CS, many of the specified firms are foreign 
GSIBs with a large presence in the United States, and the agencies 
recognize the importance of maintaining a comprehensive understanding 
of the U.S. operations of large FBOs. While SVB, SB, and First Republic 
were not required to file resolution plans under section 165(d) of the 
Dodd-Frank Act and the Rule, the effects of their failures illustrate 
that the failure of a large IDI may have serious adverse effects on 
financial stability in the United States.\12\ The agencies' experience 
with these three banking organizations is particularly instructive in 
developing guidance to foreign-based triennial full filers that present 
a U.S. multiple point of entry (U.S. MPOE) resolution strategy and that 
have large subsidiary IDIs, to assist their progress in developing 
their resolution plans that comply with the

[[Page 64643]]

statutory and regulatory requirements governing IDI resolution.
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    \12\ For example, the FDIC--upon the recommendation of two-
thirds of each of the board of directors of the FDIC and the Board, 
as well as a determination by the Secretary of the Treasury, in 
consultation with the President--resolved SVB and SB using the 
systemic risk exception to the statutory requirement to employ the 
least-costly method to resolve a failed IDI. https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm; https://www.fdic.gov/news/press-releases/2023/pr23017.html.
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C. Resolution Plan Strategy

    The specified firms have adopted one of two U.S. resolution 
strategies: a U.S. single point of entry (U.S. SPOE) or U.S. MPOE 
strategy. Under a U.S. SPOE approach, only the top-tier U.S. material 
entity holding company enters bankruptcy and all U.S. material entity 
subsidiaries remain operating as a going concern. The U.S. MPOE 
approach entails multiple U.S. material entities entering separate 
resolution proceedings: any top-tier U.S. material entity holding 
company enters bankruptcy; any U.S. material entity IDI subsidiary is 
resolved separately under the Federal Deposit Insurance Act of 1950, as 
amended (the FDI Act); and other individual U.S. material entity 
subsidiaries separately enter bankruptcy (or another applicable 
resolution regime) or are wound down. The U.S. SPOE and U.S. MPOE 
resolution plan strategies require firms to consider different risks 
and require different types of planning and development of capabilities 
for the execution of the respective strategies. For their 2021 
resolution plan submissions, some of the specified firms presented a 
U.S. SPOE strategy, but most of the specified firms presented a U.S. 
MPOE strategy.
    The agencies do not prescribe a specific resolution strategy for 
any covered company, nor do the agencies identify a preferred strategy. 
The proposed guidance is not intended to favor one strategy or another. 
Specified filers may continue to submit resolution plans using the 
resolution strategies they believe would be most effective in achieving 
an orderly resolution of their firms, but a resolution plan must 
address the key vulnerabilities and support the underlying assumptions 
required to successfully execute the chosen resolution strategy.
    With respect to the specified firms, the Rule requires the firm's 
U.S. resolution plan to address subsidiaries, branches, and agencies, 
and identified critical operations and core business lines, as 
applicable, that are domiciled in the United States or conducted in 
whole or material part in the United States.\13\ To date, the 
resolution plans of specified filers that have presented a U.S. SPOE 
strategy have presumed entry of the top tier U.S. intermediate holding 
company (IHC) into bankruptcy, while its material entity subsidiaries 
remain open and operating. Each of the specified firms that has 
presented such an approach is required by the Board's Regulation YY to 
have a U.S. IHC under which all non-branch U.S. entities are 
organized.\14\ The agencies note that some of the specified firms are 
not subject to the Regulation YY requirement to establish a U.S. IHC. 
The agencies are considering whether such a specified firm not subject 
to a U.S. IHC requirement could provide for the orderly resolution of 
its U.S. entities and operations utilizing a U.S. SPOE resolution 
without having a top-tier holding company which would be the only 
entity to enter resolution.
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    \13\ 12 CFR 243.5(a)(2) and 12 CFR 381.5(a)(2).
    \14\ 12 CFR 252.153.
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    Question 1: The agencies invite comment on all aspects of the 
utilization of a U.S. SPOE strategy under section 165(d) of the Dodd-
Frank Act by a specified filer whether or not it is subject to the 
Regulation YY requirement to establish a U.S. IHC, including the 
feasibility of the U.S. SPOE strategy and the characteristics of the 
firm's U.S. entities and operations that would facilitate successful 
U.S. SPOE strategy execution.

D. Long-Term Debt Rulemaking

    The agencies, as well as the Office of the Comptroller of the 
Currency, are issuing a proposed rule for comment that would require 
certain large IDI holding companies, U.S. intermediate holding 
companies of FBOs, and certain IDIs, to issue and maintain outstanding 
a minimum amount of long-term debt (LTD), among other proposed 
requirements.\15\ This proposed rule would improve the resolvability of 
these firms, and, in particular, their IDI subsidiaries, in case of 
failure, reducing costs to the Deposit Insurance Fund (DIF) and 
mitigating financial stability and contagion risks by reducing the risk 
of loss to uninsured depositors. LTD issued by the IDI could help 
support resolution strategies by, among other things, recapitalizing a 
bridge depository institution and facilitating its exit from resolution 
as a newly chartered IDI that would have new ownership. The agencies 
expect that a final long-term debt rule could interact with how the 
specified firms plan for resolution under the Rule, and the agencies 
anticipate ensuring that the final resolution plan guidance for foreign 
triennial full filers is consistent with any final long-term debt rule. 
Accordingly, the agencies welcome comments that take the proposed long-
term debt rulemaking into consideration.\16\
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    \15\ This proposed rulemaking is published elsewhere in this 
Federal Register (LTD proposal).
    \16\ The public also may provide comments on the proposed 
guidance that assume that no long-term debt rule is finalized and 
that specified firms remain subject to current capital rules.
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II. Overview of the Proposed Guidance

    The proposed guidance begins with the proposed scope and then is 
organized into several substantive topical areas. Each substantive 
topic is bifurcated, with separate guidance for a U.S. SPOE resolution 
strategy and a U.S. MPOE resolution strategy. As discussed, each 
resolution strategy poses distinct risks and requires its own type of 
planning and capabilities development for executing the strategy. 
Accordingly, the proposed guidance would account for the different 
challenges posed by each approach.
    The proposed guidance for firms that adopt a U.S. SPOE resolution 
strategy is generally based on the 2020 FBO Guidance or the associated 
proposal.\17\ Successful execution of a U.S. SPOE strategy relies on 
the ability to provide sufficient capital and liquidity to material 
entities, a governance structure that can identify the onset of 
financial stress events, and the ability to ensure the timely execution 
of the strategy and to maintain continuity of operations throughout 
resolution.
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    \17\ Guidance for Resolution Plan Submissions of Certain 
Foreign-Based Covered Companies, 85 FR 15449 (March 18, 2020) (2020 
Proposed FBO Guidance).
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    Some aspects of this proposal reflect expectations that were 
included in the 2020 Proposed FBO Guidance. For example, the proposal 
contains capital and liquidity pre-positioning expectations similar to 
the 2020 Proposed FBO Guidance, to better support U.S. SPOE strategies 
and in light of the LTD proposal. Although IDI subsidiaries of certain 
specified firms may be required under an LTD rule to have outstanding a 
minimum amount of prepositioned LTD, firms with a U.S. SPOE strategy 
should have a framework for determining the amount and allocation of 
resources among the firm's material entities. Similarly, for specified 
firms that adopt a U.S. SPOE strategy, the agencies are proposing 
governance mechanisms and separability expectations similar to those 
contained in the 2020 Proposed FBO Guidance. Governance mechanisms 
increase the likelihood that the U.S. SPOE strategy would be 
implemented at a point in the stress continuum prior to the firm having 
exhausted all financial resources, increasing the likelihood that the 
bankruptcy reorganization would be successful. Separability provides 
additional optionality to firms' U.S. SPOE strategies.
    The proposed guidance for firms that utilize a U.S. MPOE resolution 
strategy

[[Page 64644]]

is based upon the 2020 FBO Guidance but tailored for a U.S. MPOE 
strategy. The agencies are, however, proposing to clarify their 
expectations for specified firms that utilize a U.S. MPOE strategy that 
includes the resolution of a material entity that is a U.S. IDI. As 
discussed elsewhere in this proposal, the resolution of a large U.S. 
IDI under the FDI Act likely would pose substantial operational and 
legal challenges and complexities. Accordingly, the agencies believe 
that the resolution plans of firms whose resolution plans contemplate 
the separate resolution of a material entity that is a U.S. IDI would 
benefit from developing capabilities specific to and considering legal 
requirements regarding U.S. IDI resolution.
    The agencies believe that each substantive area of the proposed 
guidance would play a part in helping to ensure that the specified 
firms can be resolved in an orderly manner. The proposed guidance would 
describe the agencies' expectations for each of these areas. In 
addition, the proposed guidance would consolidate items of feedback 
provided to a number of the specified firms in the past, thereby 
providing the public with one source of applicable guidance for the 
specified firms. The proposed guidance is not, however, intended to 
override the obligation of an individual specified firm to respond, in 
its next resolution plan submission, to pending items of individual 
feedback or any shortcomings or deficiencies identified or determined 
by the agencies in that specified firm's prior resolution plan 
submission. The proposed guidance also is not meant to limit specified 
firms' consideration of additional vulnerabilities or obstacles that 
might arise based on a firm's particular structure, operations, or 
resolution strategy, and that should be factored into the specified 
firm's resolution plan submission.
    The proposed guidance concludes with information about the format 
and structure of a plan that applies equally to plans contemplating 
either a U.S. SPOE strategy or a U.S. MPOE strategy.

A. Scope of Application

    The agencies propose to apply the guidance to all foreign-based 
triennial full filers. The Board's tailoring framework provides clear, 
predictable scoping based on publicly reported quantitative data. As 
discussed above, the agencies believe that it is appropriate to provide 
resolution planning guidance to all foreign triennial full filers given 
issues identified in these firms' 2021 targeted resolution plans and 
considering lessons learned from recent events, including the agencies' 
experiences in connection with the events leading to UBS AG's 
acquisition of Credit Suisse, following the intervention of the Swiss 
authorities.
    The agencies would like the specified firms to submit resolution 
plans that take into consideration the final version of the proposed 
guidance as soon as practicable. However, the agencies understand that 
the specified firms may need time to take into consideration the 
guidance when developing their resolution plans. In light of the timing 
of this proposal, the agencies are considering providing a short 
extension of the next resolution plan submission date for the specified 
firms, with the expectation that these plan submissions would be due 
sooner than one year after the proposed guidance is published in final 
form.
    The agencies seek comment on all aspects of the proposed scope of 
application.
    Question 2: Should the agencies provide more than 6 months for the 
specified firms to take into consideration the expectations in the 
proposed guidance, once finalized? If so, what time period should the 
agencies provide?

B. Group Resolution Plan

    The agencies recognize that the preferred resolution outcome for 
many specified firms is a successful home country resolution using a 
global SPOE resolution strategy that does not involve the placement of 
any U.S. material entities into resolution. However, by law, U.S. 
resolution planning requirements require relevant FBOs to contemplate 
their resolution under the Bankruptcy Code.
    U.S. operations of an FBO are often highly interconnected with the 
broader, global operations of the financial institution. To clarify the 
interaction between U.S. and global resolution strategies, the proposal 
outlines expectations for specified firms to describe the impact of 
executing the firm's global, group-wide resolution plan on the firm's 
U.S. operations and detail the extent to which resolution planning 
under the Rule relies on different assumptions, strategies, and 
capabilities from the global plan. A specified firm's broader 
resolvability framework is expected to consider the objectives of both 
the group-wide resolution strategy and the U.S. resolution strategy 
pursuant to the Rule, with complementary efforts to enhance 
resolvability across plans.

C. Capital

    For specified firms with a U.S. SPOE resolution strategy, the 
agencies propose guidance substantially similar to the 2020 Proposed 
FBO Guidance regarding capital. The ability to provide sufficient 
capital to material entities without disruption from creditors is 
important in order to ensure that material entities can continue to 
maintain operations as the firm is resolved. The proposal describes 
expectations concerning the appropriate positioning of capital and 
other loss-absorbing instruments (e.g., debt that a parent holding 
company may choose to forgive or convert to equity) among the material 
entities within the firm (resolution capital adequacy and positioning, 
or RCAP). The positioning of capital resources within the firm should 
be consistent with any applicable rules requiring prepositioned 
resources in IDIs in the form of long-term debt. The proposal also 
describes expectations regarding a methodology for periodically 
estimating the amount of capital that may be needed to support each 
material entity after the bankruptcy filing (resolution capital 
execution need, or RCEN).
    The agencies are not proposing further expectations concerning 
capital to firms whose plans contemplate a U.S. MPOE resolution 
strategy, as a U.S. MPOE strategy assumes most material entities do not 
continue as going concerns upon entry into resolution.
    Question 3: In addition to the capital-related resolution plan 
requirements under the Rule, are there other capital-related 
expectations that would reasonably enhance the resolvability of a 
specified firm that utilizes a U.S. MPOE strategy in its resolution 
plan?
    Question 4: Do the capital-related resolution expectations in the 
proposed guidance align with the provisions of the interagency long-
term debt rulemaking proposal? Are there any aspects of the proposed 
guidance that should be revised, or additional expectations added, in 
light of the interagency long-term debt rulemaking proposal?

D. Liquidity

    For firms that adopt a U.S. SPOE resolution strategy, the agencies 
propose guidance substantially similar to the 2020 Proposed FBO 
Guidance regarding liquidity. A firm's ability to reliably estimate and 
meet its liquidity needs prior to, and in, resolution is important to 
the execution of a firm's resolution strategy because it enables the 
firm to respond quickly to demands from stakeholders and 
counterparties, including regulatory authorities in other

[[Page 64645]]

jurisdictions and financial market utilities. Maintaining sufficient 
and appropriately positioned liquidity also allows the subsidiaries to 
continue to operate while the firm is being resolved in accordance with 
the firm's resolution strategy.
    For firms that adopt a U.S. MPOE resolution strategy, the agencies 
propose that a firm should have the liquidity capabilities necessary to 
execute its resolution strategy, and its plan should include analysis 
and projections of a range of liquidity needs during resolution.
    Question 5: In addition to the liquidity-related resolution plan 
requirements under the Rule and the liquidity-related expectations in 
the proposed guidance, are there other liquidity related expectations 
that would reasonably enhance the resolvability of a specified firm 
that utilizes a U.S. MPOE resolution strategy? Are there circumstances 
under which it would be appropriate for a resolution plan that utilizes 
a U.S. MPOE strategy to include the movement of liquidity among U.S. 
material entities that are in resolution?

