RESOLUTION 

PLANS

Regulators Have 

Refined Their Review 

Processes but Could 

Improve Transparency 

and Timeliness

Report to the Chairman, Committee on 

Financial Services, U.S. House of 

Representatives

April 2016

GAO-16-341

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-16-341, a report to the 

Chairman, Committee on Financial Services, 

U.S. House of Representatives

April 2016

RESOLUTION PLANS

Regulators Have Refined Their Review Processes but 

Could Improve Transparency and Timeliness

What GAO Found

The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve System

(Federal Reserve) have developed separate but similar review processes for 

determining whether a resolution plan is “not credible” or would not facilitate a 

company’s orderly resolution under the Bankruptcy Code (the Code). Both 

regulators have processes for staffing review teams, determining whether a plan

includes all required information, assessing whether a plan’s strategy mitigates 

obstacles to the company’s orderly resolution, and documenting and vetting 

team findings and conclusions. Although the regulators’ review processes are 

separate, the regulators coordinate with each other by meeting jointly with 

companies, working together to discuss and share review findings, and jointly 

issuing guidance and feedback to companies.

The regulators have made progress assessing resolution plans but have 

provided limited disclosures about their reviews. Following their 2012, 2013, and 

2014 plan reviews, the regulators clarified and expanded their expectations for

the plans—jointly providing companies with guidance or feedback. The 

regulators did not jointly make any not-credible determinations but reported they 

may do so for the 2015 plans. However, they have not disclosed their

frameworks for determining whether a plan is not credible. They also developed 

but have not disclosed their criteria for reducing plan requirements for many 

smaller companies. Without greater disclosure, companies lack information they 

could use to assess and enhance their plans. The regulators view such 

information as confidential, but a federal directive on open government 

recognizes that transparency promotes accountability by providing more 

information on government activities. A lack of information on how the regulators

assess plans and allow some companies to file reduced plans could undermine

public and market confidence in resolution plans.

In addition, the resolution plan rule requires companies to annually submit plans 

approved by their board of directors. However, the annual filing cycle may not be 

feasible. GAO found that the regulators took 9 months, on average, to complete 

their reviews. FDIC said companies can take up to 3 months to obtain internal 

approval of their plans. The regulators attributed their long review time in part to 

the plans’ complexity, and one regulator said that companies ideally should have 

6 months to incorporate feedback. Absent a longer filing cycle, companies may 

not have sufficient time to revise their plans to incorporate regulatory feedback 

intended to enhance their resolvability under the Code. 

According to companies and stakeholders that GAO interviewed, resolution 

planning has improved the resolvability of large financial companies under the 

Code. Companies with $100 billion or more in nonbank assets generally said that 

resolution planning also had led to some operational improvements, but

companies with less than $100 billion in nonbank assets generally said that they 

had reaped few benefits from resolution planning. However, whether the plans of 

the largest companies actually would facilitate their rapid and orderly resolution 

under the Code is uncertain, in part because none has used its plan to go 

through bankruptcy. At the same time, the regulators told GAO that they were 

incurring costs to review the plans, and companies said that complying with the 

rule also had raised their costs.

View GAO-16-341. For more information, 

contact Lawrance L. Evans, Jr., at (202) 512-

8678 or EvansL@gao.gov

Why GAO Did This Study

Section 165(d) of the Dodd-Frank Wall 

Street Reform and Consumer 

Protection Act requires bank holding 

companies with $50 billion or more in 

total assets and nonbank financial 

companies designated by the Financial 

Stability Oversight Council for 

supervision by the Federal Reserve to 

prepare plans for their rapid and 

orderly resolution under the Code. In 

2011, the regulators issued a rule to 

require companies to annually file a 

resolution plan. If they jointly found a

plan was not credible, the company 

could be subject to more stringent 

requirements. GAO was asked to 

review the regulators’ programs for 

assessing resolution plans. This report 

examines each regulator’s review 

processes, the progress made in 

assessing plans, and stakeholder 

views on the usefulness of the plans. 

GAO analyzed FDIC’s and the Federal 

Reserve’s policies and procedures, 

documentation of plan reviews, 

guidance and feedback provided to 

companies, and public plans. GAO 

also interviewed the regulators, a 

judgmental sample of 25 companies 

(18 percent of all companies required 

to file a plan) based on assets, and a 

variety of market participants and 

academics based on their expertise, 

experience working with companies, or 

use of public plans. 

What GAO Recommends

GAO recommends that FDIC and the 

Federal Reserve publicly disclose 

information about their assessment 

frameworks and reduced plan criteria 

for smaller companies and revise the 

annual filing requirement. The 

regulators agreed with GAO’s 

recommendations.
Page i GAO-16-341 Resolution Plans

Letter 1

Background 4

FDIC and the Federal Reserve Review Resolution Plans 

Separately but Coordinate on Key Aspects of Reviews 14

FDIC and the Federal Reserve Have Made Progress Assessing 

Resolution Plans but Have Faced Challenges Providing 

Transparent and Timely Feedback 22

Stakeholders’ Views on the Usefulness of Resolution Plans Vary 35

Conclusions 56

Recommendations for Executive Action 57

Agency Comments 57

Appendix I Objectives, Scope, and Methodology 59

Appendix II Comments from the Federal Deposit Insurance Corporation and the 

Board of Governors of the Federal Reserve System 63

Appendix III GAO Contact and Staff Acknowledgments 65

Tables

Table 1: Initial Resolution Plan Filing Schedule 8

Table 2: Federal Deposit Insurance Corporation (FDIC) and 

Federal Reserve Resolution Plan Vertical Assessment 

Areas and Work Products 19

Table 3: Resolution Plan Filing Dates and Guidance or Feedback 

Issued by the Regulators, 2012 through 2014 24

Table 4: Months between the Submission Date of Resolution 

Plans and the Date the Companies Receive Feedback, 

2012 through 2014 32

Table 5: Indicators of Size, Interconnectedness, and Complexity 

for U.S. Bank Systemically Important Financial Institutions 

as of 2nd Quarter of 2015 (Total Assets, Credit Default 

Swap Gross Notional Amounts Outstanding, and Total 

Debt Outstanding in Billions of Dollars) 47

Table 6: Definition of Modifiers by Interview Grouping 60

Contents
Page ii GAO-16-341 Resolution Plans

Figures

Figure 1: Simplified Example of the Structure of a Large Bank 

Holding Company 5

Figure 2: Federal Deposit Insurance Corporation (FDIC) and 

Federal Reserve Processes for Prereview Guidance 15

Figure 3: Federal Deposit Insurance Corporation (FDIC) and 

Federal Reserve Vertical Review Teams, as of 2015 17

Figure 4: 2015 Plan Types for Wave 3 Companies 30

Figure 5: Federal Deposit Insurance Corporation (FDIC) Payroll 

Costs Related to Resolution Planning per Company by 

Wave 1, 2, 3, and Designated Nonbank Filers, Calendar 

Years 2012 through 2014 51

Abbreviations

the Code U.S. Bankruptcy Code

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer 

Protection Act

FDIC Federal Deposit Insurance Corporation

Federal Reserve Board of Governors of the Federal Reserve System

FSOC Financial Stability Oversight Council

ISDA International Swaps and Derivatives Association

SEC Securities and Exchange Commission

SIFI systemically important financial institution

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-16-341 Resolution Plans

441 G St. N.W.

Washington, DC 20548

April 12, 2016

The Honorable Jeb Hensarling

Chairman

Committee on Financial Services

House of Representatives

Dear Mr. Chairman:

A key lesson learned from the 2007-2009 financial crisis is the importance 

of advance planning for the efficient resolution—that is, the reorganization 

or liquidation—of systemically important financial institutions (SIFI) that 

fail.1 For example, Lehman Brothers’ unplanned bankruptcy filing 

reportedly contributed to its disorderly resolution and intensified the 

financial crisis. Lehman Brothers’ bankruptcy and the potential for more 

such failures led the U.S. government to intervene to provide tens of 

billions of dollars of capital and other support to a few large troubled SIFIs 

out of concern that allowing them to also go into bankruptcy would have 

further disrupted troubled credit markets and damaged confidence in the 

U.S. financial system.

To help improve the resolvability of SIFIs and thus increase stability 

during times of market stress, Section 165(d) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (Dodd-Frank Act) requires 

these institutions to prepare and maintain plans (also called living wills) 

for their rapid and orderly resolution under the U.S. Bankruptcy Code (the 

Code).2 In late 2011, the Federal Deposit Insurance Corporation (FDIC) 

and Board of Governors of the Federal Reserve System (Federal 

Reserve) jointly issued a final rule to implement the resolution plan 

 1

The term SIFI is commonly used by academics and other experts to refer to bank holding 

companies with $50 billion or more in total consolidated assets and nonbank financial 

companies designated by the Financial Stability Oversight Council for Federal Reserve 

supervision and enhanced prudential standards, but the Dodd-Frank Wall Street Reform 

and Consumer Protection Act does not use the term. These entities, described above as 

SIFIs, are also those mandated by the Dodd-Frank Act to comply with the resolution plan 

requirements. Therefore, throughout this report, we will refer to those combined entities as 

SIFIs.

2

Pub. L. No. 111-203, § 165(d), 124 Stat. 1376, 1426 (2010). 

Letter
Page 2 GAO-16-341 Resolution Plans

requirement.3 Under both the statute and the rule, FDIC and the Federal 

Reserve (the regulators) must review each plan and may jointly determine 

that a plan is not credible or would not facilitate an orderly resolution of 

the company under the Code.4 If a company ultimately fails to submit a 

plan that demonstrates its resolvability in bankruptcy, the regulators may 

jointly impose more stringent capital, leverage, or liquidity requirements 

on the company or its subsidiaries or restrictions on the company’s 

growth, activities, or operations.

Although resolution plans may reduce the possibility for government 

support of “too big to fail” SIFIs, such plans are a new concept.5 For 

example, at the international level, the G20 leaders committed in 2009 to 

requiring SIFIs to develop internationally consistent resolution plans.6 In 

response, the Financial Stability Board issued international standards for 

resolution plans in 2011 that identified the objectives and essential 

elements of the plans but provided limited guidance on how to achieve 

those objectives.7 Similarly, while Section 165(d) of the Dodd-Frank Act 

allows FDIC and the Federal Reserve to make any determination jointly 

about whether a plan submitted by a company is not credible or would not 

 3

Resolution Plans Required, 76 Fed. Reg. 67323 (Nov. 1, 2011). The FDIC Board of 

Directors approved the rule in September 2011. The Board of Governors of the Federal 

Reserve System approved the rule in October 2011. The rule was published in the 

Federal Register on November 1, 2011, and became effective on November 30, 2011. 

Because of the publication date, the rule is referred to as the November 2011 rule.

4

The statute and the rule require FDIC and the Federal Reserve to review plans but do not 

require them to determine whether the plans are not credible or would not facilitate an 

orderly resolution each time they review the plans. 

5

“Too big to fail” is a market notion that the federal government would intervene to prevent 

the failure of a SIFI to avoid harm to the economy. For additional information, see GAO, 

Large Bank Holding Companies: Expectations of Government Support, GAO-14-621 

(Washington D.C.: July 31, 2014). In that report, we found, among other things, that many 

market participants with whom we spoke believed that recent regulatory reforms have 

reduced but not eliminated the likelihood the federal government would prevent the failure 

of one of the largest SIFIs.

6

The G20, established in 1999, is a forum for international cooperation on important 

issues of the global economic and financial agenda. Its members include 19 countries and 

the European Union. The G20 leaders established the Financial Stability Board as the 

successor to the Financial Stability Forum and made it responsible for coordinating and 

promoting the implementation of the G20 reform commitments.

7

Financial Stability Board, “Key Attributes of Effective Resolution Regimes for Financial 

Institutions,” October 2011. Under these standards, regulatory authorities, not SIFIs, are 

expected to prepare resolution plans.
Page 3 GAO-16-341 Resolution Plans

facilitate the company’s orderly resolution, the act provides no direction 

on how to make such a determination. Further, as Congress has reflected 

on the Dodd-Frank Act, some Congress members, academics, and others 

have raised concerns about the ability of the act, including its resolution 

plan requirement, to end the notion of a government bailout for financial 

institutions considered “too big to fail.”8

You asked us to examine the process that FDIC and the Federal Reserve 

use to review resolution plans submitted in response to Section 165(d) of 

the Dodd-Frank Act, including the transparency of the review process, 

associated costs, and potential usefulness of the plans. This report 

examines

• the processes the regulators use to review resolution plans;

• the extent to which the regulators have determined whether resolution 

plans are not credible or would not facilitate an orderly resolution 

under the Code; and

• stakeholder views on the usefulness of the resolution plans to 

companies and other stakeholders.

To examine the process used by the regulators to review resolution plans 

and the extent to which the regulators have determined whether 

resolution plans are not credible or would not facilitate an orderly 

resolution under the Code, we reviewed the Dodd-Frank Act, the final 

resolution plan rule, and FDIC and Federal Reserve documentation of 

plan reviews conducted for plan years 2012 through 2014, as well as 

guidance and feedback the regulators provided to companies. To 

examine what is known about the usefulness of the resolution plans to 

companies and other stakeholders, we systematically selected and 

interviewed 25 companies that filed a resolution plan in 2014 about the 

benefits, costs, and challenges associated with the plans. The companies 

we interviewed represented all filing groups, or waves, including 10 of the 

18 Wave 1, Wave 2, and designated nonbank filers, and 15 of the 120 

Wave 3 filers (see below for more description of the filing waves).9 In 

addition, we judgmentally selected and interviewed a sample of 20 

stakeholders—including bankruptcy attorneys and consultants, industry 

 8

See, for example, Republican Staff, Committee on Financial Services, Subcommittee on 

Oversight and Investigations, Failing to End “Too Big to Fail”: An Assessment of the DoddFrank Act Four Years Later (July 2014).

9

Throughout this report, we use the terms “companies” and “filers” interchangeably.
Page 4 GAO-16-341 Resolution Plans

groups, credit rating agencies, investors, and academics—about the 

usefulness of the resolution plans.10 They were selected based on their 

subject matter expertise, experience helping companies prepare 

resolution plans, or use of the public versions of the resolution plans for 

their own purposes. We also interviewed officials from other federal 

agencies about their involvement with resolution plan reviews. For all 

objectives, we interviewed FDIC and Federal Reserve officials. For more 

information on our methodologies, see appendix I.