E. Governance Mechanisms

    For firms using a U.S. SPOE resolution strategy, the agencies 
propose guidance that is substantially similar to the 2020 Proposed FBO 
Guidance regarding governance mechanisms. An adequate governance 
structure with triggers that identify the onset, continuation, and 
increase of financial stress is important to ensure that there is 
sufficient time to communicate and coordinate with the foreign parent 
regarding the provision of financial support and other key actions. The 
governance mechanisms section proposes expectations that firms have 
playbooks that describe the board and senior management actions of the 
U.S. non-branch material entities that would be necessary in order to 
execute the firm's U.S. resolution strategy. In addition, the proposal 
describes expectations that these firms have triggers that are linked 
to specific actions outlined in these playbooks to ensure the timely 
escalation of information to both U.S. IHC and foreign parent governing 
bodies. The proposal also describes the expectations that firms 
identify and analyze potential legal challenges to planned U.S. IHC 
support mechanisms, and any defenses and mitigants to such challenges. 
To the extent the preferred global resolution strategy for the firm is 
a home country SPOE resolution, the governance mechanisms section 
proposes expectations that a firm design such mechanisms in a way that 
does not interfere with the execution of the global strategy.
    For firms that adopt a U.S. MPOE resolution strategy, the agencies 
propose adopting governance mechanisms expectations to ensure 
communication and coordination between the governing body of the U.S. 
operations and the foreign parent for the purpose of facilitating 
preparations for an orderly resolution.
    Question 6: Are the governance mechanisms expectations regarding 
communications and triggers for firms that utilize a U.S. MPOE strategy 
appropriate and clear? Are there other governance-related expectations 
that should be extended to resolution plans utilizing a U.S. MPOE 
resolution strategy?

F. Operational

    The development and maintenance of operational capabilities is 
important to support and enable execution of a firm's resolution 
strategy, including providing for the continuation of identified 
critical operations and preventing or mitigating adverse effects on 
U.S. financial stability. For firms that utilize a U.S. SPOE resolution 
strategy, the agencies propose adopting portions of the operational 
expectations of the 2020 FBO Guidance and SR letter 14-1,\18\ with 
modifications that reflect the specific characteristics and 
complexities of the specified firms. Like the 2020 FBO Guidance, the 
proposal contains expectations on payment, clearing and settlement 
activities, managing, identifying and valuing collateral, and shared 
and outsourced services. For firms that utilize a U.S. MPOE resolution 
strategy, the agencies propose adopting expectations based on SR letter 
14-1 and the 2020 FBO Guidance that are most relevant to an MPOE 
resolution strategy. For example, the proposed expectations regarding 
payment, clearing and settlement activities are those most likely to 
support resolution in the MPOE context.
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    \18\ SR letter 14-1, ``Principles and Practices for Recovery and 
Resolution Preparedness'' (Jan. 24, 2014), available at https://www.federalreserve.gov/supervisionreg/srletters/sr1401.htm.
---------------------------------------------------------------------------

    Question 7: Does the proposed guidance sufficiently address FBOs 
that plan to utilize a U.S. SPOE strategy that may not be required to 
comply with U.S. qualified financial contract resolution stay 
regulations? How should FBOs that are not ``regulated entities'' under 
ISDA's Resolution Stay Protocol demonstrate that their SPOE resolution 
strategies will be feasible despite the lack of a stay on cross 
defaults to the parent company? What guidance should the agencies 
provide with respect to how the SPOE strategy of such a firm should 
address the potential effects of early termination of the firm's 
qualified financial contracts?

G. Legal Entity Rationalization & Separability

    For specified firms that utilize a U.S. SPOE resolution strategy, 
the agencies propose substantively adopting the 2020 FBO Guidance 
regarding legal entity rationalization and guidance that is 
substantially similar to the 2020 FBO Proposed Guidance regarding 
separability. It is important that firms maintain a structure that 
facilitates orderly resolution. To achieve this, the proposal states 
that a firm should develop and describe in their plans criteria 
supporting the U.S. resolution strategy and integrate them into day-to-
day decision making processes. The criteria would be expected to 
consider the best alignment of legal entities and business lines and 
facilitate resolvability of U.S. operations as a firm's activities, 
technology, business models, or geographic footprint change over time. 
In addition, the proposed guidance provides that the firm should 
identify discrete U.S. operations that could be sold or transferred in 
resolution to provide meaningful optionality for the resolution 
strategy under a range of potential failure scenarios and include this 
information in their plans.
    For firms that utilize a U.S. MPOE resolution strategy, the 
proposed guidance would clarify that the firms should have legal entity 
structures that support their U.S. resolution strategy and describe 
those structures in their plans. The proposal also provides that to the 
extent a material entity IDI relies upon other affiliates during 
resolution, the firm should discuss its rationale for the legal entity 
structure and associated resolution risks and potential mitigants. In 
addition, the agencies propose that the firms include options for the 
sale, transfer, or disposal of significant assets, portfolios, legal 
entities, or business lines in resolution.
    Question 8: Are there other separability related expectations that 
would reasonably enhance resolution plans that utilize a U.S. MPOE 
resolution strategy?

[[Page 64646]]

H. Insured Depository Institution (IDI) Resolution <SUP>19</SUP>
---------------------------------------------------------------------------

    \19\ The FDIC has a separate rule requiring resolution plans 
from certain IDIs, 12 CFR 360.10, ``Resolution Plans Required for 
Insured Depository Institutions With $50 Billion or More in Total 
Assets'' (the IDI Rule). The Rule and the IDI Rule each have 
different goals and the expected content of the respective 
resolution plans accordingly also is different. The Rule requires a 
covered company to submit a resolution plan that would allow rapid 
and orderly resolution of the covered company under the Bankruptcy 
Code in the event of material financial distress or failure. The 
purpose of the IDI Rule is to ensure that the FDIC has access to all 
of the material information it needs to efficiently resolve an IDI 
in the event of its failure.
---------------------------------------------------------------------------

    Background. When an IDI fails and the FDIC is appointed receiver, 
the FDIC generally must utilize the resolution option for the failed 
IDI that is least costly to the DIF of all possible methods (the least-
cost requirement).\20\ An exception to this requirement is provided 
where a determination is made by the Secretary of the Treasury, in 
consultation with the President and after a written recommendation from 
two-thirds of the FDIC's Board of Directors and two-thirds of the 
Board, that complying with the least-cost requirement would have 
serious adverse effects on economic conditions or financial stability 
and implementing another resolution option would avoid or mitigate such 
adverse effects.\21\ A specified firm should not assume the use of this 
systemic risk exception to the least-cost requirement in its resolution 
plan.
---------------------------------------------------------------------------

    \20\ See 12 U.S.C. 1823(c)(4). A deposit payout and liquidation 
of the failed IDI's assets (payout liquidation) is the general 
baseline the FDIC uses in a least-cost requirement determination. 
See 12 U.S.C. 1823(c)(4)(D).
    \21\ See 12 U.S.C. 1823(c)(4)(G).
---------------------------------------------------------------------------

    Purchase and Assumption Transaction. The FDIC typically seeks to 
resolve a failed IDI by identifying, before the IDI's failure, one or 
more potential acquirers so that as many of the IDI's assets and 
deposit liabilities as possible can be sold to and assumed by the 
acquirer(s) instead of remaining in the receivership created on the 
failure date.\22\ This transaction form, termed a ``purchase and 
assumption'' or ``P&A'' transaction, has historically been the 
resolution approach that is least costly to the DIF, easiest for the 
FDIC to execute, and least disruptive to the depositors of the failed 
IDI--particularly in the case of transactions involving the assumption 
of all the failed IDI's deposits by the assuming institution (an ``all-
deposit transaction'')--and typically can be completed over the weekend 
following the IDI's closure by its primary regulator but before 
business ordinarily would commence the following Monday (closing 
weekend). The limited size and operational complexity present in most 
small-bank failures has allowed the FDIC to execute a P&A transaction 
with a single acquirer on numerous occasions. Resolving an IDI via a 
P&A transaction over the closing weekend, however, may not be available 
to the FDIC, particularly in failures involving large IDIs. P&A 
transactions require lead time to identify potential buyers and allow 
due diligence on, and an auction of, the failing IDI's assets and 
banking business, also termed its ``franchise.'' Additionally, larger 
banks can pose significant, and potentially systemic, challenges in 
resolutions. These challenges include: a more limited pool of potential 
acquirers as a failed IDI increases in size, which makes a transaction 
in which nearly all assets and liabilities are transferred to one or 
more acquirers increasingly less likely; operational complexities which 
require advance planning on the part of the IDI and the FDIC and the 
development of certain capabilities; potential market concentration and 
antitrust considerations; and potentially the need to maintain the 
continuity of activities conducted in whole or in part in the IDI that 
are critical to U.S. financial stability.
---------------------------------------------------------------------------

    \22\ See generally https://www.fdic.gov/resources/resolutions/bank-failures/ for background about the resolution of IDIs by the 
FDIC.
---------------------------------------------------------------------------

    For example, the largest failed IDI in U.S. history, Washington 
Mutual Bank, had approximately $307 billion in assets. The DIF did not 
incur a loss associated with this failure in part because it benefitted 
from the FDIC's sale of the institution to an acquirer which had first 
engaged in exhaustive due diligence of the institution during a self-
marketing effort conducted by the IDI prior to its failure. A more 
recent example, that of First Republic Bank, which was also acquired in 
an all-deposit transaction, illustrates that such a transaction can be 
difficult to effectuate. The FDIC invited 21 banks and 21 nonbanks to 
participate in the bidding process and received bids from only 4 
bidders.\23\ The least costly bid necessitated a loss-sharing 
agreement, and the transaction is expected to result in a significant 
loss to the DIF. In addition, the FDIC received only one viable bid for 
Silicon Valley Bank during the weekend following its failure, but this 
bid did not satisfy the least-cost test. The FDIC received no viable 
all-deposit bids for Signature Bank at the time it failed.\24\
---------------------------------------------------------------------------

    \23\ See Remarks by Chairman Martin J. Gruenberg on ``Oversight 
of Prudential Regulators'' before the Committee on Financial 
Services, United States House of Representatives available at 
https://www.fdic.gov/news/speeches/2023/spmay1523.html; see also 
Remarks by Chairman Martin J. Gruenberg on ``Recent Bank Failures 
and the Federal Regulatory Response'' before the Committee on 
Banking, Housing, and Urban Affairs, United States Senate available 
at https://www.fdic.gov/news/speeches/2023/spmar2723.html.
    \24\ To protect depositors and preserve the value of the assets 
and operations of each of SVB and SB following failure--which can 
improve recoveries for creditors and the DIF--the FDIC ultimately 
transferred all the deposits and substantially all of the assets of 
each failed bank to a full-service bridge depository institution 
(BDI) operated by the FDIC while the FDIC marketed the institutions 
to potential bidders.
---------------------------------------------------------------------------

    If no P&A transaction that meets the least-cost requirement can be 
accomplished at the time an IDI fails, the FDIC must pursue an 
alternative resolution strategy. The primary alternative resolution 
strategies for a failed IDI are: (1) a payout liquidation; or (2) 
utilization of a BDI. The FDIC conducts payout liquidations by paying 
insured deposits in cash or transferring the insured deposits to an 
existing institution or a new institution organized by the FDIC to 
assume the insured deposits (generally, a Deposit Insurance National 
Bank or DINB). In payout liquidations, the FDIC as receiver retains 
substantially all of the failed IDI's assets for later sale, and the 
franchise value of the failed IDI is lost.
    Bridge Depository Institution. If the FDIC determines that 
temporarily continuing the operations of the failed IDI is less costly 
than a payout liquidation, it may organize a BDI to purchase certain 
assets and assume certain liabilities of the failed IDI.\25\ Generally, 
a BDI would continue the failed bank's operations according to business 
plans and budgets approved by the FDIC and carried out by FDIC-selected 
leadership of the BDI. In addition to providing depositors access to 
deposits and banking services, the BDI would conduct any necessary 
restructuring required to rationalize the failed IDI's operations and 
maximize value to be achieved in an eventual sale. Subject to the 
least-cost requirement, the initial structure of the BDI may be based 
upon an all-deposit transaction, a transaction in which the BDI assumes 
only the insured deposits, or a transaction in which the BDI assumes 
all insured deposits and a portion of the uninsured deposits. Once a 
BDI is established, the FDIC seeks to stabilize the institution while 
simultaneously planning for the eventual termination of

[[Page 64647]]

the BDI. In exiting and terminating a BDI, the FDIC may merge or 
consolidate the BDI with another depository institution, issue and sell 
a majority of the capital stock in the BDI, or effect the assumption of 
the deposits or acquisition of the assets of the BDI.\26\ However, many 
of the same factors that challenge the feasibility of a traditional P&A 
transaction also complicate planning for the termination of a BDI 
through a sale of the whole entity or its constituent parts.
---------------------------------------------------------------------------

    \25\ Before a BDI may be chartered, the chartering conditions 
set forth in 12 U.S.C. 1821(n)(2) must also be satisfied. For 
purposes of this guidance, if the Plan provides appropriate analysis 
concerning the feasibility of the BDI strategy, there is no 
expectation that the resolution plan also demonstrate separately 
that the conditions for chartering the BDI have been satisfied.
    \26\ 12 U.S.C. 1821(n)(10).
---------------------------------------------------------------------------

    The proposed guidance would clarify the expectations for a firm 
adopting a U.S. MPOE resolution strategy with a material entity IDI to 
demonstrate how the IDI can be resolved in a manner that is consistent 
with the overall objective of the Plan to substantially mitigate the 
risk that the failure of the specified firm would have serious adverse 
effects on financial stability in the United States, while also 
adhering to the requirements of the FDI Act regarding failed bank 
resolutions without relying on the assumption that a systemic risk 
exception will be available. These expectations would not be applicable 
to firms adopting a U.S. SPOE resolution strategy because U.S. IDI 
subsidiaries of such firms would not be expected to enter resolution.
    Question 9: Should the guidance indicate that if a specified filer 
proposes a strategy using a BDI to resolve its subsidiary material 
entity IDI, the plan should include a detailed description of the 
balance sheet components that would transfer to the BDI and of the 
process the specified filer believes is most appropriate to value the 
transferred components, inclusive of pro forma balance sheet and income 
statements?
    Question 10: Should the guidance indicate that if a specified filer 
proposes a strategy using a BDI to resolve its subsidiary material 
entity IDI, the plan should describe and quantify:
    <bullet> The amounts to be realized through liquidating the failed 
IDI's assets and any expected premiums associated with selling the 
institution's deposits;
    <bullet> Any franchise value bid premiums expected to be realized 
through maintaining certain ongoing business operations in a BDI; and
    <bullet> A comparison of the loss to the DIF realized from a payout 
liquidation and from utilizing a BDI so as to support the conclusion 
that a BDI would result in the least costly resolution?

I. Derivatives and Trading Activities

    The agencies request comment on whether to provide guidance on 
derivatives and trading activities for specified firms that utilize a 
U.S. SPOE resolution strategy. Although most of the specified firms 
have limited derivatives and trading operations compared to the U.S. 
GSIBs, it remains important that their derivatives and trading 
activities can be stabilized and de-risked during resolution without 
causing significant disruption to U.S. markets, particularly for firms 
with large U.S. broker-dealers. The agencies also are considering the 
resolution challenges that may be posed by transactions that originate 
from and may be managed in the U.S. but are booked outside of the U.S. 
If the agencies were to provide guidance on derivatives and trading 
activities, the agencies likely would adopt aspects of the 2020 
Proposed FBO Guidance. The agencies do not anticipate providing 
derivatives and trading activities guidance to specified firms that 
utilize a U.S. MPOE resolution strategy.
    Question 11: Should the agencies provide resolution plan guidance 
on derivatives and trading activities for specified firms that utilize 
a U.S. SPOE resolution strategy? If so, what should be the content of 
that guidance, what methodology should the agencies use to determine 
the scope of specified firms to be subject to that guidance, and would 
it be appropriate to adopt all or some of the expectations contained in 
the 2020 Proposed FBO Guidance? What other derivatives and trading 
activities-related expectations would reasonably enhance resolution 
plans that utilize a U.S. SPOE resolution strategy?
    Question 12: Should the agencies provide resolution plan guidance 
on derivatives and trading activities for specified firms that utilize 
a U.S. MPOE resolution strategy? If so, what should be the content of 
that guidance and what methodology should the agencies use to determine 
the scope of specified firms to be subject to that guidance?
    Question 13: Should any resolution plan guidance the agencies 
provide to the specified firms on derivatives and trading activities 
take a different approach to transactions that originate in the U.S. 
but are booked outside of the U.S. and transactions that originate and 
are booked in the U.S.?

J. Branches

    U.S. branches of FBOs can play a critical role in a firm's U.S. 
operations and may present unique issues in a resolution of a specified 
firm's U.S. entities and operations. The agencies propose guidance that 
is similar to the 2020 FBO Guidance regarding branches. Under the 
proposal, specified firms would be expected to show how branches would 
continue to facilitate the firm's FMU access for identified critical 
operations and to meet funding needs. The proposal also outlines 
expectations that the specified firms analyze the effects on the firm's 
FMU access and identified critical operations of the cessation of 
operations of any U.S. branch that is a material entity.

K. Format and Structure of Plans; Assumptions

    This section states the agencies' preferred presentation regarding 
the format, assumptions, and structure of resolution plans. Plans 
should contain an executive summary, a narrative of the firm's 
resolution strategy, relevant technical appendices, and a public 
section as detailed in the Rule. The proposed format, structure, and 
assumptions are generally similar to those in the 2020 FBO Guidance, 
except that the proposed guidance reflects the expectation that a firm 
should support any assumptions that it will have access to the Discount 
Window and/or other borrowings during the period immediately prior to 
entering bankruptcy and clarifies expectations around such assumptions 
and that firms should not assume the use of the systemic risk exception 
to the least-cost test in the event of a failure of an IDI requiring 
resolution under the FDI Act. In addition, for firms that adopt a U.S. 
MPOE resolution strategy, the proposal includes the expectation that a 
plan should demonstrate and describe how the failure event(s) results 
in material financial distress of its U.S. operations, including 
consideration of the likelihood of the diminution the firm's liquidity 
and capital levels prior to bankruptcy.
    Question 14: Certain firms' plans rely on lending facilities, 
including the Discount Window or other government-sponsored facilities 
in the period immediately preceding a bankruptcy filing. Should the 
guidance include additional clarifications related to assumptions 
regarding these lending facilities? Should the guidance contain 
clarifications relating to other assumptions discussed in the guidance 
or additional appropriate assumptions?

[[Page 64648]]

    Question 15: The agencies included in the 2019 GSIB Guidance and 
2020 FBO Guidance answers that had been previously published to 
frequently asked questions (FAQs) the agencies received from the 
guidance recipients about the topics in resolution plan guidance (e.g., 
capital, liquidity, etc.); however, there was no FAQ process for the 
specified firms given the limited number of common questions received. 
Should the agencies include in resolution guidance for the specified 
firms answers to FAQs similar to those contained in the 2019 GSIB 
Guidance and 2020 FBO Guidance? If so, which answers to FAQs should the 
final guidance contain, and what changes, if any, should the agencies 
make to the answers to FAQs in the 2019 GSIB Guidance and 2020 FBO 
Guidance?

III. Paperwork Reduction Act

    Certain provisions of the proposed guidance contain ``collections 
of information'' within the meaning of the Paperwork Reduction Act of 
1995 (PRA) (44 U.S.C. 3501-3521). In accordance with the requirements 
of the PRA, the agencies may not conduct or sponsor, and a respondent 
is not required to respond to, an information collection unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number. The agencies reviewed the proposed guidance and 
determined that it would revise the reporting revisions that have been 
previously approved by OMB under the Board's OMB control number 7100-
0346 (Reporting Requirements Associated with Regulation QQ; FR QQ) and 
the FDIC's control number 3064-0210 (Reporting Requirements Associate 
with Resolution Planning). The Board has reviewed the proposed guidance 
under the authority delegated to the Board by OMB.
    Comments are invited on the following:
    (A) Whether the collections of information are necessary for the 
proper performance of the agencies' functions, including whether the 
information has practical utility;
    (B) The accuracy of the agencies' estimates of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    (C) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (D) Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (E) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments on aspects of this document that may affect reporting, 
recordkeeping, or disclosure requirements and burden estimates should 
be sent to the addresses listed in the ADDRESSES section of the 
Supplementary Information. A copy of the comments may also be submitted 
to the OMB desk officer for the Agencies: By mail to U.S. Office of 
Management and Budget, 725 17th Street NW, #10235, Washington, DC 
20503, or by facsimile to (202) 395-5806, Attention, Federal Banking 
Agency Desk Officer.

Proposed Revisions, With Extension, of the Following Information 
Collections

Board

    Collection title: Reporting Requirements Associated with Regulation 
QQ.
    Collection identifier: FR QQ.
    OMB control number: 7100-0346.
    Frequency: Triennial, Biennial, and on occasion.
    Respondents: Bank holding companies (including any foreign bank or 
company that is, or is treated as, a bank holding company under section 
8(a) of the International Banking Act of 1978 and meets the relevant 
total consolidated assets threshold) with total consolidated assets of 
$250 billion or more, bank holding companies with $100 billion or more 
in total consolidated assets with certain characteristics, and nonbank 
financial firms designated by the Financial Stability Oversight Council 
for supervision by the Board.

FDIC

    Collection title: Reporting Requirements Associated with Resolution 
Planning.
    OMB control number: 3064-0210.
    Current Actions: The proposed guidance would apply to all triennial 
full filers, but expectations would differ based on whether a firm 
adopts an SPOE or an MPOE resolution strategy and whether it is foreign 
or domestic. The proposed guidance is intended to clarify the agencies' 
expectations concerning the resolution plans required pursuant to the 
Rule. The document does not have the force and effect of law. Rather, 
it describes the agencies' expectations and priorities regarding these 
the resolution plans of triennial full filers and the agencies' general 
views regarding specific areas where additional detail should be 
provided and where certain capabilities or optionality should be 
developed and maintained to demonstrate that each firm has considered 
fully, and is able to mitigate, obstacles to the successful 
implementation of its preferred resolution strategy.
    The proposed guidance for triennial full filers using an SPOE 
strategy is based on the 2019 GSIB guidance (for domestic firms) and 
the 2020 FBO guidance (for foreign firms). It would clarify the 
agencies' expectations around capital, liquidity, governance 
mechanisms, and operations. The proposed guidance also would clarify 
expectations concerning management information systems capabilities and 
the identification of discrete separability options appropriate to the 
resolution strategy. Additionally, if finalized, the FBOs that adopt an 
SPOE resolution strategy should address how their U.S. resolution plan 
aligns with their group resolution plan.
    The proposed guidance for triennial full filers using an MPOE 
resolution strategy addresses similar topics but reflects the risks of 
and capabilities needed for an MPOE resolution. The proposed guidance 
explains the agencies' expectations around liquidity and operational 
capabilities, and legal entity rationalization. The proposed guidance 
also provides clarified expectations related to the separate resolution 
of a U.S. IDI and to identification of discrete separability options. 
FBOs that adopt an MPOE resolution strategy would have expectations 
related to governance mechanisms; the role of branches; and the group 
resolution plan.
    The proposed guidance does not specify expectations around 
derivatives and trading activities.
    Historically, the Board and the FDIC have split the respondents for 
purposes of PRA clearances. As such, the agencies will split the change 
in burden as well. As a result of this split and the proposed 
revisions, there is a proposed net increase in the overall estimated 
burden hours of 13,386 hours for the Board and 17,610 hours for the 
FDIC. Therefore, the total Board estimated burden for its entire 
information collection would be 216,853 hours and the total FDIC 
estimate burden for its entire information collection would be 211,300 
hours.
    The following table presents only the change in the estimated 
burden hours, as amended if the guidance were finalized, broken out by 
agency. The table does not include a discussion of the remaining 
estimated burden hours,

[[Page 64649]]

which remain unchanged.\27\ As shown in the table, the Triennial Full 
filing types would be estimated more granularly according to SPOE and 
MPOE resolution strategies.
---------------------------------------------------------------------------

    \27\ In addition to the proposed revisions to the estimations 
for Triennial Full filings, the agencies have revised the estimation 
for Biennial Full filings from 40,115 hours per response to 39,550 
hours per response to align the burden estimation methodology with 
what was used for Triennial Full filings under the proposed 
guidance. Specifically, the agencies removed a component for a 
biennial full filer's analysis of its critical operations as part of 
its submission of targeted and full resolution plans, because this 
critical operations analysis is integrated in the preparation of 
such plans.

            Table 1--Burden Hour Estimates Under Current Regulations and Under the Proposed Guidance
----------------------------------------------------------------------------------------------------------------
                                                     Estimated       Estimated       Estimated       Estimated
                      FR QQ                          number of        annual       average hours   annual burden
                                                    respondents      frequency     per response        hours
----------------------------------------------------------------------------------------------------------------
                                                  Board Burdens
----------------------------------------------------------------------------------------------------------------
Current
    Triennial Full:
        Complex Foreign.........................               1               1           9,777           9,777
        Foreign and Domestic....................               7               1           4,667          32,669
                                                 ---------------------------------------------------------------
            Current Total.......................  ..............  ..............  ..............          42,446
Proposed
    Triennial Full:
        FBO SPOE *..............................               2               1          11,848          23,696
        FBO MPOE................................               3               1           5,939          17,817
        Domestic MPOE...........................               3  ..............           5,513          16,539
                                                 ---------------------------------------------------------------
            Proposed Total......................  ..............  ..............  ..............          58,052
----------------------------------------------------------------------------------------------------------------
                                                  FDIC Burdens
----------------------------------------------------------------------------------------------------------------
Current
    Triennial Full:
        Complex Foreign.........................               0               1           9,777               0
        Foreign and Domestic....................               7               1           4,667          32,669
                                                 ---------------------------------------------------------------
            Current Total.......................  ..............  ..............  ..............          32,669
Proposed
    Triennial Full:
        FBO SPOE *..............................               2               1          11,848          23,696
        FBO MPOE................................               3               1           5,939          17,817
        Domestic MPOE...........................               2               1           5,513          11,026
                                                 ---------------------------------------------------------------
            Proposed Total......................  ..............  ..............  ..............          52,539
----------------------------------------------------------------------------------------------------------------
* There are currently no domestic triennial full filers utilizing a SPOE strategy. Estimated hours per response
  for a domestic SPOE triennial full filer would be 11,235 hours.