We conducted this performance audit from November 2014 to April 2016 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Large banking organizations in the United States generally are organized 

as bank holding companies, which are companies that can control, 

among other entities, one or more banks.11 Typically, a large U.S. parent 

(or top tier) bank holding company owns a number of domestic depository 

institutions that also engage in lending and other activities. A holding 

company may also own nonbanking and foreign entities that engage in a 

broader range of business activities, which may include securities dealing 

 10To characterize companies’ and stakeholders’ views throughout the report, we 

consistently defined modifiers (e.g. “nearly all”) to quantify each group of interviewees’

views as follows: “all” represents 100 percent of the group, “nearly all” represents 80 

percent to 99 percent of the group, “most” represents 60 percent to 79 percent of the 

group, “several” represents 40 percent to 59 percent of the group, and “some” represents 

20 percent to 39 percent of the group. While the percentage of the group of interviews 

remains consistent, the number of interviews each modifier represents differs based on 

the number of interviews in that grouping: 10 Wave 1, Wave 2, and designated nonbank 

filers; 15 Wave 3 filers; and 20 stakeholders.

11For additional information on bank holding companies, see, for example, GAO, 

Government Support for Bank Holding Companies: Statutory Changes to Limit Future 

Support Are Not Yet Fully Implemented, GAO-14-18 (Washington, D.C.: Nov. 14, 2013) 

and GAO-14-621.

Background

Bank Holding Companies 

and the Bank Holding 

Company Act
Page 5 GAO-16-341 Resolution Plans

and underwriting, insurance, real estate, leasing and trust services, or 

asset management. Some large U.S. bank holding companies have 

thousands of subsidiaries. Figure 1 provides a simplified example of a 

large bank holding company’s structure.

Figure 1: Simplified Example of the Structure of a Large Bank Holding Company

The Bank Holding Company Act of 1956, as amended, contains a 

comprehensive framework for the supervision of bank holding companies 

and their nonbank subsidiaries.12 Generally, any company that acquires 

control of an insured bank or bank holding company is required to register 

with the Federal Reserve as a bank holding company.13 Under the Bank 

 12Bank Holding Company Act of 1956, Pub. L. No. 84-511, 70 Stat. 133 (1956) (codified 

as amended at 12 U.S.C. §§ 1841-1852). Bank holding companies are companies that 

own or control, among other entities, a bank, as defined in the Bank Holding Company 

Act. 12 U.S.C. § 1841(a)(1), (c). 

13Any one of the following circumstances will trigger coverage under the Bank Holding 

Company Act: (1) stock ownership—the company owns, controls, or has the power to vote 

25 percent or more of any class of the voting securities of a bank or bank holding 

company (either directly or indirectly or acting through one or more other persons); (2) 

ability to elect a board majority—the company controls the election of a majority of the 

directors or trustees of a bank or bank holding company; or (3) effective control of 

management—the Board determines, after notice and opportunity for hearing, that the 

company directly or indirectly exercises a controlling influence over the management or 

policies of a bank or bank holding company. For purposes of any such proceeding, it is 

presumed that any company that directly or indirectly owns, controls, or has power to vote 

fewer than 5 percent of any class of voting securities of a specific bank or bank holding 

company does not have the requisite control. See 12 U.S.C. § 1841(a)(1),(2).
Page 6 GAO-16-341 Resolution Plans

Holding Company Act, these companies are subject to, among other 

things, consolidated supervision by the Federal Reserve. Further, the act 

restricts the activities of the holding company and its affiliates to those 

that are closely related to banking or, for qualified financial holding 

companies, activities that are financial in nature.14

The Section 165(d) resolution plan requirement is one of many DoddFrank Act provisions and related reforms designed to help restrict future 

government support for and reduce the likelihood and effects of the failure 

of SIFIs. Such reforms include the act’s (1) restrictions on the Federal 

Reserve’s emergency authorities to provide assistance to financial 

institutions; (2) new tools and authorities for FDIC and the Federal 

Reserve to resolve a failing SIFI outside of bankruptcy if its failure would 

have serious adverse effects on the U.S. financial system; (3) enhanced 

regulatory standards for SIFIs related to capital, liquidity, and risk 

management; and (4) other reforms intended to reduce the potential 

disruptions to the financial system that could result from a SIFI’s failure, 

such as the Volcker rule and swaps clearing and margin requirements.15

Title I of the Dodd-Frank Act requires bank holding companies with $50 

billion or more in consolidated assets and nonbank financial companies 

designated by the Financial Stability Oversight Council (FSOC) to 

periodically submit to FDIC, the Federal Reserve Board, and FSOC 

resolution plans that detail how the companies could be resolved in a 

rapid and orderly manner in the event of material financial distress or 

 14In 1999, the Gramm-Leach-Bliley Act provided that a bank holding company may elect 

to become a financial holding company that can engage in a broader range of activities 

that the Federal Reserve determines to be financial in nature or incidental to such financial 

activity. 12 U.S.C. § 1843(k)(1). The financial holding company can engage in activities 

that the Federal Reserve determines (1) to be financial in nature or incidental to such 

financial activity, or (2) are complementary to a financial activity and do not pose a 

substantial risk to the safety and soundness of depository institutions or the financial 

system generally. The bank holding company and its depository institution subsidiaries 

must be well-capitalized and well-managed. 12 U.S.C. § 1843(l)(1).

15For additional information on these reforms, see GAO-14-621.

Resolution Plans and 

Orderly Liquidation 

Authority under the DoddFrank Act

Resolution Plans
Page 7 GAO-16-341 Resolution Plans

failure.16 If FDIC and the Federal Reserve jointly determine that a 

resolution plan is not credible or would not facilitate an orderly resolution 

under the Code, they must notify the company in writing of such a 

determination and identify the aspects of the plan that the regulators 

jointly found deficient, and the company must submit a revised plan that 

remedies the deficiencies. If the company fails to resubmit a credible plan 

that adequately remedies the deficiencies, FDIC and the Federal Reserve 

may jointly impose more stringent capital, leverage, or liquidity 

requirements; restrict growth, activities, or operations; and, if within two 

years after the implementation of those requirements the company has 

failed to resubmit a resolution plan with the required revisions, in 

consultation with FSOC, require the company to divest itself of certain 

assets or operations.

Section 165(d) of the Dodd-Frank Act requires resolution plans to include 

the following information:

• the manner and extent to which any insured depository institution 

affiliated with the company is adequately protected from risks arising 

from the activities of any nonbank subsidiaries of the company;

• descriptions of the company’s ownership structure, assets, liabilities, 

and contractual obligations; and

• identification of the cross-guarantees tied to different securities, 

identification of major counterparties, and a process for determining to 

whom the collateral of the company is pledged; and

• any other information that the Federal Reserve and FDIC jointly

require by rule or order.

FDIC and the Federal Reserve’s final resolution plan rule took effect in 

November 2011.17 The rule requires companies subject to the rule to file 

plans annually but implements filing deadlines on a staggered schedule 

 16For purposes of Title I of the Dodd-Frank Act, a bank holding company includes a 

foreign bank or company that is treated as a bank holding company under Section 8(a) of 

the International Banking Act of 1978. Pub. L. No. 111-203, § 102(a)(1), 124 Stat. 1376, 

1391 (2010). The Dodd-Frank Act established FSOC to monitor the stability of the U.S. 

financial system and take actions to mitigate risks that might destabilize the system. The 

act also gave FSOC a number of significant authorities to help it execute its broad 

mission, including authority to designate nonbank financial companies for supervision by 

the Federal Reserve. For additional information on the designation process, see GAO, 

Financial Stability Oversight Council: Further Actions Could Improve the Nonbank 

Designation Process, GAO-15-51 (Washington, D.C.: Nov. 20, 2014).

1776 Fed. Reg. 67323 (Nov. 1, 2011). 
Page 8 GAO-16-341 Resolution Plans

that is generally based on companies’ total nonbank assets (or, in the 

case of foreign-based companies, their total U.S. nonbank assets). The 

groups of filers required to meet each deadline are known as waves (see 

table 1). As table 1 shows, the first wave—the largest bank holding 

companies—generally were required to file their initial resolution plans in 

2012, while the other companies (Waves 2 through 4) were not required 

to file their initial plans until 2013 or later.

Table 1: Initial Resolution Plan Filing Schedule

Type of resolution plan filer

Filing deadline for 

initial plan

Number of companies 

filing initial plan

Wave 1: Companies with $250 billion or more in total nonbank assets (or for 

foreign banking organizations, in total U.S. nonbank assets) 

July 1, 2012 11a

Wave 2: Companies with $100 billion or more but less than $250 billion in 

total nonbank assets (or for foreign banking organizations, in total U.S. 

nonbank assets) 

July 1, 2013 4b

Wave 3: Companies with $50 billion or more in total consolidated assets but 

less than $100 billion in total nonbank assets (or for foreign banking 

organizations, in total U.S. nonbank assets) 

December 31, 2013 116c

Wave 4: Nonbank financial companies (previously designated by the 

Financial Stability Oversight Council)

July 1, 2014 3d

Source: GAO analysis of Federal Deposit Insurance Corporation and Federal Reserve documents. | GAO-16-341

a

Two of the Wave 1 filers had less than $100 billion in total nonbank assets but were included in 

Wave 1 because of their status as global systemically important banks.

b

The regulators permanently adjusted the annual resolution plan filing deadline for three of the Wave 

2 filers from July 1 to December 31. The fourth Wave 2 filer files its plan by July 1 with the Wave 1 

filers. 

c

The total number of Wave 3 companies filing resolution plans in 2013, 2014, and 2015 was 116, 120, 

and 119, respectively. 

d

These three nonbank financial companies became subject to the resolution plan requirement upon 

their designation by the Financial Stability Oversight Council (FSOC) in July 2013 and September 

2013. A fourth nonbank financial company became subject to the resolution plan requirement in 

December 2014. A court order on March 30, 2016 rescinded the fourth nonbank financial company’s 

designation by FSOC and therefore, the requirement to file a resolution plan. However, as of April 4, 

2016, the court’s decision is open for appeal by FSOC. The regulators permanently adjusted the 

annual resolution plan filing deadline for all nonbank financial companies from July 1 to December 31.

According to the resolution plan rule, a company’s plan must be divided 

into a public section and a confidential section. The latter section must 

include seven informational sections: (1) executive summary, (2) strategic 

analysis, (3) description of corporate governance relating to resolution 

planning, (4) description of organizational structure and related 

information, (5) management information systems, (6) interconnections 
Page 9 GAO-16-341 Resolution Plans

and interdependencies, and (7) supervisory and regulatory information.18

In the strategic analysis section—generally the most substantive 

component—each company must describe the key assumptions and 

supporting analysis underlying the plan, the specific actions the company 

must take to facilitate a rapid and orderly resolution, the strategy for 

maintaining the operations of and funding for the company and its 

material entities, and the actions the company will take to prevent or 

mitigate any adverse effects of a failure. The strategy must also describe 

any potential material weaknesses or impediments to the plan, and the 

actions and steps the company has taken or proposes to take to 

remediate or otherwise mitigate the weaknesses or impediments 

identified by the company.

As noted earlier, although any determination that a company’s plan is not 

credible or would not facilitate an orderly resolution under the Code must 

be made jointly, neither the statute nor the resolution plan rule requires 

the regulators to make such a determination each time they review the 

plans, even if they identify shortcomings in a company’s plan. As of 

January 2016, the regulators have not yet jointly determined that any 

companies’ plans are not credible or would not facilitate an orderly 

resolution under the Code. Specifically, FDIC’s Board of Directors 

determined that the Wave 1 filers’ 2013 plans and three of the Wave 2 

filers’ 2014 plans were not credible or would not facilitate an orderly 

resolution under the Code. However, the Federal Reserve Board of 

Governors did not make a similar not credible determination, but instead 

said that the companies must take meaningful action to improve their 

resolvability under the Code. The Board of Governors noted that this 

action was consistent with the statement in the resolution plan rule’s 

 18Under the final rule, domestic companies must present the seven informational sections 

with respect to their subsidiaries and operations that are domiciled in the United States, as 

well as their foreign subsidiaries, offices, and operations. Foreign-based companies 

generally must address the subsidiaries, branches and agencies, and key activities that 

are domiciled in the United States or are conducted in whole or in material part in the 

United States, with additional requirements for certain informational sections. However, 

the rule generally allows companies with less than $100 billion in total nonbank assets and 

with at least 85 percent of their total consolidated assets in an insured depository 

institution to file a tailored resolution plan. The tailored plan must include the same seven 

informational elements as the full plan, but—for all but one of the elements—the 

presentation may be limited to the company and its nonbanking material entities and 

operations. Companies that are eligible to file a tailored plan must notify FDIC and the 

Federal Reserve of their intent to do so, and the agencies must jointly grant the company 

permission to file a tailored plan. 
Page 10 GAO-16-341 Resolution Plans

preamble that the initial resolution plans would provide the foundation for 

developing more robust plans over the next few years.

Complementing the 165(d) resolution plan requirement, FDIC adopted a 

final rule in January 2012 requiring an insured depository institution with 

$50 billion or more in total assets to periodically provide FDIC with a 

contingent plan for the resolution of such institution in the event of its 

failure.19 The rule requires that the plan enable FDIC, as receiver, to 

resolve the institution under Sections 11 and 13 of the Federal Deposit 

Insurance Act.20 The plan must ensure that depositors have access to 

their insured deposits within 1-business day of the institution’s failure and 

that the plan maximizes the return from the sale or other disposition of 

any assets and minimizes the amount of loss realized by creditors.

In cases where resolution of a financial company under the Code may 

result in serious adverse effects on U.S. financial stability, the orderly 

liquidation authority set out in Title II of the Dodd-Frank Act serves as the 

backstop alternative.21 Orderly liquidation authority gives FDIC the 

authority, subject to certain constraints, to resolve large financial 

companies, including nonbanks, outside of the bankruptcy process. FDIC 

may be appointed receiver for a financial company if the Secretary of the 

Treasury, in consultation with the President, determines, among other 

things, that the company’s failure and its resolution under applicable 

federal or state law, including bankruptcy, would have serious adverse 

effects on U.S. financial stability and no viable private-sector alternative is 

 19Resolution Plans Required for Insured Depository Institutions with $50 Billion or More in 

Total Assets, 77 Fed. Reg. 3075 (Jan. 23, 2012).