Appendix: Text of the Proposed Guidance

Guidance for Resolution Plan Submissions of Foreign Triennial Full 
Filers

I. Introduction

    Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5365(d)) requires certain financial 
companies to report periodically to the Board of Governors of the 
Federal Reserve System (the Board) and the Federal Deposit Insurance 
Corporation (the FDIC) (together, the agencies) their plans for 
rapid and orderly resolution in the event of material financial 
distress or failure. On November 1, 2011, the agencies promulgated a 
joint rule implementing the provisions of Section 165(d).\1\ 
Subsequently, in November 2019, the agencies finalized amendments to 
the joint rule addressing amendments to the Dodd-Frank Act made by 
the Economic Growth, Regulatory Relief, and Consumer Protection Act 
and improving certain aspects of the joint rule based on the 
agencies' experience implementing the joint rule since its 
adoption.\2\ Financial companies meeting criteria set out in the 
Rule must file a resolution plan (Plan) according to the schedule 
specified in the Rule.
---------------------------------------------------------------------------

    \1\ Resolution Plans Required, 76 FR 67323 (November 1, 2011).
    \2\ Resolution Plans Required, 84 FR 59194 (November 1, 2019). 
The amendments became effective December 31, 2019. ``Rule'' means 
the joint rule as amended in 2019. Terms not defined herein have the 
meanings set forth in the Rule.
---------------------------------------------------------------------------

    This document is intended to provide guidance to certain foreign 
financial companies required to submit Plans regarding development 
of their respective U.S. strategies to assist their further 
development of a Plan for their 2024 and subsequent Plan 
submissions. Specifically, the guidance applies to any foreign-based 
covered company that is subject to Category II or III standards 
according to their combined U.S. operations in accordance with the 
Board's tailoring rule (specified firms).\3\ This guidance 
supersedes the joint Guidance for Resolution Plan Submissions of 
Certain Foreign-Based Covered Companies.\4\
---------------------------------------------------------------------------

    \3\ Prudential Standards for Large Bank Holding Companies, 
Savings and Loan Holding Companies, and Foreign Banking 
Organizations, 84 FR 59032 (Nov. 1, 2019).
    \4\ 85 FR 83557 (Dec. 22, 2020) (2020 FBO Guidance).
---------------------------------------------------------------------------

    The Plan for a specified firm would address a scenario where its 
U.S. operations experience material financial distress and the 
foreign parent is unable or unwilling to provide sufficient 
financial support for the continuation of U.S. operations, and at 
least the top tier U.S. IHC files for bankruptcy under Title 11, 
United States Code. Under such a scenario, the Plan should provide 
for the orderly resolution of the specified firm's U.S. material 
entities and operations.
    In general, this document is organized around a number of key 
challenges in resolution (interaction with group resolution plan; 
capital; liquidity; governance mechanisms; operational; branches; 
legal

[[Page 64650]]

entity rationalization and separability; and insured depository 
institution resolution, if applicable) that apply across resolution 
plans, depending on their strategy. Additional challenges or 
obstacles may arise based on a firm's particular structure, 
operations, or resolution strategy. Each firm is expected to 
satisfactorily address these vulnerabilities in its Plan. In 
addition, each topic of this guidance is separated into expectations 
for a specified firm that utilizes a U.S. single point of entry 
(U.S. SPOE) resolution strategy for its Plan and expectations for a 
specified firm that utilizes a U.S. multiple point of entry (U.S. 
MPOE) resolution strategy for its Plan.\5\ Under the Rule, the 
agencies will review a Plan to determine if it satisfactorily 
addresses key potential challenges, including those specified below. 
If the agencies jointly decide that an aspect of a Plan presents a 
weakness that individually or in conjunction with other aspects 
could undermine the feasibility of the Plan, the agencies may 
determine jointly that the Plan is not credible or would not 
facilitate an orderly resolution under the U.S. Bankruptcy Code.
---------------------------------------------------------------------------

    \5\ The agencies recognize that the preferred resolution outcome 
for many specified firms is a successful home country resolution 
using a global SPOE resolution strategy where U.S. material entities 
are provided with sufficient capital and liquidity resources to 
allow them to stay out of resolution proceedings and maintain 
continuity of operations throughout the parent's resolution. 
However, because support from the foreign parent in stress cannot be 
ensured, the Rule provides that the U.S. resolution plan for 
specified firms should specifically address a scenario where the 
U.S. operations experience material financial distress, and the Plan 
should not assume that the specified firm takes resolution actions 
outside the United States that would eliminate the need for any U.S. 
subsidiaries to enter resolution proceedings.
---------------------------------------------------------------------------

II. Interaction With Group Resolution Plan

U.S. SPOE & U.S. MPOE

    Recognizing that the preferred resolution outcome for the 
specified firms is often a successful SPOE home country resolution, 
a specified firm's Plan should describe the impact of executing the 
global resolution plan on U.S. operations. This description should 
include a discussion of the expected resolution strategy for the 
firm's U.S. entities and operations under the global resolution 
plan. In addition, a specified firm's resolvability work in the 
United States should consider both the objectives of the firm's 
group-wide resolution strategy and the Rule. Efforts to enhance the 
resolvability of U.S. operations and entities should be as 
complementary as practicable to the group-wide resolution strategy, 
while complying with the Rule. To the extent that the Plan relies on 
different assumptions, strategies, and capabilities, such as those 
used to project liquidity needs in resolution, from those necessary 
to execute the global strategy, the Plan should include a 
description of such differences.

III. Capital

U.S. SPOE

    The firm should have the capital capabilities necessary to 
execute its U.S. resolution strategy, including the modeling and 
estimation process described below. Resolution Capital Adequacy and 
Positioning (RCAP). In order to help ensure that a firm's U.S. non-
branch material entities \6\ could be resolved in an orderly manner, 
the firm's U.S. IHC should have an adequate amount of loss-absorbing 
capacity to execute its U.S. resolution strategy. Thus, a firm's 
U.S. IHC should have outstanding a minimum amount of loss-absorbing 
capacity, including long-term debt, to help ensure that the firm has 
adequate capacity to meet that need at the U.S. IHC on a 
consolidated basis (IHC LAC).\7\
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    \6\ The terms ``material entities,'' ``identified critical 
operations,'' and ``core business lines'' have the same meaning as 
in the Rule. The term ``U.S. material entity'' means any subsidiary, 
branch, or agency that is a material entity and is domiciled in the 
United States. The term ``U.S. non-branch material entity'' means a 
material entity organized or incorporated in the U.S. including, in 
all cases, the U.S. IHC. The term ``U.S. IHC subsidiaries'' means 
all U.S. non-branch material entities other than the U.S. IHC.
    \7\ Total Loss-Absorbing Capacity, Long-Term Debt, and Clean 
Holding Company Requirements for Systemically Important U.S. Bank 
Holding Companies and Intermediate Holding Companies of Systemically 
Important Foreign Banking Organizations, 82 FR 8266 (January 24, 
2017); LTD proposal.
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    Proceeds from a firm's U.S. IHC LAC should be appropriately 
positioned between the U.S. IHC and the subsidiaries of the U.S. IHC 
that are material entities (U.S. IHC subsidiaries), consistent with 
any applicable rules requiring prepositioned resources at U.S. IDIs 
in the form of long-term debt. After adhering to any requirements 
related to prepositioning long-term debt at IDIs, the positioning of 
a firm's remaining IHC LAC should balance the certainty associated 
with pre-positioning internal LAC directly at U.S. IHC subsidiaries 
with the flexibility provided by holding recapitalization resources 
at the U.S. IHC (contributable resources) to meet unanticipated 
losses at the U.S. IHC subsidiaries. That balance should take 
account of both pre-positioning at U.S. IHC subsidiaries and holding 
resources at the U.S. IHC, and the obstacles associated with each. 
With respect to material entities that are not subject to pre-
positioning requirements, the firm should not rely exclusively on 
either full pre-positioning or U.S. IHC contributable resources to 
execute its U.S. resolution strategy, unless it has only one U.S. 
IHC subsidiary that is an operating subsidiary. The Plan should 
describe the positioning of internal LAC among the U.S. IHC and the 
U.S. IHC subsidiaries, along with analysis supporting such 
positioning.
    Finally, to the extent that pre-positioned internal LAC at a 
U.S. IHC subsidiary is in the form of intercompany debt and there 
are one or more entities between the lender and the borrower, the 
firm should structure the instruments so as to ensure that the U.S. 
IHC subsidiary can be recapitalized.
    Resolution Capital Execution Need (RCEN). To the extent 
necessitated by the firm's U.S. resolution strategy, U.S. non-branch 
material entities need to be recapitalized to a level that allows 
for an orderly resolution. The firm should have a methodology for 
periodically estimating the amount of capital that may be needed to 
support each U.S. IHC subsidiary after the U.S. IHC bankruptcy 
filing (RCEN). The firm's positioning of IHC LAC should be able to 
support the RCEN estimates.
    The firm's RCEN methodology should use conservative forecasts 
for losses and risk-weighted assets and incorporate estimates of 
potential additional capital needs through the resolution period,\8\ 
consistent with the firm's resolution strategy for its U.S. 
operations. The RCEN methodology should be calibrated such that 
recapitalized U.S. IHC subsidiaries will have sufficient capital to 
maintain market confidence as required under the U.S resolution 
strategy. Capital levels should meet or exceed all applicable 
regulatory capital requirements for ``well-capitalized'' status and 
meet estimated additional capital needs throughout resolution. U.S. 
IHC subsidiaries that are not subject to capital requirements may be 
considered sufficiently recapitalized when they have achieved 
capital levels typically required to obtain an investment-grade 
credit rating or, if the entity is not rated, an equivalent level of 
financial soundness. Finally, the methodology should be 
independently reviewed, consistent with the firm's corporate 
governance processes and controls for the use of models and 
methodologies.
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    \8\ The resolution period begins immediately after the U.S. IHC 
bankruptcy filing and extends through the completion of the U.S. 
resolution strategy.
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U.S. MPOE

    The agencies do not propose issuing guidance on this topic to 
firms whose Plans contemplate a U.S. MPOE resolution strategy.

IV. Liquidity

U.S. SPOE

    The firm should have the liquidity capabilities necessary to 
execute its U.S resolution strategy, including those described 
below. For resolution purposes, these capabilities should include 
having an appropriate model and process for estimating and 
maintaining sufficient liquidity at--or readily available from the 
U.S. IHC to--U.S. IHC subsidiaries, and a methodology for estimating 
the liquidity needed to successfully execute the U.S. resolution 
strategy, as described below.
    Capabilities. A firm is expected to have a comprehensive 
understanding of funding sources, uses, and risks at material 
entities and identified critical operations, including how funding 
sources may be affected under stress. For example, a firm should 
have and describe its capabilities to:
    (A) Evaluate the funding requirements necessary to perform 
identified critical operations, including shared and outsourced 
services and access to financial market utilities (FMUs); \9\
---------------------------------------------------------------------------

    \9\ 12 CFR 252.156(g)(3).
---------------------------------------------------------------------------

    (B) Monitor liquidity reserves and relevant custodial 
arrangements by jurisdiction and material entity; \10\
---------------------------------------------------------------------------

    \10\ 12 CFR 252.156(g)(2).
---------------------------------------------------------------------------

    (C) Routinely test funding and liquidity outflows and inflows 
for U.S. non-branch material entities at the legal entity level

[[Page 64651]]

under a range of adverse stress scenarios, taking into account the 
effect on intra-day, overnight, and term funding flows between 
affiliates and across jurisdictions;
    (D) Assess existing and potential restrictions on the transfer 
of liquidity between U.S. non-branch material entities; \11\ and
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    \11\ Id.
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    (E) Develop contingency strategies to maintain funding for U.S. 
non-branch material entities and identified critical operations in 
the event of a disruption in the specified firm's current funding 
model.\12\
---------------------------------------------------------------------------

    \12\ 12 CFR 252.156(e).
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    Resolution Liquidity Adequacy and Positioning (RLAP). With 
respect to RLAP, the firm should be able to measure the stand-alone 
liquidity position of each U.S. non-branch material entity--i.e., 
the high-quality liquid assets (HQLA) at the U.S. non-branch 
material entity less net outflows to third parties and affiliates--
and ensure that liquidity is readily available to meet any deficits. 
The RLAP model should cover a period of at least 30 days and reflect 
the idiosyncratic liquidity profile of the U.S. IHC and risk of each 
U.S. IHC subsidiary. The model should balance the reduction in 
frictions associated with holding liquidity directly at the U.S. IHC 
subsidiary with the flexibility provided by holding HQLA at the U.S. 
IHC or at a U.S. IHC subsidiary available to meet unanticipated 
outflows at other U.S. IHC subsidiaries.\13\ The firm should not 
rely exclusively on either full pre-positioning or U.S. IHC 
contributable resources to execute its U.S. resolution strategy, 
unless it has only one U.S. IHC subsidiary that is an operating 
subsidiary.
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    \13\ To the extent HQLA is held at the U.S. IHC or at a U.S. IHC 
subsidiary, the model must consider whether such funds are freely 
available. To be freely available, the HQLA must be free of legal, 
regulatory, contractual, and other restrictions on the ability of 
the material entity to liquidate, sell, or transfer the asset.
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    The model \14\ should ensure that on a consolidated basis the 
U.S. IHC holds sufficient HQLA to cover net liquidity outflows of 
the U.S. non-branch material entities. The model should also measure 
the stand-alone net liquidity positions of each U.S. non-branch 
material entity. The stand-alone net liquidity position of each U.S. 
non-branch material entity (HQLA less net outflows) should be 
measured using the firm's internal liquidity stress test assumptions 
and should treat inter-affiliate exposures in the same manner as 
third-party exposures. For example, an overnight unsecured exposure 
to a non-U.S. affiliate should be assumed to mature. Finally, the 
firm should not assume that a net liquidity surplus at any U.S. IHC 
subsidiary that is a depository institution could be moved to meet 
net liquidity deficits at an affiliate, or to augment U.S. IHC 
resources, consistent with Regulation W.
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    \14\ ``Model'' refers to the set of calculations required by 
Regulation YY that estimate the U.S. IHC's liquidity position.
---------------------------------------------------------------------------

    Additionally, the RLAP methodology should take into account for 
each of the U.S. IHC, U.S. IHC subsidiaries, and any branch that is 
a material entity (A) the daily contractual mismatches between their 
respective inflows and outflows; (B) their respective daily flows 
from movement of cash and collateral for all inter-affiliate 
transactions; and (C) their respective daily stressed liquidity 
flows and trapped liquidity as a result of actions taken by clients, 
counterparties, key FMUs, and foreign supervisors, among others.
    In calculating its RLAP estimate, the U.S. IHC should calculate 
its liquidity position with respect to its foreign parent, branches 
and agencies, and other affiliates (together, affiliates) separately 
from its liquidity position with respect to third parties, and 
should not offset inflows from affiliated parties against outflows 
to external parties. In addition, a U.S. IHC should use cash-flow 
sources from its affiliates to offset cash-flow needs of its 
affiliates only to the extent that the term of the cash-flow source 
from its affiliates is the same as, or shorter than, the term of the 
cash-flow need of its affiliates.\15\
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    \15\ The U.S. IHC should calculate its cash-flow sources from 
its affiliates consistent with the net internal stressed cash-flow 
need calculation in Sec.  252.157(c)(2)(iv) of Regulation YY.
---------------------------------------------------------------------------

    Resolution Liquidity Execution Need (RLEN). The firm should have 
a methodology for estimating the liquidity needed after the U.S. 
IHC's bankruptcy filing to stabilize any surviving U.S. IHC 
subsidiaries and to allow those entities to operate post-filing, in 
accordance with the U.S. strategy.
    The firm's RLEN methodology should:
    A. Estimate the minimum operating liquidity (MOL) needed at each 
U.S. IHC subsidiary that is a material entity to ensure those 
entities could continue to operate, to the extent relied upon in the 
U.S. resolution strategy, after implementation of the U.S. 
resolution strategy and/or to support a wind-down strategy;
    B. Provide daily cash flow forecasts by U.S. IHC subsidiary to 
support estimation of peak funding needs to stabilize each entity 
under resolution;
    C. Provide a comprehensive breakout of all inter-affiliate 
transactions and arrangements that could impact the MOL or peak 
funding needs estimates for the U.S. IHC subsidiaries; and
    D. Estimate the minimum amount of liquidity required at each 
U.S. IHC subsidiary to meet the MOL and peak needs noted above, 
which would inform the provision of financial resources from the 
foreign parent to the U.S. IHC, or if the foreign parent is unable 
or unwilling to provide such financial support, any preparatory 
resolution-related actions.
    The MOL estimates should capture U.S. IHC subsidiaries' intraday 
liquidity requirements, operating expenses, working capital needs, 
and inter-affiliate funding frictions to ensure that U.S. IHC 
subsidiaries could operate without disruption during the resolution.
    The peak funding needs estimates should be projected for each 
U.S. IHC subsidiary and cover the length of time the firm expects it 
would take to stabilize that U.S. IHC subsidiary. Inter-affiliate 
funding frictions should be taken into account in the estimation 
process.
    The firm's forecasts of MOL and peak funding needs should ensure 
that U.S. IHC subsidiaries could operate through resolution 
consistent with regulatory requirements, market expectations, and 
the firm's post-failure strategy. These forecasts should inform the 
RLEN estimate, i.e., the minimum amount of HQLA required to 
facilitate the execution of the firm's strategy for the U.S. IHC 
subsidiaries.
    For nonsurviving U.S. IHC subsidiaries, the firm should provide 
analysis and an explanation of how the material entity's resolution 
could be accomplished within a reasonable period of time and in a 
manner that substantially mitigates the risk of serious adverse 
effects on U.S. financial stability. For example, if a U.S. IHC 
subsidiary that is a broker-dealer is assumed to fail and enter 
resolution under the Securities Investor Protection Act, the firm 
should provide an analysis of the potential impacts on funding and 
asset markets and on prime brokerage clients, bearing in mind the 
objective of an orderly resolution.

U.S. MPOE

    The firm should have the liquidity capabilities necessary to 
execute its U.S. resolution strategy. A Plan with a U.S. MPOE 
strategy should include analysis and projections of a range of 
liquidity needs during resolution, including intraday; reflect 
likely failure and resolution scenarios; and consider the guidance 
on assumptions provided in Section X, Format and Structure of Plans; 
Assumptions.

V. Governance Mechanisms

U.S. SPOE

    A firm should identify the governance mechanisms that would 
ensure that communication and coordination occur between the boards 
of the U.S. IHC or a U.S. subsidiary and the foreign parent to 
facilitate the provision of financial support, or if not 
forthcoming, any preparatory resolution-related actions to 
facilitate an orderly resolution. Playbooks, Foreign Parent Support, 
and Triggers. Governance playbooks should detail the board and 
senior management actions of U.S. non-branch material entities that 
would be needed under the firm's U.S. resolution strategy. The 
governance playbooks should also include a discussion of: (A) the 
firm's proposed U.S. communications strategy, both internal and 
external; \16\ (B) the fiduciary responsibilities of the applicable 
board(s) of directors or other similar governing bodies and how 
planned actions would be consistent with such responsibilities 
applicable at the time actions are expected to be taken; (C) 
potential conflicts of interest, including interlocking boards of 
directors; (D) any employee retention policy; and (E) any other 
limitations on the authority of the U.S. IHC and the U.S. IHC 
subsidiary boards and senior management to implement the U.S. 
resolution strategy. All responsible parties and timeframes for 
action should be identified. Governance playbooks should be

[[Page 64652]]

updated periodically for each entity whose governing body would need 
to act under the firm's U.S. resolution strategy.
---------------------------------------------------------------------------

    \16\ External communications include those with U.S. and foreign 
authorities and other external stakeholders.
---------------------------------------------------------------------------

    In order to meet liquidity needs at the U.S. non-branch material 
entities, the firm may either fully pre-position liquidity in the 
U.S. non-branch material entities or develop a mechanism for planned 
foreign parent support, of any amount not pre-positioned, for the 
successful execution of the U.S. strategy. Mechanisms to support 
readily available liquidity may include a term liquidity facility 
between the U.S. IHC and the foreign parent that can be drawn as 
needed and as informed by the firm's RLEN estimates and liquidity 
positioning. To the extent the preferred global resolution strategy 
for the firm is a home country SPOE resolution, the mechanism should 
be designed so as to not interfere with the execution of that 
strategy. The Plan should include analysis of how the U.S. IHC/
foreign parent facility is funded or buffered for by the foreign 
parent. The sufficiency of the liquidity should be informed by the 
firm's RLAP and RLEN estimates for the U.S. non-branch material 
entities. Additionally, the Plan should include analysis of the 
potential challenges to the planned foreign parent support mechanism 
and associated mitigants. Where applicable, the analysis should 
discuss applicable non-U.S. law and cross-border legal challenges 
(e.g., challenges related to enforcing contracts governed by foreign 
law). The analysis should identify the mitigant(s) to such 
challenges that the firm considers most effective.
    The firm should be prepared to increase communication and 
coordination at the appropriate time in order to mitigate financial, 
operational, legal, and regulatory vulnerabilities. To facilitate 
this communication and coordination, the firm should establish 
clearly identified triggers linked to specific actions for:
    (A) The escalation of information to U.S. senior management, 
U.S. risk committee and U.S. governing bodies to potentially take 
the corresponding actions as the U.S. operations experience material 
financial distress, leading eventually to the decision to implement 
the U.S. resolution strategy.
    i. Triggers should identify when and under what conditions the 
U.S. material entities would transition from business-as-usual 
conditions to a stress period.
    ii. Triggers should also take into consideration changes in the 
foreign parent's condition from business-as-usual conditions through 
resolution.
    (B) The escalation of information to and discussions with the 
appropriate governing bodies to confirm whether the governing bodies 
are able and willing to provide financial resources to support U.S. 
operations.
    i. Triggers should be based on the firm's methodology for 
forecasting the liquidity and capital needed to facilitate the U.S. 
strategy. For example, triggers may be established that reflect U.S. 
non-branch material entities' financial resources approaching RCEN/
RLEN estimates, with corresponding actions to confirm the foreign 
parent's financial capability and willingness to provide sufficient 
support.
    Corresponding escalation procedures, actions, and timeframes 
should be constructed so that breach of the triggers will allow 
prerequisite actions to be completed. For example, breach of the 
triggers needs to occur early enough to provide for communication, 
coordination, and confirmation of the provision of resources from 
the foreign parent.
    Support Within the United States. If the Plan provides for the 
provision of capital and liquidity by a U.S. material entity (e.g., 
the U.S. IHC) to its U.S. affiliates prior to the U.S. IHC's 
bankruptcy filing (Support), the Plan should also include a detailed 
legal analysis of the potential state law and bankruptcy law 
challenges and mitigants to providing the Support. Specifically, the 
analysis should identify potential legal obstacles and explain how 
the firm would seek to ensure that Support would be provided as 
planned. Legal obstacles include claims of fraudulent transfer, 
preference, breach of fiduciary duty, and any other applicable legal 
theory identified by the firm. The analysis also should include 
related claims that may prevent or delay an effective 
recapitalization, such as equitable claims to enjoin the transfer 
(e.g., imposition of a constructive trust by the court). The 
analysis should apply the actions contemplated in the Plan regarding 
each element of the claim, the anticipated timing for commencement 
and resolution of the claims, and the extent to which adjudication 
of such claim could affect execution of the firm's U.S. resolution 
strategy. The analysis should include mitigants to the potential 
challenges to the planned Support. The Plan should identify the 
mitigant(s) to such challenges that the firm considers most 
effective.
    Furthermore, the Plan should describe key motions to be filed at 
the initiation of any bankruptcy proceeding related to (as 
appropriate) asset sales and other non-routine matters.

U.S. MPOE

    A firm should identify the governance mechanisms that would 
ensure that communication and coordination occur between the 
governing body of the U.S. operations (for example, the boards of 
the U.S. IHC or a U.S. subsidiary) and the foreign parent to 
facilitate any preparatory resolution-related actions to facilitate 
an orderly resolution. The Plan should also detail the board and 
senior management actions of U.S. material entities that would be 
needed under the firm's U.S. resolution strategy.
    The firm should be prepared to increase communication and 
coordination at the appropriate time in order to mitigate financial, 
operational, legal, and regulatory vulnerabilities. To facilitate 
this communication and coordination, the firm should establish 
clearly identified triggers linked to specific actions for the 
escalation of information to U.S. senior management, U.S. risk 
committee and U.S. governing bodies to potentially take the 
corresponding actions as the U.S. operations experience material 
financial distress, leading eventually to the decision to implement 
the U.S. resolution strategy. The triggers should:
    A. Identify when and under what conditions the U.S. material 
entities would transition from business-as-usual conditions to a 
stress period.
    B. Take into consideration changes in the foreign parent's 
condition from business-as-usual conditions through resolution.

VI. Operational

U.S. SPOE

Payment, Clearing, and Settlement Activities

    Framework. Maintaining continuity of payment, clearing, and 
settlement (PCS) services is critical for the orderly resolution of 
firms that are either users or providers,\17\ or both, of PCS 
services. A firm should demonstrate capabilities for continued 
access to PCS services essential to an orderly resolution under its 
U.S. resolution strategy through a framework to support such access 
by:
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    \17\ A firm is a user of PCS services if it accesses PCS 
services through an agent bank or it uses the services of a 
financial market utility (FMU) through its membership in that FMU or 
through an agent bank. A firm is a provider of PCS services if it 
provides PCS services to clients as an agent bank or it provides 
clients with access to an FMU or agent bank through the firm's 
membership in or relationship with that service provider. A firm is 
also a provider if it provides clients with PCS services through the 
firm's own operations (e.g., payment services or custody services).
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    <bullet> Identifying clients,\18\ FMUs, and agent banks as key 
from the firm's perspective for the firm's U.S. material entities, 
identified critical operations, and core business lines, using both 
quantitative (volume and value) \19\ and qualitative criteria;
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    \18\ For purposes of this section, a client is an individual or 
entity, including affiliates of the firm, to whom the firm provides 
PCS services and any related credit or liquidity offered in 
connection with those services.
    \19\ In identifying entities as key, examples of quantitative 
criteria may include: for a client, transaction volume/value, market 
value of exposures, assets under custody, usage of PCS services, and 
any extension of related intraday credit or liquidity; for an FMU, 
the aggregate volumes and values of all transactions processed 
through such FMU; and for an agent bank, assets under custody, the 
value of cash and securities settled, and extensions of intraday 
credit.
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    <bullet> Mapping U.S. material entities, identified critical 
operations, core business lines, and key clients of the firm's U.S. 
operations to both key FMUs and key agent banks; and
    <bullet> Developing a playbook for each key FMU and key agent 
bank essential to an orderly resolution under its U.S. resolution 
strategy that reflects the firm's role(s) as a user and/or provider 
of PCS services.
    The framework should address direct relationships (e.g., a 
firm's direct membership in an FMU, a firm's provision of clients 
with PCS services through its own operations in the United States, 
or a firm's contractual relationship with an agent bank) and 
indirect relationships (e.g., a firm's provision of clients with 
access to the relevant FMU or agent bank through the firm' 
membership in or relationship with that FMU or agent bank, or a 
firm's U.S. affiliate and branch provision of U.S. material entities 
and key clients of the firm's U.S. operations

[[Page 64653]]

with access to an FMU or agent bank). The framework also should 
address the potential impact of any disruption to, curtailment of, 
or termination of such direct and indirect relationships on the 
firm's U.S. material entities, identified critical operations, and 
core business lines, as well as any corresponding impact on key 
clients of the firm's U.S. operations.
    Playbooks for Continued Access to PCS Services. The firm is 
expected to provide a playbook for each key FMU and key agent bank 
that addresses considerations that would assist the firm and key 
clients of the firm's U.S. operations in maintaining continued 
access to PCS services in the period leading up to and including the 
firm's resolution under its U.S. resolution strategy.
    Each playbook should provide analysis of the financial and 
operational impact to the firm's U.S. material entities and key 
clients of the firm's U.S. operations due to adverse actions that 
may be taken by a key FMU or a key agent bank and contingency 
actions that may be taken by the firm. Each playbook also should 
discuss any possible alternative arrangements that would allow 
continued access to PCS services for the firm's U.S. material 
entities, identified critical operations and core business lines, 
and key clients of the firm's U.S. operations, while the firm is in 
resolution under its U.S. resolution strategy. The firm is not 
expected to incorporate a scenario in which it loses key FMU or key 
agent bank access into its U.S. resolution strategy or its RLEN and 
RCEN estimates. The firm should continue to engage with key FMUs, 
key agent banks, and key clients of the firm's U.S. operations, and 
playbooks should reflect any feedback received during such ongoing 
outreach.
    Content Related to Users of PCS Services. Individual key FMU and 
key agent bank playbooks should include:
    <bullet> Descriptions of the firm's relationship as a user, 
including through indirect access, with the key FMU or key agent 
bank and the identification and mapping of PCS services to the 
firm's U.S. material entities, identified critical operations, and 
core business lines that use those PCS services;
    <bullet> Discussion of the potential range of adverse actions 
that may be taken by that key FMU or key agent bank when the firm is 
in resolution under its U.S. resolution strategy,\20\ the 
operational and financial impact of such actions on the firm's U.S. 
material entities, identified critical operations, and core business 
lines, and contingency arrangements that may be initiated by the 
firm in response to potential adverse actions by the key FMU or key 
agent bank; and
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    \20\ Examples of potential adverse actions may include increased 
collateral and margin requirements and enhanced reporting and 
monitoring.
---------------------------------------------------------------------------