2012 C.F.R § 360.10(a). 

21Pub. L. No. 111-203, § 204, 124 Stat. 1376, 1454-1456 (codified at 12 U.S.C. § 5384). 

For additional information on orderly liquidation authority, see GAO, Bankruptcy: Agencies 

Continue Rulemakings for Clarifying Specific Provisions of Orderly Liquidation Authority, 

GAO-12-735 (Washington, D.C.: July 12, 2012).

FDIC Insured Depository 

Institution Resolution Plans

Orderly Liquidation Authority
Page 11 GAO-16-341 Resolution Plans

available to prevent the default of the financial company.22 While the 

Dodd-Frank Act does not specify how FDIC must exercise this authority, 

FDIC has been developing approaches to resolving a company under the 

orderly liquidation authority, including one that it refers to as the singlepoint-of-entry approach.23

U.S. regulators have coordinated with foreign counterparts through the 

G20 and the Financial Stability Board to develop a policy framework for 

addressing the risks posed by SIFIs. In November 2010, G20 leaders 

endorsed the Financial Stability Board’s framework for reducing the 

probability and impact of the failure of SIFIs.24 Key elements of this 

framework include developing effective resolution regimes for these 

institutions. FDIC, the Federal Reserve System, and Treasury helped to 

develop international standards that the Financial Stability Board issued 

for resolution regimes in October 2011.25 According to the Financial 

Stability Board’s November 2015 progress report, only a subset of its 

member jurisdictions, mostly those home to global, systemically important 

banks, have a bank resolution regime with a scope and range of powers 

that is broadly in line with the international resolution standards.26 It also 

reported that all global, systemically important banks have recovery plans 

 22Pub. L. No. 111-203, § 203(b), 124 Stat. 1376, 1450 (codified at 12 U.S.C. § 5383(b)). 

Before the Secretary of the Treasury, in consultation with the President, makes a decision 

to seek the appointment of FDIC as receiver of a financial company, at least two-thirds of 

those serving on the Board of Governors of the Federal Reserve System and at least twothirds of those serving on the Board of Directors of FDIC must vote to make a written 

recommendation to the Secretary of the Treasury to appoint FDIC as receiver. Pub. L. No. 

111-203, § 203(a)(1)(A), 124 Stat. at 1450 (codified at 12 U.S.C. § 5383(a)(1)(A)). In the 

case of a broker-dealer, the recommendation must come from the Federal Reserve Board 

and the Securities and Exchange Commission, in consultation with FDIC, and in the case 

of an insurance company, from the Federal Reserve Board and the Director of the Federal 

Insurance Office, in consultation with FDIC. Pub. L. No. 111-203, § 203(a)(1)(B)-(C), 124 

Stat. at 1450 (codified at 12 U.S.C. § 5383(a)(1)(B)-(C)).

23Resolution of Systemically Important Financial Institutions: The Single Point of Entry 

Strategy, 78 Fed. Reg. 76614 (Dec. 18, 2013).

24Financial Stability Board, “Reducing the Moral Hazard Posed by Systemically Important 

Financial Institutions – FSB Recommendations and Time Lines,” October 20, 2010. 

25Financial Stability Board, “Key Attributes of Effective Resolution Regimes for Financial 

Institutions,” October 2011.

26Financial Stability Board, “Implementation and Effects of the G20 Financial Regulatory 

Reforms: Report of the Financial Stability Board to G20 Leaders,” November 9, 2015.

International Coordination 

on Resolution
Page 12 GAO-16-341 Resolution Plans

and crisis management groups, but significant work remains to make 

resolution strategies and plans operational.

Bankruptcy is a federal court procedure conducted under the Code.27

Under the resolution plan rule, companies must describe how they would 

be resolved or reorganized under Title 11 of the Code, which includes 

Chapter 11. A reorganization proceeding under Chapter 11 allows a 

debtor that is a commercial enterprise to continue to operate some or all 

of its operations subject to court supervision as a way to satisfy creditor 

claims. The debtor typically remains in control of its assets under a 

Chapter 11 proceeding, but in some cases the court may direct the U.S. 

Trustee to appoint a Chapter 11 trustee to take over the affairs of the 

debtor. Chapter 11 proceedings can be voluntary (initiated by the debtor) 

or involuntary (generally initiated by at least three creditors holding at 

least a certain minimum amount of claims against the debtor).28

Certain financial institutions may not file as debtors under the Code, and 

other entities face special restrictions in using the Code.29

• Insured depository institutions: Under the Federal Deposit Insurance 

Act, FDIC serves as the conservator or receiver for insured depository 

institutions placed into conservatorship or receivership under 

applicable law.30

• Insurance companies: Insurers generally are subject to oversight by 

state insurance commissioners, who have the authority to place them 

into conservatorship, rehabilitation, or receivership.

• Broker-dealers: Broker-dealers can be liquidated under the Securities 

Investor Protection Act or under a special subchapter of Chapter 7 of 

 27For additional information on bankruptcy, see GAO, Financial Company Bankruptcies: 

Need to Further Consider Proposals’ Impact on Systemic Risk, GAO-13-622 (Washington, 

D.C.: July 18, 2013).

28Voluntary cases are permitted under 11 U.S.C. § 301. Involuntary cases are subject to 

11 U.S.C. § 303.

29Financial companies that the Secretary of the Treasury determines meet the conditions 

specified under orderly liquidation authority—including that their failure and resolution 

under otherwise applicable federal or state law would have serious adverse effects on 

financial stability in the United States—may be resolved under an FDIC receivership, 

broadly similar to that currently used to resolve insured depositories.

3012 U.S.C. § 1821(c).

U.S. Bankruptcy Code, 

Financial Companies, and 

Federal Regulators
Page 13 GAO-16-341 Resolution Plans

the Code. However, broker-dealers may not file for reorganization 

under Chapter 11.31

• Commodity brokers: Commodity brokers, also known as futures 

commission merchants, are restricted to using only a special 

subchapter of Chapter 7 for bankruptcy relief.32

Regulators often play a role in financial company bankruptcies. With the 

exception of the Commodity Futures Trading Commission and Securities 

and Exchange Commission (SEC), the Code does not explicitly name 

federal financial regulators as a party of interest with a right to be heard 

before the court.33 In practice, however, regulators frequently appear 

before the court in financial company bankruptcies. For example, as 

receiver of failed insured depository institutions, FDIC’s role in 

bankruptcies of bank holding companies is typically limited to that of 

creditor. The Commodity Futures Trading Commission has the express 

right to be heard and raise any issues in a case under Chapter 7.34 SEC 

has the same rights in a case under Chapter 11.35 SEC may become 

involved in a bankruptcy particularly if there are issues related to 

disclosure or the issuance of new securities. The Commodity Futures 

Trading Commission and SEC also are involved in Chapter 7 

bankruptcies of broker-dealers and commodity brokers. In the event of a 

broker-dealer liquidation, pursuant to the Securities Investor Protection 

Act, the bankruptcy court retains jurisdiction over the case and a trustee, 

selected by the Securities Investor Protection Corporation, typically 

administers the case.36 SEC may join any Securities Investor Protection 

Act proceeding as a party.37

 31Chapter 7 of the Code contains special provisions for the liquidation of stockbrokers. 11 

U.S.C. §§ 741-753. 

32Chapter 7 of the Code contains special provisions for commodity broker liquidation (11 

U.S.C. §§ 753, 761-767), and the Commodity Futures Trading Commission’s rules relating 

to bankruptcy are set forth at 17 C.F.R. § 190.01 et seq.

3311 U.S.C. § 762; 11 U.S.C. § 1109.

3411 U.S.C. § 762.

3511 U.S.C. § 1109. 

3615 U.S.C. § 78eee(b)(4); 15 U.S.C. § 78eee(b)(2)(B) - (C) and (3); 15 U.S.C. § 78fff-1.

3715 U.S.C. § 78eee(c). 
Page 14 GAO-16-341 Resolution Plans

FDIC and the Federal Reserve have developed separate but similar 

processes for their reviews of companies’ resolution plans. Both 

regulators have processes for staffing review teams, determining whether 

a plan includes all required information, assessing whether a plan’s 

strategy mitigates obstacles to the company’s orderly resolution, and 

documenting and vetting team findings and conclusions. Although the 

regulators’ review processes are separate, the regulators coordinate with 

each other in various ways, such as in their discussions about review 

findings and their communications with companies.

FDIC and the Federal Reserve have separate but similar processes for 

reviewing resolution plans. For instance, both developed strategies for 

reviewing plans and provided their review teams with guidance on 

implementing the strategies. As shown in figure 2, FDIC and the Federal 

Reserve each have two committees—composed of senior staff—that offer 

direction to review teams on plan assessment strategies. We found that 

both FDIC and the Federal Reserve typically prepare scoping 

memorandums or project plans to structure their upcoming plan reviews. 

For example, two FDIC scoping memorandums we reviewed for Wave 2 

companies included key areas of focus, background information from 

previous plans, and assignments of specific review components and 

products to be delivered. We also reviewed two Federal Reserve project 

plans for Wave 3 companies—one for larger companies and another for 

smaller companies—that included objectives of the review, governance, 

responsibilities, products to be delivered, and timelines, among other 

items.

FDIC and the Federal 

Reserve Review 

Resolution Plans 

Separately but 

Coordinate on Key 

Aspects of Reviews

Regulators Have Created 

Separate but Similar 

Processes for Reviewing 

Resolution Plans
Page 15 GAO-16-341 Resolution Plans

Figure 2: Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Processes for Prereview Guidance

Both FDIC and the Federal Reserve have separate review teams for each 

wave of plan filers. As shown in figure 3, FDIC’s Office of Complex 

Financial Institutions and the Division of Risk Management Supervision’s 

Complex Financial Institutions Section share responsibility for reviewing 

resolution plans submitted by the Wave 1 filers, two of the four Wave 2 
Page 16 GAO-16-341 Resolution Plans

filers, and the nonbank filers.38 The Division of Risk Management 

Supervision’s Large Bank Supervision Branch reviews plans submitted by 

the Wave 3 filers and the other two Wave 2 filers. Subject matter experts 

in issue areas such as legal, resolution, and international from other FDIC 

divisions participate on reviews as needed.

Within the Federal Reserve System, 10 Federal Reserve banks review 

resolution plans of companies located in their district, with assistance, as 

needed, from subject matter experts.39 The Federal Reserve Bank of New 

York conducts most of the reviews, given that more than 75 percent of the 

Wave 1 and 2 companies and designated nonbanks and about two-thirds 

of the Wave 3 companies are located in its district.

For the Wave 1 and 2 companies and designated nonbanks, both 

regulators assign a team of around five to six staff to review each 

company’s plan. For Wave 3 companies, FDIC generally assigns a fiveto-six person team to review multiple Wave 3 plans, and the Federal 

Reserve generally assigns a two person team to review each plan (see 

figure 3).

 38FDIC established the Office of Complex Financial Institutions in 2010 to, among other 

things, serve as the focal point for implementing FDIC’s new systemic resolution 

authorities under the Dodd-Frank Act, including the 165(d) resolution plans and its orderly 

liquidation authority. The Division of Risk Management Supervision is responsible for 

FDIC’s safety and soundness examinations and other supervisory duties, and its Large 

Bank Supervision Branch specializes in FDIC’s supervision of large banking 

organizations. 

39The Federal Reserve provided information on (a) the number of Wave 1, 2, and 3 plans 

assigned to the Federal Reserve Bank of New York and (b) the number of Wave 3 plans 

assigned to other Federal Reserve banks for the review of filers’ 2013 plans. We relied on 

the information the Federal Reserve provided and confirmed the home districts of all 

remaining Wave 1, Wave 2, and nonbank filers using publicly available information. 
Page 17 GAO-16-341 Resolution Plans

Figure 3: Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Vertical Review Teams, as of 2015

a

Two of the four Wave 2 companies’ plans are reviewed by the Office of Complex Financial 

Institutions, and the other two companies’ plans are reviewed by the Division of Risk Management 

Supervision’s Large Bank Supervision Branch with the Wave 3 companies.

b

Ninety of the Wave 3 companies were allowed to file a reduced plan in December 2015 (see 

discussion below). One or two FDIC staff review all of the reduced plans.

c

The Federal Reserve bank for the district in which a company is located leads that company’s plan 

review, but subject matter experts from other Federal Reserve banks may be assigned to multiple 

plans.
Page 18 GAO-16-341 Resolution Plans

d

We used information on the Federal Reserve’s staffing for its July 2015 plan review (11 Wave 1 filers 

and 1 Wave 2 filer) and its review of one Wave 2 filer’s 2014 plan. Our calculation does not include 

staffing for nonbank filers’ plan reviews.

e

According to Federal Reserve officials, the on-site team for each Wave 3 company typically reviews 

the company’s plan. However, some staff serve on more than one on-site team.

During their plan reviews, FDIC and Federal Reserve teams assess 

whether submitted resolution plans are informationally complete. As 

noted, the resolution plan rule includes seven informational requirements, 

such as an executive summary, strategic analysis, and description of 

organizational structure. We found that to determine whether submitted 

plans contain all required information, both regulators use similar 

checklists to conduct and document their completeness reviews. Teams 

typically are given about 2 weeks to conduct the completeness review.

Following their completeness reviews, we found that FDIC and Federal 

Reserve teams then conduct two types of more substantive reviews of 

companies’ plans. First, the regulators conduct vertical, or companyspecific, reviews to identify issues, shortcomings, and obstacles to 

resolvability. As shown in table 2, FDIC and the Federal Reserve focus 

their vertical plan reviews on similar assessment areas.40 For example, 

we found that both regulators assess how the companies plan to

maintain, transfer, sell, or wind down their critical operations—defined in 

the final rule as the operations of the company for which the failure or 

discontinuance would pose a threat to the financial stability of the United 

States—in an orderly manner through the resolution process.41 Second, 

FDIC and Federal Reserve teams conduct horizontal reviews to examine 

selected issues across multiple companies. For example, FDIC’s 2015 

plan review included a horizontal review of the governance mechanism 

across all Wave 1 and 2 companies. According to FDIC officials, the 

horizontal reviews supplement the vertical assessment of key issue areas 

and promote consistency across the plan reviews. In addition, we found 

that the regulators use horizontal reviews to help inform their general 

guidance and decision-making around resolution planning.