    <bullet> Discussion of PCS-related liquidity sources and uses in 
business-as-usual (BAU), in stress, and in the resolution period, 
presented by currency type (with U.S. dollar equivalent) and by U.S. 
material entity.
    [cir] PCS Liquidity Sources: These may include the amounts of 
intraday extensions of credit, liquidity buffer, inflows from FMU 
participants, and prefunded amounts of key clients of the firm's 
U.S. operations in BAU, in stress, and in the resolution period. The 
playbook also should describe intraday credit arrangements (e.g., 
facilities of the key FMU, key agent bank, or a central bank) and 
any similar custodial arrangements that allow ready access to a 
firm's funds for PCS-related key FMU and key agent bank obligations 
(including margin requirements) in all currencies relevant to the 
firm's participation, including placements of firm liquidity at 
central banks, key FMUs, and key agent banks.
    [cir] PCS Liquidity Uses: These may include margin and 
prefunding by the firm and key clients of the firm's U.S. 
operations, and intraday extensions of credit, including incremental 
amounts required during resolution.
    [cir] Intraday Liquidity Inflows and Outflows: The playbook 
should describe the firm's ability to control intraday liquidity 
inflows and outflows and to identify and prioritize time-specific 
payments. The playbook also should describe any account features 
that might restrict the firm's ready access to its liquidity 
sources.
    Content Related to Providers of PCS Services.\21\ Individual key 
FMU and key agent bank playbooks should include:
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    \21\ Where a firm is a provider of PCS services through the 
firm's own operations in the United States, the firm is expected to 
produce a playbook for the U.S. material entities that provide those 
services, addressing each of the items described under ``Content 
Related to Providers of PCS Services,'' which include contingency 
arrangements to permit the firm's key clients of the firm's U.S. 
operations to maintain continued access to PCS services.
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    <bullet> Identification and mapping of PCS services to the 
firm's U.S. material entities, identified critical operations, and 
core business lines that provide those PCS services, and a 
description of the scale and the way in which each provides PCS 
services;
    <bullet> Identification and mapping of PCS services to key 
clients of the firm's U.S. operations to whom the firm's U.S. 
material entities, identified critical operations, and core business 
lines provide such PCS services and any related credit or liquidity 
offered in connection with such services;
    <bullet> Discussion of the potential range of firm contingency 
arrangements available to minimize disruption to the provision of 
PCS services to key clients of the firm's U.S. operations, including 
the viability of transferring activity and any related assets of key 
clients of the firm's U.S. operations, as well as any alternative 
arrangements that would allow the key clients of the firm's U.S. 
operations continued access to PCS services if the firm could no 
longer provide such access (e.g., due to the firm's loss of key FMU 
or key agent bank access), and the financial and operational impacts 
of such arrangements from the firm's perspective;
    <bullet> Descriptions of the range of contingency actions that 
the firm may take concerning its provision of intraday credit to key 
clients of the firm's U.S. operations, including analysis 
quantifying the potential liquidity the firm could generate by 
taking such actions in stress and in the resolution period, such as 
(i) requiring key clients of the firm's U.S. operations to designate 
or appropriately pre-position liquidity, including through 
prefunding of settlement activity, for PCS-related key FMU and key 
agent bank obligations at specific material entities of the firm 
(e.g., direct members of key FMUs) or any similar custodial 
arrangements that allow ready access to funds for such obligations 
in all relevant currencies of key clients of the firm's U.S. 
operations; (ii) delaying or restricting PCS activity of key clients 
of the firm's U.S. operations; and (iii) restricting, imposing 
conditions upon (e.g., requiring collateral), or eliminating the 
provision of intraday credit or liquidity to key clients of the 
firm's U.S. operations; and
    <bullet> Descriptions of how the firm will communicate to key 
clients of the firm's U.S. operations the potential impacts of 
implementation of any identified contingency arrangements or 
alternatives, including a description of the firm's methodology for 
determining whether any additional communication should be provided 
to some or all key clients of the firm's U.S. operations (e.g., due 
to BAU usage of that access and/or related intraday credit or 
liquidity of the key client of the firm's U.S. operations), and the 
expected timing and form of such communication.
    Capabilities. The firm is expected to have and describe 
capabilities to understand, for each U.S. material entity, the 
obligations and exposures associated with PCS activities, including 
contractual obligations and commitments. The firm should be able to:
    <bullet> Track the following items by (i) U.S. material entity 
and, (ii) with respect to customers, counterparties, and agents and 
service providers, by location and jurisdiction:
    [cir] PCS activities, with each activity mapped to the relevant 
material entities, identified critical operations, and core business 
lines; \22\
---------------------------------------------------------------------------

    \22\ 12 CFR 243.5(e)(12) and 12 CFR 381.5(e)(12).
---------------------------------------------------------------------------

    [cir] Customers and counterparties for PCS activities, including 
values and volumes of various transaction types, as well as used and 
unused capacity for all lines of credit; \23\
---------------------------------------------------------------------------

    \23\ Id.
---------------------------------------------------------------------------

    [cir] Exposures to and volumes transacted with FMUs, nostro 
agents, and custodians; and \24\
---------------------------------------------------------------------------

    \24\ 12 CFR 252.156(g).
---------------------------------------------------------------------------

    [cir] Services provided and service level agreements, as 
applicable, for other current agents and service providers (internal 
and external); \25\
---------------------------------------------------------------------------

    \25\ 12 CFR 243.5(f)(l)(i) and 12 CFR 381.5(f)(1)(i).
---------------------------------------------------------------------------

    <bullet> Assess the potential effects of adverse actions by 
FMUs, nostro agents, custodians, and other agents and service 
providers, including suspension or termination of membership or 
services, on the firm's U.S. operations and customers and 
counterparties of those U.S. operations; \26\
---------------------------------------------------------------------------

    \26\ 12 CFR 252.156(e).
---------------------------------------------------------------------------

    <bullet> Develop contingency arrangements in the event of such 
adverse actions; \27\ and
---------------------------------------------------------------------------

    \27\ Id.
---------------------------------------------------------------------------

    <bullet> Quantify the liquidity needs and operational capacity 
required to meet all PCS

[[Page 64654]]

obligations, including any change in demand for and sources of 
liquidity needed to meet such obligations.
    Managing, Identifying, and Valuing Collateral. The firm is 
expected to have and describe its capabilities to manage, identify, 
and value the collateral that the U.S. non-branch material entities 
receive from and post to external parties and affiliates. 
Specifically, the firm should:
    <bullet> Be able to query and provide aggregate statistics for 
all qualified financial contracts concerning cross-default clauses, 
downgrade triggers, and other key collateral-related contract 
terms--not just those terms that may be impacted in an adverse 
economic environment--across contract types, business lines, legal 
entities, and jurisdictions;
    <bullet> Be able to track both collateral sources (i.e., 
counterparties that have pledged collateral) and uses (i.e., 
counterparties to whom collateral has been pledged) at the CUSIP 
level on at least a t+1 basis;
    <bullet> Have robust risk measurements for cross-entity and 
cross-contract netting, including consideration of where collateral 
is held and pledged;
    <bullet> Be able to identify CUSIP and asset class level 
information on collateral pledged to specific central counterparties 
by legal entity on at least a t+1 basis;
    <bullet> Be able to track and report on inter-branch collateral 
pledged and received on at least a t+1 basis and have clear policies 
explaining the rationale for such inter-branch pledges, including 
any regulatory considerations; and
    <bullet> Have a comprehensive collateral management policy that 
outlines how the firm as a whole approaches collateral and serves as 
a single source for governance.\28\
---------------------------------------------------------------------------

    \28\ The policy may reference subsidiary or related policies 
already in place, as implementation may differ based on business 
line or other factors.
---------------------------------------------------------------------------

    In addition, as of the conclusion of any business day, the firm 
should be able to:
    <bullet> Identify the legal entity and geographic jurisdiction 
where counterparty collateral is held;
    <bullet> Document all netting and re-hypothecation arrangements 
with affiliates and external parties, by legal entity; and
    <bullet> Track and manage collateral requirements associated 
with counterparty credit risk exposures between affiliates, 
including foreign branches.
    At least on a quarterly basis, the firm should be able to:
    <bullet> Review the material terms and provisions of 
International Swaps and Derivatives Association Master Agreements 
and the Credit Support Annexes, such as termination events, for 
triggers that may be breached as a result of changes in market 
conditions;
    <bullet> Identify legal and operational differences and 
potential challenges in managing collateral within specific 
jurisdictions, agreement types, counterparty types, collateral 
forms, or other distinguishing characteristics; and
    <bullet> Forecast changes in collateral requirements and cash 
and non-cash collateral flows under a variety of stress scenarios.
    Management Information Systems. The firm should have the 
management information systems (MIS) capabilities to readily produce 
data on a U.S. legal entity basis (including any U.S. branch) and 
have controls to ensure data integrity and reliability. The firm 
also should perform a detailed analysis of the specific types of 
financial and risk data that would be required to execute the U.S. 
resolution strategy and how frequently the firm would need to 
produce the information, with the appropriate level of granularity. 
The firm should have the capabilities to produce the following types 
of information in a timely manner and describe these capabilities in 
the Plan:
    <bullet> Financial statements for each material entity (at least 
monthly);
    <bullet> External and inter-affiliate credit exposures, both on- 
and off-balance sheet, by type of exposure, counterparty, maturity, 
and gross payable and receivable;
    <bullet> Gross and net risk positions with internal and external 
counterparties;
    <bullet> Guarantees, cross holdings, financial commitments and 
other transactions between material entities;
    <bullet> Data to facilitate third-party valuation of assets and 
businesses, including risk metrics;
    <bullet> Key third-party contracts, including the provider, 
provider's location, service(s) provided, legal entities that are a 
party to or a beneficiary of the contract, and key contractual 
rights (for example, termination and change in control clauses);
    <bullet> Legal agreement information, including parties to the 
agreement and key terms and interdependencies (for example, change 
in control, collateralization, governing law, termination events, 
guarantees, and cross-default provisions);
    <bullet> Service level agreements between affiliates, including 
the service(s) provided, the legal entity providing the service, 
legal entities receiving the service, and any termination/
transferability provisions;
    <bullet> Licenses and memberships to all exchanges and value 
transfer networks, including FMUs;
    <bullet> Key management and support personnel, including dual-
hatted employees, and any associated retention agreements;
    <bullet> Agreements and other legal documents related to 
property, including facilities, technology systems, software, and 
intellectual property rights. The information should include 
ownership, physical location, where the property is managed and 
names of legal entities and lines of business that the property 
supports; and
    <bullet> Updated legal records for domestic and foreign 
entities, including entity type and purpose (for example, holding 
company, bank, broker dealer, and service entity), jurisdiction(s), 
ownership, and regulator(s).
    Shared and Outsourced Services. The firm should maintain a fully 
actionable implementation plan to ensure the continuity of shared 
services that support identified critical operations \29\ or core 
business lines and robust arrangements to support the continuity of 
shared and outsourced services, including, without limitation, 
appropriate plans to retain key personnel relevant to the execution 
of the firm's strategy. For example, specified firms should evaluate 
internal and external dependencies and develop documented strategies 
and contingency arrangements for the continuity or replacement of 
the shared and outsourced services that are necessary to maintain 
identified critical operations or core business lines. Examples may 
include personnel, facilities, systems, data warehouses, and 
intellectual property. Specified firms also should maintain current 
cost estimates for implementing such strategies and contingency 
arrangements.
---------------------------------------------------------------------------

    \29\ ``Shared services that support identified critical 
operations'' or ``critical shared services'' are those that support 
identified critical operations conducted in whole or in material 
part in the United States.
---------------------------------------------------------------------------

    If a material entity provides shared services that support 
identified critical operations or core business lines, and the 
continuity of these shared services relies on the assumed 
cooperation, forbearance, or other non-intervention of regulator(s) 
in any jurisdiction, the Plan should discuss the extent to which the 
resolution or insolvency of any other group entities operating in 
that same jurisdiction may adversely affect the assumed cooperation, 
forbearance, or other regulatory non-intervention. If a material 
entity providing shared services that support identified critical 
operations or core business lines is located outside of the United 
States, the Plan should discuss how the firm will ensure the 
operational continuity of such shared services through resolution.
    The firm should (A) maintain an identification of all shared 
services that support identified critical operations or core 
business lines; (B) maintain a mapping of how/where these services 
support its core business lines and identified critical operations; 
(C) incorporate such mapping into legal entity rationalization 
criteria and implementation efforts; and (D) mitigate identified 
continuity risks through establishment of service-level agreements 
(SLAs) for all shared services that support identified critical 
operations or core business lines.
    SLAs should fully describe the services provided, reflect 
pricing considerations on an arm's-length basis where appropriate, 
and incorporate appropriate terms and conditions to (A) prevent 
automatic termination upon certain resolution-related events and (B) 
achieve continued provision of such services during resolution.\30\ 
The firm should also store SLAs in a central repository or 
repositories located in or immediately accessible from the U.S. at 
all times, including in resolution (and subject to enforceable 
access arrangements) in a searchable format. In addition, the firm 
should ensure the financial resilience of internal shared service 
providers by maintaining working capital for six months (or through 
the period of stabilization as required in the firm's U.S. 
resolution strategy) in such entities sufficient to cover contract 
costs, consistent with the U.S.