 40FDIC piloted its assessment approach with two Wave 2 companies in 2014 and fully 

implemented it beginning with the review of plans submitted in July 2015.

4176 Fed. Reg. 67323, 67335 (Nov. 1, 2011) (codified at 12 C.F.R. § 381.2(g) and 

243.2(g).
Page 19 GAO-16-341 Resolution Plans

Table 2: Federal Deposit Insurance Corporation (FDIC) and Federal Reserve 

Resolution Plan Vertical Assessment Areas and Work Products

Regulator 

Vertical reviews: assessment 

areas 

Vertical reviews: work 

productsa

FDIC • Critical operations

• Stress scenario

• Material entity strategy

• Operational readiness

• Corporate governance

• Individual 

memorandums for each 

assessment areab

• Summary memorandum

Federal Reserve • Critical operations

• Material entities

• Strategy for orderly resolution

• Obstacles to orderly resolution

• Assumptions

• Remediation plans

• Individual 

memorandums for each 

obstacle to orderly 

resolutionc

• Summary memorandum

Source: GAO analysis of FDIC and Federal Reserve documents. | GAO-16-341

a

We found that typically FDIC and the Federal Reserve each produce a single summary 

memorandum for Wave 3 companies, although FDIC officials told us that they may produce 

supplemental reports for companies requiring more in-depth analysis.

b

FDIC officials told us that FDIC piloted this approach with two Wave 2 companies in 2014 and staff 

only prepared memorandums for two of the five assessment areas that year. Beginning with the 2015 

review, staff will prepare memorandums for all five assessment areas.

c

The regulators identified the obstacles in public guidance to companies in April 2013 (see discussion 

below). FDIC officials told us that the key obstacles are built into their assessment areas—particularly 

critical operations and material entity strategy—while the Federal Reserve treats the obstacles as a 

stand-alone assessment area but prepares individual memorandums for each obstacle.

The regulators each prepare an overall summary memorandum 

documenting each plan review and, in some cases, supporting 

memorandums for specific assessment areas. They also typically prepare 

memorandums documenting their horizontal reviews. Finally, the 

regulators have developed or are currently developing assessment 

frameworks that they use or plan to use to determine whether aspects of 

a resolution plan are deficient based on their vertical and horizontal 

reviews.42 Specifically, FDIC recently developed a framework that rolls up 

the findings of its five assessment areas into three broader areas, each of 

which includes a short list of key questions that—combined with staff 

judgment about each company’s facts and circumstances—are used to 

determine whether a plan is deficient. Federal Reserve officials told us 

 42For purposes of this report, we use “deficient” to mean that a resolution plan is not 

credible or would not facilitate a company’s rapid and orderly resolution under the Code.
Page 20 GAO-16-341 Resolution Plans

that they are currently developing a similar framework and have recently 

used FDIC’s framework to guide interagency discussions. According to 

FDIC and Federal Reserve officials, teams generally complete their 

vertical reviews within about 2 months, and horizontal reviews can take 

approximately another 2 months.

Since their initial reviews in 2012, FDIC and the Federal Reserve 

periodically have revised parts of their review processes based on 

lessons learned. For example, as described earlier, in 2014, FDIC revised 

its approach to plan assessments by establishing key assessment areas 

to frame its review. In addition, FDIC officials told us that because of the 

large number of Wave 3 companies, FDIC developed an information 

technology tool for recording responses from Wave 3 filers’ plans. The 

tool serves to allow staff to consistently capture information and run 

standard and customized reports as needed. The Federal Reserve 

reported that in 2013, it automated its obstacles log—an electronic 

database in which reviewers catalog each obstacle to rapid and orderly 

resolution at each material entity—by prepopulating cells with drop-down 

menus based on reviewers’ 2012 findings on Wave 1 filers’ plans. The 

Federal Reserve also noted that it simplified its completeness review 

process in 2013 as well as leveraged analyses it conducted in 2012 to 

identify Wave 1 companies’ critical operations, rather than repeating the 

analyses.

After teams complete their reviews, their findings are subject to further 

review and vetting at a higher level. According to FDIC, for the regulator’s 

Wave 1 and 2 reviews, the Oversight Group, an interdivisional group of 

senior executives, directs vertical and horizontal team efforts, reviews 

staff-level shortcomings and deficiencies to be included in companyspecific feedback letters, recommends industry-wide guidance and action 

items, coordinates with Federal Reserve senior staff to help ensure 

consistency across reviews, and recommends staff-level findings to the 

FDIC Board of Directors. For FDIC’s Wave 3 reviews, the Division of Risk 

Management Supervision’s Large Bank Supervision Branch created an 

interdivisional resolution plan review committee, which serves a similar 

purpose as the Oversight Group for Wave 1 and 2 reviews. At the Federal 

Reserve, the Federal Reserve Board’s Recovery and Resolution Planning 

Section performs the same tasks under the direction of the two 

Resolution Plan Vetting Committees and in consultation with the review 

teams and legal staff.

Finally, FDIC’s Board of Directors and the Federal Reserve’s Board of 

Governors separately review and vote on staff recommendations on the 
Page 21 GAO-16-341 Resolution Plans

credibility of plans, requests for filing extensions, and joint feedback 

letters provided to companies. Although each board votes separately, to 

make a joint determination under the act—for example, to determine that 

a plan is deficient—each board must vote to approve the action.

FDIC and the Federal Reserve have coordinated not only on reviews of 

resolution plans but also on the development of the review process. For 

example, Federal Reserve officials stated that in 2012, the regulators 

initially held joint training sessions. Also, the Federal Reserve developed 

a preliminary methodology for identifying critical operations and 

collaborated with FDIC to implement it. Subsequently, FDIC and the 

Federal Reserve worked together to refine the list of critical operations 

and identified whether a company had critical operations and, if so, 

notified the company of the operations they deemed critical before the 

company submitted its initial plan.

During the review process, FDIC and the Federal Reserve coordinate 

with each other in a number of ways. For example, the two regulators 

independently determine the scope of their plan reviews, but FDIC 

officials told us that they compared their assessment areas and generally 

agreed on the same areas of focus. Similarly, FDIC and Federal Reserve 

officials said that the regulators shared their training materials with each 

other. Officials from both regulators also told us that they coordinated 

their meetings with companies to minimize any duplicative efforts, and 

that senior staff schedule weekly calls and periodic meetings to discuss 

findings and any issues identified during the review process. The officials 

noted that they were often in daily communication with each other during 

the plan reviews. Finally, while review teams from each regulator were 

not initially allowed to share internal review documents with one another 

without prior approval, FDIC authorized teams to share such information 

without prior approval beginning with the 2014 pilot reviews.

After the teams complete their separate reviews, the regulators work 

together to reach agreement on the findings and conclusions that they 

use to make recommendations for their respective boards’ consideration. 

For example, FDIC officials told us that after the regulators completed 

their reviews of Wave 1 filers’ 2013 plans, the regulators jointly identified 

a number of issues with the plans and then, with little dissension, agreed 

on prioritizing and addressing them. The regulators also have coordinated 

on the guidance and feedback they provide to companies.

FDIC and the Federal 

Reserve Coordinate on 

Various Aspects of Their 

Reviews
Page 22 GAO-16-341 Resolution Plans

Officials from both regulators told us that at this time, they were not 

considering combining their staffs to form one team to jointly review and 

assess resolution plans. According to FDIC officials, the FDIC Board 

needs to be able to make its credibility determinations based on its own 

independent analysis. Federal Reserve officials told us that because most 

of a plan review involved reading and analysis, there would be few 

efficiency gains from doing the work jointly. But officials from both 

regulators emphasized to us that the current process was collaborative 

because the review teams were in regular communication with each 

other. As we have previously reported, to achieve a common outcome, 

collaborating agencies should establish mutually reinforcing or joint 

strategies to achieve a common outcome.43 Such strategies help in 

aligning the partner agencies’ activities, core processes, and resources to 

accomplish the outcome. In addition, agencies should establish

compatible policies, procedures, and other means—such as frequent 

communication—to work across agency boundaries. Given FDIC’s and 

the Federal Reserve’s similar review strategies, coordinated approach to 

communicating with companies, and frequent communication with one 

another, their resolution plan review processes—while conducted 

separately—are generally collaborative.

FDIC and the Federal Reserve have made progress reviewing the 

resolution plans that companies submitted each year from 2012 to 2014 

but have provided limited disclosures about their reviews and have not 

always provided companies enough time to incorporate feedback given 

the annual filing cycle. As previously noted, under the resolution plan rule, 

the regulators are required to review submitted plans and are allowed, but 

not required, to jointly determine whether the plans are deficient. FDIC’s 

Board of Directors determined that all of the Wave 1 filers’ 2013 plans 

and three of the Wave 2 filers’ 2014 plans were not credible or would not 

facilitate an orderly resolution under the Code. However, the Federal 

Reserve Board of Governors did not make such a determination but 

instead said that the companies must take meaningful action to improve 

their resolvability under the Code. The Board of Governors noted that this 

action was consistent with the statement in the resolution plan rule’s 

preamble that the regulators did not expect that the initial resolution plan 

 43GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain 

Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005). 

FDIC and the Federal 

Reserve Have Made 

Progress Assessing 

Resolution Plans but 

Have Faced 

Challenges Providing 

Transparent and 

Timely Feedback
Page 23 GAO-16-341 Resolution Plans

iterations submitted after this rule takes effect will be found to be deficient 

and that the initial resolution plans would provide the foundation for 

developing more robust plans over the next few years. The regulators 

issued press releases in August 2014 and March 2015 stating that they 

expected to jointly determine that the resolution plans submitted by Wave 

1 and 2 filers, respectively, in 2015 were deficient if the filers had not 

made sufficient improvements.44

Although the resolution plan rule sets forth the information companies 

must include in their plans, the regulators have clarified, revised, and, in 

some cases, expanded information requirements through their guidance 

and feedback. To a large extent, we found that the guidance and 

feedback has focused on the rule’s strategic analysis, which must 

describe a company’s plan for a rapid and orderly resolution under the 

Code. For example, to address shortcomings found in Wave 1 filers’ 2012 

plans, the regulators issued publicly available guidance (April 2013) 

instructing the filers, among other things, to support the assumptions 

underlying their resolution strategies, discuss steps to mitigate five 

obstacles the regulators identified as common during a resolution, and 

provide a detailed description of their planned bankruptcy process in their 

subsequent plans.45 Following their review of the Wave 1 filers’ 2013 

plans, the regulators issued each filer a feedback letter that identified 

shortcomings and provided additional information and regulator-specified 

assumptions for the 2015 plans (see table 3). The feedback letters also 

directed the filers to improve their resolvability under the Code—for 

example, by establishing a rational and less complex legal structure, 

developing a holding company structure that supports resolvability, and 

ensuring the continuity of shared services that support critical operations 

and core business lines throughout the resolution process.

 44As of March 2016, the regulators expect to complete their review of the July 2015 plans 

in the coming months. The remaining plans were filed by December 31, 2015.

45In the regulators’ April 2013 guidance to Wave 1 filers, the five obstacles to a resolution 

included (1) the risks raised by multiple competing insolvencies, (2) the risk of a lack of 

global cooperation by foreign authorities, (3) the risk that interconnections could lead to 

disruptions if certain entities (internal or external) fail or stop providing services, (4) the 

risk that counterparty actions could create operational challenges, and (5) the risk of 

insufficient liquidity to maintain critical operations.

Regulators Have Refined 

Guidance and Feedback
Page 24 GAO-16-341 Resolution Plans

Table 3: Resolution Plan Filing Dates and Guidance or Feedback Issued by the Regulators, 2012 through 2014

Filers 2012 Plan response 2013 Plan response 2014 Plan response

Wave 1 11 companies filed plans by July 1, 

2012.

Regulators jointly issued guidance 

that instructed the companies on the 

information they should include in 

their 2013 resolution plans. The 

guidance included requests for (1) 

more detailed information on, and 

analysis of, obstacles to resolvability 

under the Code and (2) analysis to 

support the strategies and 

assumptions contained in the 

resolution plans.

11 companies filed plans by October 1, 

2013.

Regulators jointly issued each company 

a letter that identified (1) shortcomings 

in its 2013 plan, the additional 

information to be included in its 2015 

plan, and the assumptions its plan 

should make and (2) additional areas 

the company should address in its 2015 

plan.

11 companies filed plans by July 1, 

2014.

Regulators did not provide any 

written guidance or feedback.

Wave 2 4 companies filed plans by July 1, 2013.

Regulators jointly sent each company a 

letter that referred the companies to the 

2013 guidance issued to Wave 1 filers.

4 companies filed plans by July 1, 

2014, or October 1, 2014.

Regulators jointly issued each 

company a letter that identified (1) 

shortcomings in its 2014 plan, the 

additional information to be included 

in its 2015 plan, and the assumptions 

its plan should make and (2) 

additional areas the company should 

address in its 2015 plan.

Wave 3 116 companies filed plans by 

December 31, 2013.

Regulators jointly issued each company 

a letter, providing them with direction for 

their 2014 plans based on the relative 

size and scope of each company’s U.S. 

operations. Companies were instructed 

or permitted to file full, tailored, or 

reduced plans.a

120 companies filed plans by 

December 31, 2014.

Regulators jointly issued each 

company a letter, providing them with 

guidance, clarification, and direction 

for their 2015 plans based on the 

relative size and scope of each

company’s U.S. operations. 

Companies were instructed or 

permitted to file full, tailored, or 

reduced plans.a

Nonbanks 3 nonbanks filed plans by July 1, 

2014.

Regulators jointly issued each 

nonbank a feedback letter that 

identified areas the company should 

address in its 2015 plan. 