[[Page 64655]]

resolution strategy. The firm should demonstrate that such working 
capital is held in a manner that ensures its availability for its 
intended purpose.
---------------------------------------------------------------------------

    \30\ The firm should consider whether these SLAs should be 
governed by the laws of a U.S. state and expressly subject to the 
jurisdiction of a court in the U.S.
---------------------------------------------------------------------------

    The firm should identify all critical service providers and 
outsourced services that support identified critical operations or 
core business lines and identify any that could not be promptly 
substituted. The firm should (A) evaluate the agreements governing 
these services to determine whether there are any that could be 
terminated upon commencement of any resolution despite continued 
performance, and (B) update contracts to incorporate appropriate 
terms and conditions to prevent automatic termination upon 
commencement of any resolution proceeding and facilitate continued 
provision of such services. Relying on entities projected to survive 
during resolution to avoid contract termination is insufficient to 
ensure continuity. In the Plan, the firm should document the 
amendment of any such agreements governing these services.
    Qualified Financial Contracts. The Plan should reflect the 
current state of how the early termination of qualified financial 
contracts could impact the resolution of the firm's operations, 
including potential termination of any contracts that are not 
subject to contractual or regulatory stays of cross-default rights. 
Specifically, the Plan is expected to reflect the firm's progress 
regarding contractual stays in qualified financial contracts as of 
the date the firm submits its Plan or as of a specified earlier 
date. A firm that has adhered to the International Swaps and 
Derivatives Association's (ISDA) 2018 U.S. Resolution Stay Protocol 
or its antecedent, ISDA's 2015 Universal Resolution Stay Protocol 
(together, the Protocols) should discuss the extent of the firm's 
adherence to the Protocols in its Plan (and may also discuss the 
impact on U.S. operations of the firm's adherence to ISDA's 2016 
Jurisdictional Modular Protocol on its non-U.S. operations). A Plan 
should also explain the firm's processes for entering bilateral 
contracts with third-party entities that do not adhere to the 
Protocols and provide examples of the contractual language that is 
used under those circumstances.

U.S. MPOE

    Payment, Clearing, and Settlement (PCS) Capabilities. Firms are 
expected to have and describe capabilities to understand, for each 
U.S. material entity, its obligations and exposures associated with 
PCS activities, including contractual obligations and commitments. 
For example, firms should be able to:
    <bullet> As users of PCS services:
    [cir] Track the following items by: (i) U.S. material entity; 
and (ii) with respect to customers, counterparties, and agents and 
service providers, location and jurisdiction:
    [ssquf] PCS activities, with each activity mapped to the 
relevant material entities, identified critical operations, and core 
business lines;
    [ssquf] Customers and counterparties for PCS activities, 
including values and volumes of various transaction types, as well 
as used and unused capacity for all lines of credit;
    [ssquf] Exposures to and volumes transacted with FMUs, nostro 
agents, and custodians; and
    [ssquf] Services provided and service level agreements, as 
applicable, for other current agents and service providers (internal 
and external).
    [cir] Assess the potential effects of adverse actions by FMUs, 
nostro agents, custodians, and other agents and service providers, 
including suspension or termination of membership or services, on 
the firm's U.S. operations and customers and counterparties of those 
U.S. operations;
    [cir] Develop contingency arrangements in the event of such 
adverse actions; and
    [cir] Quantify the liquidity needs and operational capacity 
required to meet all PCS obligations, including intraday 
requirements.
    <bullet> As providers of PCS services:
    [cir] Identify their PCS clients of their U.S operations and the 
services they provide to these clients, including volumes and values 
of transactions;
    [cir] Quantify and explain time-sensitive payments; and
    [cir] Quantify and explain intraday credit provided.
    Managing, Identifying and Valuing Collateral. The firm should 
have appropriate capabilities related to managing, identifying, and 
valuing the collateral that the U.S. non-branch material entities 
receive from and posts to external parties and its affiliates, 
including tracking collateral received, pledged, and available at 
the CUSIP level and measuring exposures.
    Management Information Systems. The firm should have the 
management information systems (MIS) capabilities to readily produce 
data on a U.S. legal entity basis (including any U.S. branch) and 
have controls to ensure data integrity and reliability. The firm 
also should perform a detailed analysis of the specific types of 
financial and risk data that would be required to execute the U.S. 
resolution strategy. The firm should have the capabilities to 
produce the following types of information, as appropriate for its 
U.S. resolution strategy, in a timely manner and describe these 
capabilities in the Plan:
    <bullet> Financial statements for each material entity (at least 
monthly);
    <bullet> External and inter-affiliate credit exposures, both on- 
and off-balance sheet, by type of exposure, counterparty, maturity, 
and gross payable and receivable;
    <bullet> Gross and net risk positions with internal and external 
counterparties;
    <bullet> Guarantees, cross holdings, financial commitments and 
other transactions between material entities;
    <bullet> Data to facilitate third-party valuation of assets and 
businesses, including risk metrics;
    <bullet> Key third-party contracts, including the provider, 
provider's location, service(s) provided, legal entities that are a 
party to or a beneficiary of the contract, and key contractual 
rights (for example, termination and change in control clauses);
    <bullet> Legal agreement information, including parties to the 
agreement and key terms and interdependencies (for example, change 
in control, collateralization, governing law, termination events, 
guarantees, and cross-default provisions);
    <bullet> Service level agreements between affiliates, including 
the service(s) provided, the legal entity providing the service, 
legal entities receiving the service, and any termination/
transferability provisions;
    <bullet> Licenses and memberships to all exchanges and value 
transfer networks, including FMUs;
    <bullet> Key management and support personnel, including dual-
hatted employees, and any associated retention agreements;
    <bullet> Agreements and other legal documents related to 
property, including facilities, technology systems, software, and 
intellectual property rights. The information should include 
ownership, physical location, where the property is managed and 
names of legal entities and lines of business that the property 
supports; and
    <bullet> Updated legal records for domestic and foreign 
entities, including entity type and purpose (for example, holding 
company, bank, broker dealer, and service entity), jurisdiction(s), 
ownership, and regulator(s).
    Shared and Outsourced Services. The firm should maintain robust 
arrangements to support the continuity of shared and outsourced 
services that support any identified critical operations or are 
material to the execution of the U.S. resolution strategy, including 
appropriate plans to retain key personnel relevant to the execution 
of the firm's strategy. For example, specified firms should evaluate 
internal and external dependencies and develop documented strategies 
and contingency arrangements for the continuity or replacement of 
the shared and outsourced services that are necessary to maintain 
identified critical operations or are material to the execution of 
the U.S. resolution strategy. Examples may include personnel, 
facilities, systems, data warehouses, and intellectual property. 
Specified firms also should maintain current cost estimates for 
implementing such strategies and contingency arrangements. If a 
material entity provides shared services that support identified 
critical operations,\31\ or are material to the execution of the 
U.S. resolution strategy, and the continuity of these shared 
services relies on the assumed cooperation, forbearance, or other 
non-intervention of regulator(s) in any jurisdiction, the Plan 
should discuss the extent to which the resolution or insolvency of 
any other group entities operating in that same jurisdiction may 
adversely affect the assumed cooperation, forbearance, or other 
regulatory non-intervention. If a material entity providing shared 
services that support identified critical operations, or are 
material to the execution of the U.S. resolution strategy, is 
located outside of the United States, the Plan should discuss how 
the firm will ensure the operational continuity of such shared 
services through resolution.
---------------------------------------------------------------------------

    \31\ This should be interpreted to include data access and 
intellectual property rights.
---------------------------------------------------------------------------

    The firm should (A) maintain an identification of all shared 
services that support identified critical operations or are material 
to the execution of the U.S. resolution strategy, and (B) mitigate 
identified continuity risks through

[[Page 64656]]

establishment of SLAs for all shared services supporting identified 
critical operations or are material to the execution of the U.S. 
resolution strategy. SLAs should fully describe the services 
provided and incorporate appropriate terms and conditions to: (A) 
prevent automatic termination upon certain resolution-related 
events; and (B) achieve continued provision of such services during 
resolution.\32\
---------------------------------------------------------------------------

    \32\ The firm should consider whether these SLAs should be 
governed by the laws of a U.S. state and expressly subject to the 
jurisdiction of a court in the United States.
---------------------------------------------------------------------------

    The firm should identify all critical service providers and 
outsourced services that support identified critical operations or 
are material to the execution of the U.S. resolution strategy. Any 
of these services that cannot be promptly substituted should be 
identified in a firm's Plan. The firm should: (A) evaluate the 
agreements governing these services to determine whether there are 
any that could be terminated upon commencement of any resolution 
despite continued performance; and (B) update contracts to 
incorporate appropriate terms and conditions to prevent automatic 
termination upon commencement of any resolution proceeding and 
facilitate continued provision of such services. Relying on entities 
projected to survive during resolution to avoid contract termination 
is insufficient to ensure continuity. In the Plan, the firm should 
document the amendment of any such agreements governing these 
services.

VII. Branches

U.S. SPOE & U.S. MPOE

    Continuity of Operations. If the Plan assumes that federal or 
state regulators, as applicable, do not take possession of any U.S. 
branch that is a material entity, the Plan should support that 
assumption.
    For any U.S. branch that is a material entity, the Plan should 
describe and demonstrate how the branch would continue to facilitate 
FMU access for identified critical operations and meet funding 
needs. For such a U.S. branch, the Plan should describe how it would 
meet supervisory requirements imposed by state regulators or the 
appropriate Federal banking agency, as appropriate, including 
maintaining a net due to position and complying with heightened 
asset maintenance requirements.\33\ In addition, the Plan should 
describe how such a U.S. branch's third-party creditors would be 
protected such that the state regulator or appropriate Federal 
banking agency would allow the branch to continue operations.
---------------------------------------------------------------------------

    \33\ Firms should take into consideration historical practice, 
by applicable regulators, regarding asset maintenance requirements 
imposed during stress.
---------------------------------------------------------------------------

    Impact of the Cessation of Operations. The Plan should provide 
an analysis of the impact of the cessation of operations of any U.S. 
branch that is a material entity on the firm's FMU access and 
identified critical operations, even if such scenario is not 
contemplated as part of the U.S. resolution strategy. The analysis 
should include a description of how identified critical operations 
could be transferred to a U.S. IHC subsidiary or sold in resolution, 
the obstacles presented by the cessation of shared services that 
support identified critical operations provided by any U.S. branch 
that is a material entity, and mitigants that could address such 
obstacles in a timely manner.

VIII. Legal Entity Rationalization & Separability

Legal Entity Rationalization

U.S. SPOE

    Legal Entity Rationalization Criteria (LER Criteria). A firm 
should develop and implement legal entity rationalization criteria 
that support the firm's U.S. resolution strategy and minimize risk 
to U.S. financial stability in the event of resolution. LER Criteria 
should consider the best alignment of legal entities and business 
lines to improve the resolvability of U.S. operations under 
different market conditions. LER Criteria should govern the 
corporate structure and arrangements between the U.S. subsidiaries 
and U.S. branches in a way that facilitates resolvability of the 
firm's U.S. operations as the firm's U.S. activities, technology, 
business models, or geographic footprint change over time.
    Specifically, application of the criteria should:
    (A) Ensure that the allocation of activities across the firm's 
U.S. branches and U.S. non-branch material entities support the 
firm's U.S. resolution strategy and minimize risk to U.S. financial 
stability in the event of resolution;
    (B) Facilitate the recapitalization and liquidity support of 
U.S. IHC subsidiaries, as required by the firm's U.S. resolution 
strategy. Such criteria should include clean lines of ownership and 
clean funding pathways between the foreign parent, the U.S. IHC, and 
U.S. IHC subsidiaries;
    (C) Facilitate the sale, transfer, or wind-down of certain 
discrete operations within a timeframe that would meaningfully 
increase the likelihood of an orderly resolution in the United 
States, including provisions for the continuity of associated 
services and mitigation of financial, operational, and legal 
challenges to separation and disposition;
    (D) Adequately protect U.S. subsidiary insured depository 
institutions from risks arising from the activities of any nonbank 
U.S. subsidiaries (other than those that are subsidiaries of an 
insured depository institution); and
    (E) Minimize complexity that could impede an orderly resolution 
in the United States and minimize redundant and dormant entities.
    These criteria should be built into the firm's ongoing process 
for creating, maintaining, and optimizing the firm's U.S. structure 
and operations on a continuous basis.

U.S. MPOE

    Legal Entity Structure. A firm should maintain a legal entity 
structure that supports the firm's U.S. resolution strategy and 
minimizes risk to U.S. financial stability in the event of the 
resolution of the firm's U.S. operations. The firm should consider 
factors such as business activities; banking group structures and 
booking models and practices; and potential sales, transfers, or 
wind-downs during resolution. The Plan should describe how the 
firm's U.S. legal entity structure aligns core business lines and 
any identified critical operations with the firm's material entities 
to support the firm's U.S. resolution strategy. To the extent a 
material entity IDI relies upon an affiliate that is not the IDI's 
subsidiary during resolution of its U.S. entities, including for the 
provision of shared services, the firm should discuss its rationale 
for the legal entity structure and associated resolution risks and 
potential mitigants.
    The firm's corporate structure and arrangements among U.S. legal 
entities should be considered and maintained in a way that 
facilitates the firm's resolvability as its activities, technology, 
business models, or geographic footprint change over time.