Source: GAO analysis of Federal Deposit Insurance Corporation and Federal Reserve documents and press releases. l GAO-16-341

a

The more complex companies were required to file full plans; companies with less complex U.S. 

operations were permitted to file tailored plans; and companies with limited U.S. operations could file 

a reduced plan. A tailored resolution plan focuses on the nonbanking operations of the company and 

on the interconnections and interdependencies between the nonbanking and banking operations. A 

reduced resolution plan focuses on material changes to a company’s initial plan and actions taken to 

strengthen the effectiveness of its initial plan. Beginning in 2015, reduced plan filers were also 

required to describe, where applicable, actions to ensure any subsidiary insured depository institution 

is adequately protected from the risk arising from the activities of nonbank affiliates of the company. 
Page 25 GAO-16-341 Resolution Plans

Consistent with the resolution plan rule’s preamble, which conveyed 

expectations that the review process would evolve, the guidance and 

expectations communicated to companies have evolved over time. The 

regulators—in addition to finding shortcomings in a number of the 

companies’ assumptions—also have had to clarify their expectations 

about such assumptions through several rounds of feedback. For 

example, from April 2013 to August 2014, the regulators clarified 

previously provided assumptions for Wave 1 filers—such as a company’s 

assumptions about its access to government funding. Additionally, the 

regulators clarified and expanded assumptions—for instance, about the 

likely behavior of foreign authorities, counterparties, and others—that 

companies were to make in their subsequent plans. In September 2014, 

FDIC and Federal Reserve officials jointly met with each Wave 1 filer to 

discuss the feedback letters. Based on our review of the meeting notes, 

we found that companies continued to ask for additional clarification 

about the assumptions and expanded requirements introduced in the 

feedback letters.

In December 2014, the regulators offered to preview certain elements of 

Wave 1 filers’ 2015 plans and then in February 2015 provided the filers 

written feedback on the plan previews. We reviewed the feedback to 

Wave 1 filers and found that it included company-specific feedback, 

identifying instances in which, for example, a company made an 

unallowable assumption or did not provide adequate support for an 

assumption. The regulators also clarified additional plan assumptions and 

requirements introduced in the August 2014 feedback letters.

Generally, the regulators took a similar approach with the Wave 2 and 3 

filers (see table 3 above), sending them individual letters setting out 

general directions after reviewing their initial plans (filed in 2013). They 

also sent individual letters that provided more detailed guidance after 

reviewing the 2014 plans (see table 3). As discussed below, however, the 

regulators have exempted a majority of Wave 3 companies from most of 

the plan requirements.

Wave 1 and 2 companies we interviewed generally said the regulators’

feedback was limited. For example, most of the 10 companies we spoke 

with said that the guidance and feedback lacked specificity and seemed 

to be generally aimed at the industry as opposed to individual companies. 

One company told us that it was not clear how the regulators defined a 

“rational and less complex legal structure.” Nonbank financial companies 

we interviewed said the lack of specificity in regulators’ guidance was a 

significant challenge. At the same time, several companies also told us 
Page 26 GAO-16-341 Resolution Plans

that guidance and communication from the regulators had improved more 

recently. For example, as noted, the regulators met with the companies in 

September and December 2014 and then in February 2015 provided 

written feedback on the previews of companies’ 2015 plans.

Nearly all of the 15 Wave 3 companies we interviewed told us that they 

generally had not received any company-specific feedback on their 2013 

plans from the regulators. For example, two companies said the 

regulators told them to consult the guidance for Wave 1 companies and 

incorporate elements applicable to the company. Nearly all of the 15 

companies told us that the lack of feedback from the regulators was a 

challenge in complying with the resolution plan requirement. Moreover, 

several Wave 3 companies we interviewed said that the regulators 

seemed to take a one-size-fits-all approach to resolution planning, and 

some pointed out that these companies were less complex than the Wave 

1 companies and should be given guidance tailored to less complex 

companies.

FDIC and Federal Reserve officials generally said their guidance and 

processes have evolved through the iterations of plan reviews. According 

to the Federal Reserve officials, they initially focused their plan reviews 

on identifying potential obstacles to a resolution and, accordingly, they 

also focused their initial guidance on such obstacles. Officials also said 

that as their knowledge about the companies increased, they were able to 

issue more specific guidance and feedback to companies. Similarly, 

FDIC’s officials told us that in the initial years of plan reviews, they 

focused on the obstacles and basic elements of the plans—including 

financial, operational, and structural aspects of a company’s resolution 

strategy—and had little dialogue with the companies. Since then, officials 

added that they have issued more detailed guidance, conducted more 

substantive plan reviews, and increased communications with the 

companies. FDIC officials also said that while guidance generally has 

been targeted to Wave 1 filers, it has been adjusted for Wave 3 filers, 

given the differences in complexity between the Wave 3 and Wave 1 

filers. Based on our review of the July 2015 feedback letters sent to Wave 

3 filers, we generally found that the guidance did not include some of the 

requirements that were in the August 2014 feedback letters sent to Wave 

1 filers, such as the need for companies to achieve a rational and less 

complex legal entity structure.
Page 27 GAO-16-341 Resolution Plans

FDIC and the Federal Reserve have each developed or are currently 

developing a framework for assessing whether plans are deficient, but 

they have not disclosed the frameworks to plan filers or the public. As 

discussed, for its 2015 reviews, FDIC refined its assessment approach by 

dividing its plan review into five components: (1) an assessment of a 

company’s critical operations, (2) stress scenario leading to a bankruptcy 

filing, (3) strategy for resolving its material legal entities, (4) readiness to 

implement its strategy, and (5) resolution planning governance process. 

In addition, FDIC recently developed a framework that distills the five 

components into three principal areas and includes a series of questions 

that are used to determine whether aspects of a plan are deficient based 

on the staff review findings.46 As summarized by FDIC officials, they use 

the framework to determine whether a resolution plan will work, whether a 

company can implement its plan, and whether the company has 

integrated resolution planning into its corporate governance structure. 

According to the officials, their resolution plan assessment framework has 

been shared with the Federal Reserve and agreed upon as a means to 

create a common intersection between the two regulators’ independent 

plan review processes. Federal Reserve officials told us that they used 

FDIC’s assessment framework to guide interagency discussions during 

their recent plan reviews. They added that they are currently developing 

and expect to finalize their own framework in early 2016, with slight 

differences based on lessons learned from their review of companies’

2015 plans.

However, companies lack a full understanding of the regulators’ overall 

assessment frameworks for determining whether aspects of a plan are 

deficient. While the regulators jointly issued public guidance in April 2013 

to Wave 1 filers, the guidance has been supplemented in part by 

subsequent written and oral feedback provided to each company that has 

clarified and expanded existing assumptions and requirements. Further, 

similar to bank examination findings, such feedback is considered

confidential supervisory information, prohibiting the companies from 

disclosing or discussing it with each other. Although companies generally 

have been provided feedback about their plan shortcomings, they have 

not been provided with any assurances that addressing the shortcomings 

 46According to FDIC officials, the objectives and fundamental elements of the review 

process are consistent across all companies. For Wave 3 filers, the assessment 

framework may be tailored based on a company’s size and complexity.

Regulators’ Frameworks 

for Assessing Plans Are 

Not Transparent
Page 28 GAO-16-341 Resolution Plans

would mean that the regulators would not find aspects of their plans 

deficient.47

Further, FDIC’s and the Federal Reserve’s feedback did not fully clarify 

their overall assessment frameworks for the companies whose plans 

were under review. Nearly all of the eight Wave 1 and 2 companies we 

interviewed believed that credibility was a subjective standard that the 

regulators had not clearly defined, presenting challenges for the 

companies. Several companies described a sense of uncertainty about 

what changes they should make to their plans, with one specifically 

saying that the companies could waste time and money working toward 

an unclear objective. Two of the companies explained to us that there 

was more than one way to achieve resolution but that it was not clear 

which options the regulators would find credible. Finally, another 

company told us that because of the subjective nature of the credibility 

assessment, it was concerned about the penalties the regulators might 

assess if its plan was found deficient.

FDIC and Federal Reserve officials told us that, at the highest level, 

determining whether a plan was not credible involved judgment about the 

nature of each company and its resolution strategy. Because all 

companies and their resolution strategies are different, certain 

shortcomings may be much more important for one company than 

another, and the statute gives the regulators discretion in determining 

how findings under the various assessment factors affect a plan’s overall 

credibility. The regulators’ frameworks enable them to apply their expert 

judgment to the facts and circumstances of each company’s plan. FDIC 

views its framework as confidential supervisory information and thus has 

not disclosed it. FDIC officials told us that they are considering the policy 

implications of such disclosure. Importantly, disclosing the assessment 

framework, at least in an abbreviated form, would provide companies with 

a more comprehensive understanding of the principal factors that the 

regulators use to identify plan deficiencies. In turn, companies could use 

such information to evaluate their own plans, identify potential 

deficiencies, enhance their plans, and prioritize their remediation efforts. 

The disclosure of the assessment framework would be similar to the 

 47For example, in the regulators’ September 2014 meetings with companies and their 

February 2015 written feedback on the companies’ plan previews, staffs noted that their 

views did not necessarily reflect the views of and were not binding upon the regulators’

boards. 
Page 29 GAO-16-341 Resolution Plans

disclosure of FDIC’s and the Federal Reserve’s bank examination 

manuals, which are publicly available on their websites. According to the 

Office of Management and Budget’s directive on open government, 

transparency promotes accountability by providing the public with 

information about government activities.48 Similarly, our prior work has 

recognized that transparency—balanced with the need to maintain 

sensitive regulator information—is a key feature of accountability.49

Without more fully disclosing the regulators’ frameworks for reviewing 

plans and identifying plan deficiencies, the companies lack key 

information for assessing and improving their plans. In addition, 

companies and the public have a limited basis for understanding how the 

regulators are fulfilling their responsibility under the resolution plan rule, 

which could undermine the public’s confidence in the resolution planning 

process. For example, companies and the public would not know the 

extent to which FDIC’s and the Federal Reserve’s frameworks for 

determining whether a plan is deficient are similar or different.

FDIC and the Federal Reserve recognize the limited benefit of requiring 

many smaller, less complex Wave 3 companies to file a full resolution 

plan, but officials said that it was important to continually monitor Wave 3 

companies for potential sources of systemic risk through their plan 

submissions. In addition to permitting companies with limited nonbanking 

operations to file a tailored plan, the rule permits the regulators to further 

reduce the information required in a company’s plan.50 Following their 

review of Wave 3 companies’ 2013 plans, the regulators exercised this 

authority—allowing 61, or about 52 percent, of the companies to file 

 48Office of Management and Budget, Open Government Directive, OMB Memorandum 

M10-06 (Washington, D.C.: 2009). The directive also recognizes that the presumption of 

openness does not preclude the need to protect confidential information. 

49See GAO, Troubled Asset Relief Program: Continued Stewardship Needed as Treasury 

Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM, 

GAO-10-151 (Washington, D.C.: Nov. 2, 2009).

50Generally, companies with less than $100 billion in total nonbank assets and which have 

total insured deposit institution assets comprising 85 percent or more of the company’s 

consolidated assets are eligible to file a tailored resolution plan. A tailored plan focuses on 

the nonbanking operations of the company and on the interconnections and 

interdependencies between the nonbanking and banking operations. 76 Fed. Reg. 67323, 

67336 (Nov. 1, 2011) (codified at 12 C.F.R. §§ 381.4(a) and 243.4(a)). For reduced plans, 

see 76 Fed. Reg. 67323, 67339 (Nov. 1, 2011) (codified at 12 C.F.R. §§ 381.4(k) and 

243.4(k)).

Regulators Have Reduced 

the Plan Requirements for 

the Majority of the Wave 3 

Companies but Have Not 

Disclosed Their Criteria for 

Doing So
Page 30 GAO-16-341 Resolution Plans

“reduced plans” in 2014. Under the 2014 reduced plans, companies were 

exempted from most of the resolution plan rule’s informational 

requirements and were required to only report whether they had (1) made 

any material changes that required their prior plans to be modified or (2) 

taken any actions to improve their resolvability.51 In that regard, reduced 

plans still provide the regulators with a way to monitor such companies.

Following their review of the Wave 3 filers’ 2014 plans, the regulators 

permitted 90 of the filers, or about 76 percent, to file a reduced plan for 

the 2015 plans, and another 12 percent were permitted to file tailored 

plans (see fig. 2). According to FDIC officials, all 90 companies that are 

permitted to file a reduced plan are foreign banking organizations with 

limited U.S. operations.

Figure 4: 2015 Plan Types for Wave 3 Companies

Notes: Percentages do not add up to 100 due to rounding.

The companies with less complex U.S. operations were permitted to file tailored plans, and 

companies with limited U.S. operations could file a reduced plan. A tailored resolution plan focuses 

on the nonbanking operations of the company and on the interconnections and interdependencies 

between the nonbanking and banking operations. A reduced resolution plan focuses on material 

changes to a company’s initial plan, actions taken to strengthen the effectiveness of its initial plan, 

and, where applicable, any actions taken to adequately protect subsidiary insured depository 

 51Wave 3 companies currently filing a reduced plan must have previously filed at least one 

full or tailored plan with the agencies. 
Page 31 GAO-16-341 Resolution Plans

institutions from any risks created by a company’s nonbanking activities. 

FDIC officials told us that the regulators considered a number of factors in 

permitting certain Wave 3 companies to file reduced plans. They said that 

the regulators gained a better understanding of the companies, their 

plans, and the potential effect of their failure on U.S. financial stability, 

and adjusted some of their criteria to allow a greater number of Wave 3 

filers to file reduced plans in 2015. However, the regulators did not 

disclose their criteria for granting the exemptions from most of the plan 

requirements in their joint feedback letters to the Wave 3 companies or 

publicly. Generally, FDIC and Federal Reserve officials said that the

application of their criteria could reveal confidential information, and FDIC 

officials stated that this was in part because their criteria may reflect 

proprietary or sensitive company information. As noted earlier, the Office 

of Management and Budget’s directive on open government and our prior 

work have recognized that transparency is a key feature of accountability, 

even when there is a need to safeguard certain sensitive information to 

protect companies and markets.52 Without greater transparency, the lack 

of a clear understanding of the regulators’ decisions, including the 

reasons for viewing certain companies as less risky and allowing certain 

companies to file reduced plans, may weaken public and market 

confidence in resolution planning and limit the extent to which the 

regulators can be held accountable for their decisions. For example, 

without knowing why the companies qualified for filing a reduced plan, 

they and other Wave 3 companies would not know what steps, if any, 

they could take to decrease their risk profile and qualify for a reducedplan filing in future years. Moreover, Wave 3 filers and the public also 

would not know whether the reduced-plan benefit was provided 

consistently.