Separability

U.S. SPOE

    Separability. The firm should identify discrete U.S. operations 
that could be sold or transferred in resolution, with the objective 
of providing optionality in resolution under different market 
conditions.
    A firm's separability options should be actionable, and 
impediments to their projected mitigation strategies should be 
identified in advance. Firms should consider potential consequences 
for U.S. financial stability of executing each option, taking into 
consideration impacts on counterparties, creditors, clients, 
depositors, and markets for specific assets. The level of detail and 
analysis should vary based on a firm's risk profile and scope of 
operations. Additionally, information systems should be robust 
enough to produce the required data and information needed to 
execute separability options.
    Further, the firm should have, and be able to demonstrate, the 
capability to populate in a timely manner a data room with 
information pertinent to a potential divestiture of the identified 
separability options (including, but not limited to, carve-out 
financial statements, valuation analysis, and a legal risk 
assessment). Within the Plan, the firm should demonstrate how the 
firm's LER Criteria and implementation efforts support meeting the 
separability-related guidance above. The Plan should also provide 
the separability analysis noted above. Finally, the Plan should 
include a description of the firm's legal entity rationalization 
governance process.

U.S. MPOE

    A Plan should include options for the sale, transfer, or 
disposal of U.S. significant assets, portfolios, legal entities, or 
business lines in resolution that may be executed in a reasonable 
period of time. For each option, supporting analysis should include: 
an execution plan that includes an estimated time frame for 
implementation, a description of any impediments to execution of the 
option, and mitigation strategies to address those impediments; a 
description of the assumptions underpinning the option; a financial 
impact assessment that describes the impact of executing the option; 
and an identified critical operation impact assessment that 
describes how execution of the option may affect the provision of 
any

[[Page 64657]]

identified critical operation. Information systems should be robust 
enough to produce the required data and information needed to 
execute the options.

IX. Insured Depository Institution (IDI) Resolution

MPOE

    If the Plan includes a strategy that contemplates the separate 
resolution of a U.S. IDI that is a material entity, the Plan should 
demonstrate how this could be achieved in a manner that is 
consistent with the overall objective of the Plan to substantially 
mitigate the risk that the failure of the specified firm would have 
serious adverse effects on financial stability in the United States 
while also complying with the statutory and regulatory requirements 
governing IDI resolution. More specifically,
    <bullet> If the strategy is other than payout liquidation (e.g., 
a bridge depository institution (BDI)), the Plan should provide 
information supporting the feasibility of this strategy. Under the 
FDI Act, the FDIC generally would complete a least-cost analysis 
when resolving a failed bank at the time of entry into resolution. A 
Plan may use an approach such as one of the following in lieu of 
performing a complete least-cost analysis to demonstrate the 
feasibility of the proposed strategy.\34\
---------------------------------------------------------------------------

    \34\ See 12 U.S.C. 1823(c)(4)(A)(ii) and 12 U.S.C. 
1821(n)(2)(A).
---------------------------------------------------------------------------

    [cir] A Plan may demonstrate that a strategy involving an all-
deposit BDI would be permissible under the least-cost test of the 
FDI Act by presenting an analysis which shows that the strategy 
results in no loss to the Deposit Insurance Fund (DIF) by 
demonstrating that the incremental estimated cost to the DIF by 
having the BDI assume all uninsured deposits is offset by the 
preservation of franchise value connected to the uninsured deposits 
after accounting for the amount of any loss-absorbing debt 
instruments and other liabilities subordinate to the depositor class 
that would be left behind in the receivership.
    [cir] A Plan may demonstrate the feasibility of a strategy 
involving a BDI that assumes all insured deposits and a portion of 
uninsured deposits by providing an advance dividend to uninsured 
depositors for a portion of their deposit claim, as well as the 
basis for that dividend, and pursuant to which a loss to the DIF 
occurs, by presenting an analysis comparing the cost of the proposed 
strategy to the cost of payout liquidation and demonstrating:
    [ssquf] The incremental estimated cost to the DIF created by the 
BDI's assumption of the portion of uninsured deposits assumed is 
offset by the franchise value preserved by maintaining the assumed 
uninsured deposits, after accounting for the amount of any long-term 
debt and other liabilities subordinate to the depositor class that 
would be left behind in the receivership; \35\
---------------------------------------------------------------------------

    \35\ See 12 U.S.C. 1821(d)(11).
---------------------------------------------------------------------------

    [ssquf] The loss to the DIF under the proposed strategy 
(including the amounts paid by the DIF for more favorable treatment, 
relative to a payout liquidation, of a portion of uninsured 
deposits) is less than or equal to the loss to the DIF that would be 
incurred through a payout liquidation of the IDI; and
    [cir] The deposit payout process for any uninsured deposits that 
remain in the receivership may be executed in a manner that 
substantially mitigates the risk of serious adverse effects on U.S. 
financial stability.
    <bullet> If the Plan's strategy envisions a payout liquidation 
for the IDI, with or without use of a Deposit Insurance National 
Bank or a paying agent, the Plan should demonstrate how the deposit 
payout and asset liquidation process would be executed in a manner 
that substantially mitigates the risk of serious adverse effects on 
U.S. financial stability.
    <bullet> In all cases, the Plan should show that implementation 
of the resolution, including the impact on depositors whose accounts 
are not transferred in whole or in part to the BDI, would not create 
the risk of serious adverse effects on U.S. financial stability.
    Regardless of the IDI resolution strategy chosen, the Plan 
should assume asset valuations consistent with the severely adverse 
stress economic scenario and the IDI's condition as a failed 
institution, as referenced in ``Guidance regarding Assumptions,'' 
Items 4 and 7 below. The Plan, in light of such conditions, should 
explain the process for determining asset or business franchise 
values, including providing detailed supporting descriptions such as 
references to historical pricing, benchmarks, or recognized models; 
evidence supporting client attrition rates; and other relevant 
information.
    With respect to exit from IDI resolution proceedings, a Plan 
could support the feasibility of an asset liquidation or BDI exit 
strategy by, for example, describing an actionable process, based on 
historical precedent or otherwise supportable projections, that 
winds down certain businesses, includes the sale of assets and 
deposits to multiple acquirers, or culminates in a capital markets 
transaction, such as an initial public offering or a private 
placement of securities.

X. Format and Structure of Plans; Assumptions

U.S. SPOE & U.S. MPOE

Format of Plan

    Executive Summary. The Plan should contain an executive summary 
consistent with the Rule, which must include, among other things, a 
concise description of the key elements of the firm's strategy for 
an orderly resolution. In addition, the executive summary should 
include a discussion of the firm's assessment of any impediments to 
the firm's U.S. resolution strategy and its execution, as well as 
the steps it has taken to address any identified impediments.
    Narrative. The Plan should include a strategic analysis 
consistent with the Rule. This analysis should take the form of a 
concise narrative that enhances the readability and understanding of 
the firm's discussion of its strategy for an orderly resolution in 
bankruptcy or other applicable insolvency regimes (Narrative).
    Appendices. The Plan should contain a sufficient level of detail 
and analysis to substantiate and support the strategy described in 
the Narrative. Such detail and analysis should be included in 
appendices that are distinct from and clearly referenced in the 
related parts of the Narrative (Appendices).
    Public Section. The Plan must be divided into a public section 
and a confidential section consistent with the requirements of the 
Rule.
    Other Informational Requirements. The Plan must comply with all 
other informational requirements of the Rule. The firm may 
incorporate by reference previously submitted information as 
provided in the Rule.
    Guidance Regarding Assumptions.
    1. The Plan should be based on the current state of the 
applicable legal and policy frameworks. Pending legislation or 
regulatory actions may be discussed as additional considerations.
    2. The firm must submit a Plan that does not rely on the 
provision of extraordinary support by the United States or any other 
government to the firm or its subsidiaries to prevent the failure of 
the firm.\36\ The firm should not submit a Plan that assumes the use 
of the systemic risk exception to the least-cost test in the event 
of a failure of an IDI requiring resolution under the FDI Act.
---------------------------------------------------------------------------

    \36\ 12 CFR 243.4(a)(4)(ii) and 12 CFR 381.4(a)(4)(ii).
---------------------------------------------------------------------------

    3. The firm should not assume that it will be able to sell 
identified critical operations or core business lines, or that 
unsecured funding will be available immediately prior to filing for 
bankruptcy.
    4. The U.S. resolution strategy may be based on an idiosyncratic 
event or action, including a series of compounding events. The firm 
should justify use of that assumption, consistent with the 
conditions of the economic scenario.
    5. Within the context of the applicable idiosyncratic scenario, 
markets are functioning and competitors are in a position to take on 
business. If a firm's Plan assumes the sale of assets, the firm 
should take into account all issues surrounding its ability to sell 
in market conditions present in the applicable economic condition at 
the time of sale (i.e., the firm should take into consideration the 
size and scale of its operations as well as issues of separation and 
transfer).
    6. For a firm that adopts a U.S. MPOE strategy, the Plan should 
demonstrate and describe how the failure event(s) results in 
material financial distress of the U.S. operations.\37\ In 
particular, the Plan should consider the likelihood that there would 
be a diminution of the firm's liquidity buffer in the stress period 
prior to filing for bankruptcy from high unexpected outflows of 
deposits and increased liquidity requirements from counterparties. 
Though the immediate failure event may be liquidity-related and 
associated with a lack of market confidence in the financial 
condition of the covered company or its material legal entity 
subsidiaries prior to the final recognition of losses, the 
demonstration and description of

[[Page 64658]]

material financial distress may also include depletion of capital. 
Therefore, the Plan should also consider the likelihood of the 
depletion of capital.
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    \37\ See Section 11(c)(5) of the FDI Act, codified at 11 U.S.C. 
1821(c)(5), which details grounds for appointing the FDIC as 
conservator or receiver of an IDI.
---------------------------------------------------------------------------

    7. The firm should not assume any waivers of section 23A or 23B 
of the Federal Reserve Act in connection with the actions proposed 
to be taken prior to or in resolution.
    8. The Plan should support any assumptions that the firm will 
have access to the Discount Window and/or other borrowings during 
the period immediately prior to entering bankruptcy. To the extent 
the firm assumes use of the Discount Window and/or other borrowings, 
the Plan should support that assumption with a discussion of the 
operational testing conducted to facilitate access in a stress 
environment, placement of collateral and the amount of funding 
accessible to the firm. The firm may assume that its depository 
institutions will have access to the Discount Window only for a few 
days after the point of failure to facilitate orderly resolution. 
However, the firm should not assume its subsidiary depository 
institutions will have access to the Discount Window while 
critically undercapitalized, in FDIC receivership, or operating as a 
bridge bank, nor should it assume any lending from a Federal Reserve 
credit facility to a non-bank affiliate.
    Financial Statements and Projections. The Plan should include 
the actual balance sheet for each material entity and the 
consolidating balance sheet adjustments between material entities as 
well as pro forma balance sheets for each material entity at the 
point of failure and at key junctures in the execution of the U.S. 
resolution strategy. It should also include statements of projected 
sources and uses of funds for the interim periods. The pro forma 
financial statements and accompanying notes in the Plan must clearly 
evidence the failure trigger event; the Plan's assumptions; and any 
transactions that are critical to the execution of the Plan's 
preferred strategy, such as recapitalizations, the creation of new 
legal entities, transfers of assets, and asset sales and unwinds.
    Material Entities. Material entities should encompass those 
entities, including foreign offices and branches, which are 
significant to the maintenance of an identified critical operation 
or core business line. If the abrupt disruption or cessation of a 
core business line might have systemic consequences to U.S. 
financial stability, the entities essential to the continuation of 
such core business line should be considered for material entity 
designation. Material entities should include the following types of 
entities:
    1. Any U.S.-based or non-U.S. affiliates, including any 
branches, that are significant to the activities of an identified 
critical operation conducted in whole or material part in the United 
States.
    2. Subsidiaries or foreign offices whose provision or support of 
global treasury operations, funding, or liquidity activities 
(inclusive of intercompany transactions) is significant to the 
activities of an identified critical operation.
    3. Subsidiaries or foreign offices that provide material 
operational support in resolution (key personnel, information 
technology, data centers, real estate or other shared services) to 
the activities of an identified critical operation.
    4. Subsidiaries or foreign offices that are engaged in 
derivatives booking activity that is significant to the activities 
of an identified critical operation, including those that conduct 
either the internal hedge side or the client-facing side of a 
transaction.
    5. Subsidiaries or foreign offices engaged in asset custody or 
asset management that are significant to the activities of an 
identified critical operation.
    6. Subsidiaries or foreign offices holding licenses or 
memberships in clearinghouses, exchanges, or other FMUs that are 
significant to the activities of an identified critical operation.
    7. For each material entity (including a branch), the Plan 
should enumerate, on a jurisdiction-by-jurisdiction basis, the 
specific mandatory and discretionary actions or forbearances that 
regulatory and resolution authorities would take during resolution, 
including any regulatory filings and notifications that would be 
required as part of the preferred strategy, and explain how the Plan 
addresses the actions and forbearances. Describe the consequences 
for the covered company's U.S. resolution strategy if specific 
actions in a non-U.S. jurisdiction were not taken, delayed, or 
forgone, as relevant.

XI. Public Section

U.S. SPOE & U.S. MPOE

    The purpose of the public section is to inform the public's 
understanding of the firm's U.S. resolution strategy and how it 
works.
    The public section should discuss the steps that the firm is 
taking to improve resolvability under the U.S. Bankruptcy Code. The 
public section should provide background information on each 
material entity and should be enhanced by including the firm's 
rationale for designating material entities. The public section 
should also discuss, at a high level, the firm's intra-group 
financial and operational interconnectedness (including the types of 
guarantees or support obligations in place that could impact the 
execution of the firm's strategy).
    The discussion of strategy in the public section should broadly 
explain how the firm has addressed any deficiencies, shortcomings, 
and other key vulnerabilities that the agencies have identified in 
prior plan submissions. For each material entity, it should be clear 
how the strategy provides for continuity, transfer, or orderly wind-
down of the entity and its operations. There should also be a 
description of the resulting organization upon completion of the 
resolution process.
    The public section may note that the Plan is not binding on a 
bankruptcy court or other resolution authority and that the proposed 
failure scenario and associated assumptions are hypothetical and do 
not necessarily reflect an event or events to which the firm is or 
may become subject.


    By order of the Board of Governors of the Federal Reserve 
System.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on August 29, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-19268 Filed 9-18-23; 8:45 am]
BILLING CODE 6210-01-6714-01-P


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