Although the Dodd-Frank Act did not specify the frequency with which 

companies had to file their resolution plans, FDIC and the Federal 

Reserve stipulated in the resolution plan rule that companies had to file 

plans approved by their boards on an annual basis. However, the rule 

does not require FDIC and the Federal Reserve to substantively review 

the plans or provide feedback within any set time frame.53 As shown in 

 52Office of Management and Budget Memorandum M10-06 and GAO-10-151.

53The resolution plan rule requires FDIC and the Federal Reserve to review plans within 

60 days to determine whether the plans are informationally incomplete.

Annual Filing Requirement 

Has Created Challenges 

for Regulators and 

Companies
Page 32 GAO-16-341 Resolution Plans

table 4, our analysis of the 2012, 2013, and 2014 resolution plan reviews 

found that the regulators required around 5 to 13 months (or close to 9 

months on average) to review the plans and jointly provide companies 

with written guidance or feedback. The review process can be resourceintensive: As discussed, the review process involves a number of steps—

including vertical and horizontal assessments, internal and interagency 

discussions, drafting of guidance and feedback, and board 

determinations. Unless the regulators extended the plan submission date, 

companies would have about 3 months, on average, to incorporate the 

feedback, obtain their boards of directors’ approval, and file their plans for 

the next year.

Table 4: Months between the Submission Date of Resolution Plans and the Date the 

Companies Receive Feedback, 2012 through 2014

Filers

2012

Approximate 

number of months

2013

Approximate 

number of months

2014

Approximate 

number of months

Wave 1 filers 9.5 months 10 months N/Ab

Wave 2 foreign 

filers

Foreign filers

U.S. filer

N/Aa 9.5 months 9 months and 6 

monthsc

5 months

Wave 3 filers N/Aa 7.5 months 7 months

Nonbank filers N/Aa N/Aa 13 months 

Source: GAO analysis of Federal Deposit Insurance Corporation and Federal Reserve documentation and press releases. l 

GAO-16-341

a

The resolution plan filing requirement had not yet taken effect for these filers.

b

The regulators did not provide the filers with any written feedback because about a month after the 

2014 plans were filed, the regulators provided company-specific and industry-wide guidance—based 

on their review of the 2013 plans—to inform companies’ 2015 plans.

c

The regulators provided feedback to the three Wave 2 foreign filers on their 2014 plans in March 

2015. However, two of the companies received an extension and were allowed to submit their plans 

by October 1, 2014, instead of by July 1, 2014. Thus, one company received feedback on its plan 

approximately 9 months after filing its 2014 plan, and two companies received feedback on their 

plans approximately 6 months after filing their 2014 plans.

Because of the amount of time required to review the Wave 1 filers’ initial, 

or 2012, plans, FDIC and the Federal Reserve jointly extended the filers’

2013 resolution plan filing date from July 1, 2013, to October 1, 2013.54

 54Additionally, the agencies granted two Wave 2 companies’ requests for an extension for 

filing their 2014 plans, from July 1 to October 1. 
Page 33 GAO-16-341 Resolution Plans

However, the Wave 1 filers submitted their 2014 plans before the 

regulators could provide them with feedback on their 2013 plans. As a 

result, the regulators instructed the Wave 1 filers to incorporate the 

feedback in their 2015 plans and conducted an abbreviated review of the 

Wave 1 filers’ 2014 plans.

FDIC and the Federal Reserve generally prepared project plans or similar 

documents for each review of a wave of resolution plan submissions that 

included target dates for completing key tasks. However, in reviewing the 

regulators’ project plans, we found that the plans did not always include a 

date for providing joint feedback, and for those project plans that did, 

target dates were missed. For example, although FDIC and the Federal 

Reserve set dates for completing specific phases of their plan reviews, 

the regulators did not set a date for providing joint feedback to the Wave 

1 filers’ 2013 plans. The Federal Reserve planned to provide Wave 2 

filers with feedback on their 2013 plans by the end of 2013 but did not 

provide them with feedback until mid-April 2014. Similarly, the Federal 

Reserve set target dates for providing Wave 3 filers with feedback on 

their 2013 plans but required more time.

FDIC and Federal Reserve officials told us that the 2013 plans were 

complex and had multiple shortcomings that caused delays in providing 

feedback. According to Federal Reserve officials, the teams generally 

completed their review of the plans and prepared necessary internal work 

products in about 4 months, in accordance with the proposed deadlines. 

Moreover, FDIC officials said that regulators generally agreed with each 

other about the facts and findings. Officials from both regulators said their 

main challenge was sorting through the various fundamental issues that 

appeared across the filers’ plans, developing agency plans to address 

those issues, and crafting language to include in feedback. The officials 

told us that the regulators wanted to make sure they provided the 

appropriate response and chose the best approaches to address the 

issues. Federal Reserve officials also said that reaching joint agreement 

on issues and feedback added some time.

FDIC and Federal Reserve officials told us that they recognize the 

constraints the companies have experienced because of the timing of the 

regulators’ feedback. FDIC officials said that they expected the content 

and timing of feedback to be more specific to each company’s plan in the 

future, which could affect the timing of the feedback. Although Section 

165(d) of the Dodd-Frank Act directed the Federal Reserve to require 

companies to file their resolution plans periodically, FDIC and the Federal 

Reserve required companies to annually file resolution plans approved by 
Page 34 GAO-16-341 Resolution Plans

their board of directors in the resolution plan rule. However, the resolution 

plan rule’s annual filing cycle may not be feasible. We found that the 

regulators took 9 months, on average, to review plans and provide 

companies with joint feedback. At the same time, FDIC officials said that 

companies need up to 3 months to obtain internal approval of their plans, 

and FDIC staff keep that in mind when requesting turnaround times from 

companies. Federal Reserve officials attributed their long review time, in 

part, to the plans’ complexity and said that companies ideally should have 

6 months to incorporate regulatory feedback.55 However, Federal 

Reserve officials said that it currently is not realistic to expect the 

regulators to review plans in 6 months or the companies to address the 

feedback fully in their allotted remaining time. Federal internal control 

standards state that agencies should externally communicate the 

necessary quality information to achieve their objectives and that 

information should be readily available to recipients when needed.56 With 

regard to resolution plans, the agencies must be able to provide not only 

quality information—such as guidance or feedback—to companies but 

also sufficient time for the companies to incorporate the information in 

their plans. Absent a longer filing cycle, the rule may not effectively allow 

for the achievement of its intent.

Companies faced challenges because of the lack of timely guidance or 

feedback from the regulators. More than half of the 25 companies we 

interviewed, including companies from each wave, identified concerns 

about the timing of the regulators’ feedback. Two companies told us they 

received feedback late in their planning process, making it difficult or 

impossible for them to incorporate the feedback into their next plans. 

Similarly, another company told us that it was expensive to revise its plan 

when feedback was provided in the late stage of the planning process. 

Furthermore, eight of the Wave 1 and 2 and nonbank filers told us that 

the amount of time it took them to prepare their resolution plans ranged 

from 6 months to a year. Finally, four other companies told us that the 

timeliness of the feedback needed to be improved, with one suggesting 

that the regulators issue feedback at the beginning of the planning year.

 55Consistent with that view, the resolution plan rule states that if the regulators change a 

filing date, they must give companies at least 180 days—or approximately 6 months—

notice before the new filing date. 76 Fed. Reg. 67323, 67335 (Nov. 1, 2011) (codified at 

12 C.F.R. §§ 381.3(a)(4) and 243.3(a)(4)). 

56GAO, Standards for Internal Control in the Federal Government, GAO-14-704G 

(Washington, D.C.: September 2014). 
Page 35 GAO-16-341 Resolution Plans

According to companies and stakeholders that we interviewed, resolution 

planning has improved the resolvability of SIFIs under the Code. The 

larger filers we interviewed generally said that resolution planning had led 

to some operational improvements, while the smaller filers we interviewed 

generally said that they had reaped few benefits from resolution planning. 

Additionally, regulators are using plans to enhance their supervision of 

large financial companies. However, uncertainty exists about the plans’

ability to provide for a rapid and orderly resolution of the largest SIFIs, in 

part because none has used its plan to go through bankruptcy. At the 

same time, the regulators told us that they were incurring considerable 

costs to review the plans, and companies said that complying with the 

rule also had raised their costs.

In concept, resolution plans are expected to make the U.S. financial 

system safer and help end “too big to fail” by enabling SIFIs to be 

resolved in an orderly manner that does not have adverse effects on U.S. 

financial stability or require taxpayer funds. Because of the size, 

complexity, or interconnectedness of the Wave 1 companies, the failure 

of one of them poses the threat of disrupting U.S. financial stability. Under 

the rule, companies must prepare strategies and financial projections in 

their resolution plans using assumptions about funding, liquidity, and 

market conditions under baseline, adverse, and severely adverse 

economic conditions. In response to the resolution plan rule, the Wave 1 

filers have prepared resolution plans and made structural and other 

changes to become more resolvable.

Most of the 10 Wave 1, Wave 2, and nonbank filers and 20 stakeholders 

whom we interviewed told us that going through the planning process 

better positioned companies for an orderly resolution or had the potential 

to reduce systemic risk. For example, a bankruptcy attorney told us that 

resolution planning had benefited companies by forcing them to engage 

in comprehensive thinking for the first time about how to undergo a 

resolution. Additionally, a consultant said that the value of resolution 

planning lay in the development of the companies’ underlying operational 

and business capabilities to undergo a resolution process. Officials from a 

Wave 1 filer also told us that through resolution planning, the company 

had identified and mitigated obstacles to its resolution, better positioning it 

to be resolved under the Code.

At the same time, around half of these filers and other stakeholders told 

us that they did not expect companies to be able to use their plans as a 

playbook in the event of failure. For example, one bankruptcy attorney 

Stakeholders’ Views 

on the Usefulness of 

Resolution Plans Vary

Companies and 

Stakeholders Generally 

View Resolution Planning 

as Improving Resolvability
Page 36 GAO-16-341 Resolution Plans

said that the written plan itself was less beneficial than the planning 

process because the actual cause of bankruptcy could differ from the 

hypothetical scenario in the plan. Another bankruptcy attorney told us that 

it was important for companies to think through how they might react 

under various circumstances, but a resolution plan was just a strategy 

and did not reflect exactly what a company would do if it failed. A 

consultant said that the resolution plans themselves were not a source of 

value, because the likelihood that a company’s resolution plan would 

match the actual conditions or events under which the company 

undergoes a resolution process was low. Additionally, officials of a Wave 

1 filer explained that they distinguished between planning and writing the 

plan and noted that while the planning process had been beneficial, the 

resolution plan itself likely would not be useable in the event of failure.

In their 2015 public plan disclosures, the Wave 1 filers generally stated or 

indicated that they believed that their resolution plans would effectively 

resolve them within a reasonable time frame, without systemic disruption, 

and without taxpayer assistance. In addition, these companies identified 

in their public plans an array of actions they had taken or were in the 

process of undertaking to enable them to be resolved in an orderly 

manner under the Code. For example, actions taken by Wave 1 filers in 

response to the August 2014 feedback letters include the following.

Establish a rational and less complex legal structure that would 

take into account the best alignment of legal entities and 

business lines. To achieve this objective, at least 9 of the 11 filers 

stated in their public plans that they have taken one or more of the 

following actions: (1) reduced assets, businesses, and legal entities; 

(2) grouped legal entities with common features into separate 

ownership chains under common holding companies to simplify the 

spin-off of businesses in a resolution scenario; (3) exited certain lines 

of businesses or services; or (4) created separate retail and 

institutional broker-dealers. Through these changes, a company can 

improve its resolvability by reducing the effect of one subsidiary’s 

failure on an affiliate and improving the ability to separate and transfer 

specific businesses within the company.

Develop a holding company structure that supports resolvability.

To achieve this objective, at least six of the filers’ top-tier holding 

companies do not issue new debt with an original maturity of less than

1 year, limit their derivatives transactions with third parties, or do not 

permit subsidiaries to guarantee the debt of the parent. Such actions 
Page 37 GAO-16-341 Resolution Plans

enhance the ability of a top-tier holding company to execute a singlepoint-of-entry strategy—that is, a strategy that allows the holding 

company to enter bankruptcy while its operating subsidiaries remain 

solvent.57 These actions also enhance resolvability for other resolution 

strategies. By not issuing short-term debt, a company reduces the risk 

and effects of a potential run by its creditors in times of stress.58

According to Federal Reserve officials, limiting a holding company’s 

derivatives transactions reduces the probable effects on financial 

stability caused by third-party counterparties liquidating their collateral 

and seeking replacement trades with other counterparties. Not 

permitting subsidiaries to guarantee the parent company’s debt 

eliminates the potential that subsidiaries will suffer significant losses 

or fail as a result of their obligation to perform on the guarantees. In 

 57Under the single-point-of-entry strategy, the parent holding company would fail. Its 

assets, any short-term liabilities, and any secured obligations would then be transferred to 

a new bridge institution while its stock and long-term unsecured debt would be left behind 

in the old institution. This approach allows the subsidiaries carrying out critical services to 

remain open and operating and is similar to the approach that FDIC has developed for 

resolving companies under the Title II orderly liquidation authority.

58On November 30, 2015, the Federal Reserve proposed a rule that would require the 

eight domestic Wave 1 filers and designated nonbanks to have a minimum amount of 

loss-absorbing instruments outstanding, including unsecured long-term debt and 

additional loss-absorbing capacity. According to the Federal Reserve, requiring these 

companies to hold sufficient amounts of long-term debt, which can be converted to equity 

during resolution, would provide a source of private capital to support the companies’

critical operations during resolution, reducing the systemic impact of failure. For the 

proposed rule, see 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; Regulatory Capital Deduction for Investments in Certain Unsecured Debt 

of Systemically Important U.S. Bank Holding Companies, 80 Fed. Reg. 74926 (proposed 

Nov. 30, 2015).
Page 38 GAO-16-341 Resolution Plans

addition, in accordance with a Federal Reserve rule, the four foreign 

Wave 1 companies are establishing intermediate holding companies 

in the United States to, among other things, support resolvability.59

Amend qualified financial contracts to address the risk of 

counterparty actions. To achieve this objective, at least eight of the 

Wave 1 filers have adhered to the International Swaps and 

Derivatives Association (ISDA) Stay Protocol. The ISDA Stay Protocol 

overrides a broad range of default rights, including termination of 

transactions, which are triggered by the parent or other affiliate 

entering resolution. The protocol serves to provide time to facilitate an 

orderly resolution of a company by imposing a stay on derivatives 

contracts and other qualified financial contracts, following the 

company’s bankruptcy.

Demonstrate that shared services, supporting critical operations 

and core business lines—such as information technology 

services—would continue throughout the resolution process. To 

achieve this objective, at least 10 of the filers have taken one or more 

of the following actions: (1) developed employee retention plans to 

support critical operations and core business lines from stress to 

resolution; (2) placed critical shared services staff and assets in 

service subsidiaries that operate as stand-alone entities or 

subsidiaries of the company’s bank; or (3) enhanced legal 

agreements between material entities to enable continued access to 

intellectual property and information technology in a resolution 

scenario. Through such structural, contractual, and other changes, a 

company can help ensure that it has continued access to critical 

shared services, information, and employees needed to execute its 

resolution strategy in an orderly and timely manner.

 59The Federal Reserve finalized a rule to require larger foreign banking organizations 

based overseas and having material U.S. operations to establish a U.S. intermediate 

holding company for consolidated supervision of their U.S. subsidiaries. A U.S. 

intermediate holding company is a top tier U.S. holding company that must be created by 

July 1, 2016, by a foreign banking organization with $50 billion or more in U.S. nonbranch 

assets on July 1, 2015. By July 1, 2016, the U.S. intermediate holding company must hold 

the foreign banking organization’s ownership interests in any U.S. bank holding company 

subsidiary, any depository institution subsidiary, and in U.S. subsidiaries representing 90 

percent of the foreign banking organization’s assets not held by the bank holding company 

or depository institution. But the foreign banking organization has until July 1, 2017, to 

transfer its ownership interests in any residual U.S. subsidiaries to the U.S. intermediate 

holding company. Enhanced Prudential Standards for Bank Holding Companies and 

Foreign Banking Organizations, 79 Fed. Reg. 17240 (Mar. 27, 2014).

Challenges in the Lehman Brothers 

Bankruptcy

On September 15, 2008, Lehman Brothers 

Holding, Inc. filed for bankruptcy in the largest 

bankruptcy proceeding ever filed, which 

triggered an intensification of the financial 

crisis. The company’s resolution faced many 

problems, which Wave 1 filers’ plans are 

intended to mitigate or eliminate. According to 

our review of the examiner’s report and other 

literature, Lehman Brothers’ challenges during 

bankruptcy included the following:

• The company consisted of thousands of 

entities that were organized by product 

line, not legal entity, so that fixed assets 

were intermingled.

• Lines of business were fragmented across 

numerous subsidiaries on three different 

continents.

• The filing created an “event of default” for 

its derivatives, resulting in the termination 

of more than 900,000 contracts.

• The lack of access to computer systems 

and personnel made it difficult to manage 

the wind down of the company after the 

broker-dealer had been sold.

• Intercompany financial information was 

shut down when a subsidiary entered 

insolvency, enormously affecting the 

company’s ability to generate information, 

efficiently liquidate assets, and realize 

maximum value.

• Information was spread across 2,700 

software applications across the globe 

and had to be retrieved from among 

thousands of accounts and crossreferenced for accuracy.

Source: GAO analysis of Lehman Brothers examiner’s report 

and academic literature. | GAO-16-341
Page 39 GAO-16-341 Resolution Plans

Demonstrate that operational capabilities—such as providing 

information on a timely basis—that are necessary for resolution 

are in place. To address this objective, at least 10 of the filers have 

taken steps to enhance their operational capabilities, such as by 

enhancing their (1) collateral management reporting to provide an 

enterprise-wide view of collateral holdings in each jurisdiction, by legal 

entity, and by line of business; or (2) management information system 

capabilities to produce, for example, information for each material 

legal entity. Access to timely information is important in helping to 

facilitate the resolution of large, complex companies with extensive, 

global operations. For example, these reporting capabilities would 

help the company to access critical information, such as the location 

of collateral or the identity of key employees or counterparties, and 

avoid disruptive aspects during resolution.

According to nearly all 10 of the Wave 1, Wave 2, and nonbank filers we

interviewed, some of the steps they have taken to improve their 

resolvability also have improved aspects of their business operations. For 

example, one filer said that examining contracts to avoid internal 

contagion—the possibility that problems in one legal entity could spill over 

to other legal entities—had benefited the company’s risk management. 

Another filer told us that the company had a better understanding of its 

subsidiaries, which is useful in running the company, because of the 

changes it had made to its management information systems in response 

to resolution planning. In its public plan, one company said that it had 

incorporated resolution planning into its business processes when 

considering whether it should engage in acquisitions or new products. 

Some companies also said that the resolution plan requirement had 

accelerated or expanded projects that already were underway to improve 

business operations. Other ancillary benefits cited by the filers include 

helping educate employees about the company and bringing more 

transparency to settlement risk and intraday liquidity.60

In contrast to the larger filers, most of the 15 Wave 3 filers we interviewed 

told us that they had reaped few to no benefits from resolution planning, 

although several Wave 3 companies noted that the process had given 

them a better understanding of the company. Several of these companies 

 60Intraday liquidity refers to funds that can be accessed during the business day, usually 

to make payments in real time.

Companies’ Views on 

Usefulness of Resolution 

Planning Varied by Wave
Page 40 GAO-16-341 Resolution Plans

said that because of their simple organizational structure, they did not 

make any material changes or improvements in response to resolution 

planning and therefore did not achieve many, if any, benefits. For 

example, one reduced-plan filer said that the resolution plan was simply 

another report that the company was required to file. In contrast, four 

Wave 3 companies we interviewed told us their companies had benefited 

from resolution planning. For example, one of these filers said that the 

company’s new focus on legal entities helped it realize more operating 

efficiencies.

FDIC and the Federal Reserve also expect to use resolution plans to 

enhance their supervision of large financial companies. In addition to 

helping ensure that such companies can be resolved in a rapid and 

orderly manner, the regulators detailed in the final rule’s preamble three 

ways in which they planned to use the resolution plans:

• to support FDIC’s planning for the exercise of its resolution authority 

pursuant to the resolution authority granted in Title II of the DoddFrank Act and the Federal Deposit Insurance Act,

• to assist the Federal Reserve in its supervisory efforts to ensure these 

companies operate in a safe and sound manner that does not pose 

risks to U.S. financial stability, and

• to enhance their understanding of the U.S. operations of foreign 

banks and improve efforts to develop a comprehensive and 

coordinated resolution strategy for a cross-border company.

Established in 2010, FDIC’s Office of Complex Financial Institutions is 

responsible for, among other things, reviewing 165(d) resolution plans 

and preparing and implementing resolution plans to be used under 

FDIC’s Title II authority. The office has been developing Title II resolution 

plans for the largest financial companies covered by Title II to ensure that 

FDIC is prepared to serve as receiver if any of these companies fail. 

Importantly, such plans may draw on the strategy and information 

elements in a company’s 165(d) plans. According to FDIC officials, the 

regulator has tools that the companies do not have under the Code, such 

as access to temporary liquidity, but the 165(d) resolution plans have 

been helpful in planning for their resolution authority under Title II. The 

officials said that FDIC would need to address many of the same 

obstacles to rapid and orderly resolution that the companies are 

confronting in their plans. These obstacles include reducing the 

interconnectedness of material entities and improving the timely access to 

information necessary to resolution.

Regulators Expect to Use 

Plans to Enhance Their 

Supervision or Related 

Activities
Page 41 GAO-16-341 Resolution Plans

According to Federal Reserve officials, they are actively working to 

integrate resolution preparedness into their permanent supervisory work. 

For example, the regulator’s Large Institution Supervision Coordinating 

Committee recently implemented the Supervisory Assessment of 

Recovery and Resolution Preparedness, a horizontal exercise that 

evaluates certain large companies’ options to support recovery and 

progress in removing impediments to orderly resolution.61 As detailed in 

the August 2014 feedback letters, the actions the regulators expected the 

Wave 1 filers to take to improve their resolvability formed the basis for the 

horizontal exercise, according to Federal Reserve officials. They plan to 

undertake the exercise annually. Moreover, the officials said that the 

Supervisory Assessment of Recovery and Resolution Preparedness was 

the first step in incorporating resolution planning into their overall 

supervisory framework, and the Federal Reserve plans to continue to 

build on this effort.

As part of the regulators’ enhanced understanding of foreign banks 

through resolution planning, FDIC and the Federal Reserve have 

undertaken efforts to promote cross-border coordination and cooperation 

on the resolution of global, systemically important banks. For example, 

FDIC and the Bank of England, in conjunction with prudential regulators 

in their respective jurisdictions, developed contingency plans for the 

failure of one of these companies with U.S. and United Kingdom 

operations. Similarly, FDIC and the European Commission have 

established a joint working group to focus on resolution and deposit 

insurance issues, and FDIC also has collaborated with regulators in 

Switzerland, Germany, and Japan to discuss cross-border issues and 

impediments affecting the resolution of these companies. As part of a 

mandate, the Federal Reserve established company-specific crisis 

management groups for each of the globally systemically important banks 

headquartered in the United States, which are co-hosted with the FDIC 

and comprised primarily of each company’s prudential supervisors and 

resolution authorities in the United States and key foreign jurisdictions. 

According to a Federal Reserve official, these groups are working to 

mitigate potential cross-border obstacles to an orderly resolution of these 

 61The Federal Reserve created the Large Institution Supervision Coordinating Committee 

to fulfill its mandate under the Dodd-Frank Act for the supervision of SIFIs and to reorient 

its supervisory program in response to the supervisory lessons learned from the 2008 

financial crisis. The committee is tasked with overseeing the supervision of the Wave 1 

filers, designated nonbank filers, and one Wave 2 filer.
Page 42 GAO-16-341 Resolution Plans

companies.62 Federal Reserve officials told us their participation in these 

discussions has been beneficial to help clarify confusion among foreign 

authorities about the difference between Title I and Title II resolution 

under the Dodd-Frank Act.

Although companies have made progress developing resolution plans to 

improve their resolvability under the Code, stakeholders and others have 

identified several factors that create uncertainty about the plans’ ability to 

provide for a rapid and orderly resolution of the largest SIFIs. First, all but 

two of the domestic Wave 1 and Wave 2 companies use a single-point-ofentry strategy in their 2015 resolution plans, but this is a legally novel 

strategy. The foreign Wave 1 companies use a combination of closing 

and selling businesses in their plans, but prefer a single-point-of-entry 

strategy for their global resolution plans. According to their public plans, 

these companies generally intend to revisit this strategy for their U.S. 

resolution plans after establishing their intermediate holding companies. 

As of March 2016 and since the resolution plan rule was finalized, none of 

the plan filers has gone through bankruptcy and legally tested the singlepoint-of-entry strategy. Some companies and experts that we interviewed 

view single-point-of-entry as a promising strategy but acknowledge that 

its ability to facilitate a rapid and orderly resolution of a large SIFI is still 

uncertain. Some academics have noted that the strategy may work if the 

failure is limited to the U.S. holding company but may not work if a foreign 

subsidiary of the U.S. holding company is the source of the failure.

 62Michael S. Gibson, Director, Division of Banking Supervision and Regulation, Board of 

Governors of the Federal Reserve System, statement before the Senate Subcommittee on 

National Security and International Trade and Senate Finance Committee on Banking, 

Housing, and Urban Affairs, 113th Cong., 1st sess., May 15, 2013.

Whether the Plans Provide 

for a Rapid and Orderly 

Resolution Is Uncertain, 

and Plans for Wave 3 

Companies May Not Be as 

Critical for Systemic Risk 

Reduction

Ability of Plans to Provide for 

an Orderly Resolution Is 

Uncertain
Page 43 GAO-16-341 Resolution Plans

Second, most of the 20 stakeholders we interviewed maintain that the 

Code may not be adequately designed to resolve large SIFIs. In prior 

reports, we have detailed a number of challenges the Code presents in 

relation to the resolution of these companies.63

• Financial regulators that may be aware of potential systemic 

consequences, do not have standing to be heard before the court as a 

party of interest or the ability to file an involuntary bankruptcy petition 

against a financial company, including in response to balance-sheet 

insolvency.64

• The Code does not provide for guaranteed funding for failing 

companies. Experts generally considered funding mechanisms 

essential for the orderly resolution of large financial companies. Title II 

provides FDIC with access to an emergency liquidity fund, but there is 

nothing comparable under the Code.

• Qualified financial contracts, such as derivatives and repurchase 

agreements, receive safe-harbor treatment under the Code. These 

contracts are not subject to the Code’s automatic stay and can be 

liquidated, terminated, or accelerated in the event of insolvency. The 

ISDA Stay Protocol, as mentioned above, begins to address this issue 

and overrides a broad range of default rights through contractual 

changes. However, the ISDA Stay Protocol covers only companies 

that voluntarily agree to the protocol. In November 2014, 18 major 

global banks signed the protocol.65

• The Code generally covers only the U.S. operations of companies and 

has limited provisions for cross-border cooperation between the 

bankruptcy courts and other jurisdictions.66

 63GAO, Bankruptcy: Complex Financial Institutions and International Coordination Pose 

Challenges, GAO-11-707 (Washington D.C.: July 19, 2011); GAO-12-735; and 

GAO-13-622.

64As previously mentioned, the Commodity Futures Trading Commission and SEC are the 

only two financial regulators that have the express right to be heard and raise any issues 

in a case under Chapter 7 or Chapter 11, respectively.

65In November 2015, ISDA announced a new version of the protocol called the ISDA 2015 

Universal Resolution Stay Protocol that expanded the universe of financial contracts 

covered under the protocol to include securities financing transactions. At its launch, 21 

financial groups had signed the new protocol.

66As discussed above, the Financial Stability Board has proposed actions to address 

cross-border resolution issues, but reported in November 2015 that substantial work 

remains to make member jurisdictions’ cross-border arrangements fully operational.
Page 44 GAO-16-341 Resolution Plans

Congress has considered revising the Code, especially in reference to 

addressing the treatment of qualified financial contracts.67 The Hoover 

Institution resolution project group has also proposed a new chapter—

Chapter 14—of the Code to address issues related to bankruptcies of 

large financial companies.68

Finally, a resolution plan is not legally binding, including on a bankruptcy 

court or other resolution authority. According to a House of 

Representatives report, large financial companies are not required to file 

for bankruptcy and could have an incentive to wait to file to force FDIC to 

resolve the company under Title II.69 Resolution planning also involves a 

broad array of assumptions about how other stakeholders will behave, 

including creditors and other counterparties who must accept the 

reorganization plan and judges who confirm the final plan. These 

assumptions introduce uncertainty, both for the companies in developing 

their plans and the regulators in determining whether they are not 

credible.

According to nearly all 15 of the Wave 3 companies and most of the 20 

stakeholders we interviewed, resolution plans for most of the Wave 3 

filers may not reduce systemic risk. Most stakeholders told us that the 

 67Legislation filed in the 114th Congress treat the qualified financial contracts (QFC) in a 

few different manners. For example, in the Financial Institutions Bankruptcy Act of 2015 

(H.R. 2947 in the House) and the Taxpayer Protection and Responsible Resolution Act (S. 

1840 and S. 1841 in the Senate), which are generally specifically applicable to financial 

institutions, the rights to terminate, offset, or net QFCs would be stayed for up to 48 hours 

after bankruptcy filing. Additionally, the 21st Century Glass-Steagall Act of 2015 (S. 1709 

in the Senate and H.R. 3054 in the House) contains a provision that would repeal all safeharbor provisions for QFCs. None of these examples have been passed by both houses of 

Congress or signed into law as of March 2016. 

68The Hoover Institution resolution project group was established in 2009 under the 

auspices of the Working Group on Economic Policy at the Hoover Institution at Stanford 

University. The group revised its proposals in 2014. For its proposals, see Kenneth E. 

Scott and Thomas Jackson, eds., Bankruptcy Not Bailout: A Special Chapter 14 (Stanford, 

Calif.: Hoover Institution Press, 2012) and Tom Jackson, Building on Bankruptcy: A 

Revised Chapter 14 Proposal for the Recapitalization, Reorganization, or Liquidation of 

Large Financial Institutions, draft report, the Resolution Project, Hoover Institution, 

Stanford University (Stanford, Calif.: July 9, 2014). Accessed on April 13, 2015, 

http://www.hoover.org/research-teams/economic-policy-working-group/resolution-project.

69Republican Staff, Committee on Financial Services, Subcommittee on Oversight and 

Investigations, Failing to End “Too Big to Fail”: An Assessment of the Dodd-Frank Act 

Four Years Later (July 2014).

Individual Wave 3 Companies 

May Not Pose Systemic Risk
Page 45 GAO-16-341 Resolution Plans

failure of most Wave 3 companies would not threaten U.S. financial 

stability generally because of their limited size and complexity. As noted 

earlier, the regulators have exempted 90 Wave 3 filers from most plan 

information requirements, recognizing the limited benefit of requiring 

these companies to file a full resolution plan. At the same time, FDIC 

officials said that it was important for the regulators to continue to monitor 

these companies because of their potential to change in size or 

complexity that could pose systemic risk. Additionally, FDIC officials said 

that because the Wave 3 companies had a sizable collective presence 

and were interconnected with other companies in the U.S. financial 

system, their resolution plans could provide valuable information in 

understanding company operations and resolution strategies on an 

industry-wide basis. They explained they might explore other areas of 

potential risk related to these companies. Federal Reserve officials also 

noted that while most Wave 3 filers did not pose a systemic risk, there 

could be a situation in which they did—for instance, if all companies in a 

region experienced financial stress at the same time.

A Federal Reserve Governor and some members of Congress have 

questioned the $50 billion threshold for the resolution planning 

requirement and other enhanced prudential standards under the DoddFrank Act. In a 2014 speech, a Federal Reserve Governor said that he 

favored increasing the asset threshold for companies that fall under the 

resolution plan requirement, because the failure of most of these 

companies would not produce considerable negative effects on the 

financial system.70 In addition, Congress is considering raising the 

automatic SIFI threshold from $50 billion or more in total assets to $500 

billion or more in total assets.71 For bank holding companies with $50 

billion to $500 billion, the bill would create a multistep process to 

determine if a bank holding company should be designated as 

systemically important and required to abide by the additional rules to 

which those bank holding companies are subject, such as the resolution 

plans. The systemically important determination is based on a 

foundational determination that material financial distress of that entity 

 70Daniel K. Tarullo, Member, Board of Governors of the Federal Reserve System, 

Rethinking the Aims of Prudential Regulations, remarks at the Federal Reserve Bank of 

Chicago Bank Structure Conference, Chicago, May 8, 2014.

71For example, Financial Regulatory Improvement Act of 2015, S.1484, 114th Cong. § 

201, 202 (2015). The monetary amounts would be adjusted annually, based on inflation.
Page 46 GAO-16-341 Resolution Plans

could pose a threat to U.S. financial stability. This change could eliminate 

the resolution plan requirement for some Wave 3 companies, but the 

extent to which this could happen cannot be determined because the 

designation process involves regulatory and FSOC discretion.

We found that U.S. bank holding companies that are Wave 3 filers were 

typically smaller, less interconnected, and less complex than those that 

are Wave 1 and 2 filers.72 To assess the extent to which filers in different 

waves have the potential to adversely affect the financial system or the 

broader economy if they become distressed, we constructed indicators of 

filers’ size, interconnectedness, and complexity as of the second quarter 

of 2015.73 Our indicator of size is a filer’s total assets. Our indicators of 

interconnectedness are the gross notional amounts of credit default 

swaps outstanding for which a filer is the reference entity and a filer’s total 

debt outstanding, excluding deposits. Our indicators of complexity are the 

number of a filer’s legal entities, the number of a filer’s foreign legal 

entities, and the number of foreign countries in which a filer’s foreign legal 

entities are located. We then compared the median values of the 

indicators for domestic Wave 1 and 2 filers to the median values for 

domestic Wave 3 filers (see table 5). These indicators suggest that 

domestic Wave 3 companies have less potential to adversely affect the 

financial system or broader economy if they become distressed.

 72Our analysis excludes Wave 1, 2, and 3 filers that are (1) branches and agencies of 

foreign banks; and (2) U.S. companies but are not bank holding companies, such as 

institutions whose material financial distress or activities the Financial Stability Oversight 

Council determines could pose a threat to U.S. financial stability and therefore should be 

subject to Federal Reserve supervision and enhanced prudential standards.

73These indicators are the same as the indicators we constructed to assess the potential 

for U.S. bank holding companies with assets of $50 billion or more to adversely affect the 

financial system or the broader economy if they become distressed. See GAO, DoddFrank Regulations: Impacts on Community Banks, Credit Unions and Systemically 

Important Institutions, GAO-16-169 (Washington D.C.: Dec. 30, 2015).
Page 47 GAO-16-341 Resolution Plans

Table 5: Indicators of Size, Interconnectedness, and Complexity for U.S. Bank Systemically Important Financial Institutions as 

of 2nd Quarter of 2015 (Total Assets, Credit Default Swap Gross Notional Amounts Outstanding, and Total Debt Outstanding 

in Billions of Dollars)

Domestic Wave 1 

and 2 Domestic Wave 3

Size Median assetsa $1,290.27 $131.81

Interconnectednessb Median gross notional amounts of credit default swaps 

outstanding for which the company is the reference 

entityc

$31.36 $10.15

Median total debt outstanding (excluding deposits) $645.46 $21.80

Complexity Median numbers of legal entities 1,496 82

Median numbers of foreign legal entities 577 12

Median numbers of countries in which foreign legal 

entities are located

50 6

Source: GAO analysis of data from Bloomberg and the Board of Governors of the Federal Reserve System. | GAO-16-341

Notes: Our analysis excludes Wave 1, 2, and 3 filers that are (1) branches and agencies of foreign 

banks; and (2) U.S. companies but are not bank holding companies, such as institutions whose 

material financial distress or activities the Financial Stability Oversight Council determines could pose 

a threat to U.S. financial stability and therefore should be subject to Federal Reserve supervision and 

enhanced prudential standards. To calculate the median measures, we calculated the relevant 

indicator measure for each bank holding company, and then reported the median for domestic Wave 

1 and 2 companies or the median for domestic Wave 3 companies.

a

Total assets includes both domestic and foreign assets.

b

The gross notional amounts of credit default swaps outstanding for which the company is the 

reference entity and total debt outstanding are both indicators of interconnectedness, but they are not 

the only possible indicators of interconnectedness.

c

Only companies that are single-name reference entities for credit default swap contracts are included 

in the data for this row. Seven domestic Wave 1 and 2 companies are included, and three domestic 

Wave 3 companies are included.

While our approach allows us to compare indicators of size, 

interconnectedness, and complexity for domestic Wave 1 and 2 filers to 

those for domestic Wave 3 filers, our indicators have limitations and 

should be interpreted with caution. For example, our indicator of size 

does not include off-balance-sheet activities and thus may understate the 

amount of financial services or intermediation a filer provides. In addition, 

our indicators of interconnectedness may not reflect all of the channels 

through which a filer could affect other parts of the financial system. 

Similarly, our indicators of complexity may not capture all relevant types 

of complexity. Nevertheless, differences in our indicators provide 

important context regarding the relative potential for filers in different 

waves to adversely affect the financial system or the broader economy if 

they become distressed.
Page 48 GAO-16-341 Resolution Plans

As previously mentioned, the resolution plans include a public and private 

section, and the public sections generally have been of limited use to 

stakeholders, but FDIC and the Federal Reserve have taken action to 

improve their usefulness. Under the final rule, a company’s resolution 

plan must have a public section that includes a high-level description of 

the resolution strategy, information on material entities and core business 

lines, and information helpful in understanding how the resolution plan 

would be executed. According to FDIC officials, market participants 

should be able to understand the progress, or lack of progress, 

companies are making towards resolution from the public plans.

However, stakeholders generally did not find the initial public sections to 

be useful. For example, nearly all nine of the academics and credit rating 

agencies that we interviewed told us that the 2012 through 2014 public 

sections were not informative—noting that the information was limited or 

already publicly available in other sources. Similarly, a 2013 study 

analyzing the 2012 public sections of the 11 Wave 1 filers found that the 

public disclosures did not facilitate market discipline and, in some cases, 

did not increase public understanding of the financial institution or its 

business.74 In addition, most of the companies we interviewed had 

received few or no comments from shareholders or creditors on their 

resolution plan. In our review of transcripts from investor conferences 

held by five of the Wave 1 and 2 filers between August 2014 and June 

2015, we found that the companies generally did not discuss resolution 

plans in their presentations, and three securities analysts raised 

questions about the implementation status of resolution plans, indicating 

that investors generally did not use the public sections of resolution plans 

in their evaluations of these companies.

In a February 2015 written communication to the Wave 1 companies and 

the Wave 2 company that filed in July 2015, the regulators jointly provided 

new guidance that directed the companies to provide more detailed 

information in their 2015 public plan sections. These areas included more 

detail on each material entity, the strategy for resolving each material 

entity in a manner that mitigates systemic risk, a high-level description of 

what the company would look like following resolution, and the steps 

taken to improve resolvability under the Code. After the release of the 

 74Jacopo Carmassi and Richard John Herring, “Living Wills and Cross-border Resolution 

of Systemically Important Banks,” Journal of Financial Economic Policy, vol. 5, no. 4, 

(2013): 361 – 387.

Stakeholders Believe the 

Public Plans Are of Limited 

Use and Raised Concerns 

about the Lack of 

Transparency from the 

Regulators
Page 49 GAO-16-341 Resolution Plans

2015 public plans, we followed up with stakeholders who had commented 

on the previous public plans to obtain their views on the 2015 public 

plans. Most of these stakeholders told us that the 2015 public plans were 

an improvement over previous years’ plans but that additional information 

would be helpful. For example, improvements included additional 

information on a company’s organizational structure and intergroup 

funding. Suggestions for improvement included adding a consolidated 

balance sheet and having consistent components to facilitate analysis 

across multiple companies. One Wave 1 company said that because the 

2015 public portion of the plan contained more detailed information than 

previous years, it was prepared for more questions from shareholders but 

did not experience any increase in inquiries or comments about the plan.

FDIC performed a horizontal review of the July 2015 public plans to see 

that they met the new requirements in the February 2015 joint 

communication, according to FDIC officials. FDIC officials said that some 

companies did a good job of showing items visually and that they planned 

to capture best practices and give additional feedback for the next filing. 

The officials told us that the regulators also directed the three foreign 

Wave 2 companies and nonbank filers to disclose additional information 

in the public sections of their December 2015 plans. However, they did 

not give such instructions to Wave 3 companies.

In addition to their concerns about the public plan sections, several of the 

20 stakeholders we interviewed raised concerns about the regulators’

lack of transparency about their review processes. As previously 

discussed, the regulators have developed and revised their approaches 

for analyzing and assessing the plans but have publicly disclosed limited 

information about their reviews. Two academics whom we interviewed 

told us that after the failure of financial regulators during the 2008 

financial crisis, the public was being asked to put too much trust in the 

regulators without any transparency. A bankruptcy attorney provided 

another perspective on transparency and said that everyone would 

benefit if the regulators were more transparent about their standards and 

allowed the companies to talk among themselves to solve impediments to 

resolution that were common to multiple companies.

FDIC and the Federal Reserve are considering publicly providing more 

information about their resolution plan reviews. Federal Reserve officials 

told us that while they were continuously evaluating the release of more 

plan information into the public domain, they did not have a time frame for 

reaching a decision on this issue. FDIC officials also told us that the 

regulator was considering disclosing more information about its review 
Page 50 GAO-16-341 Resolution Plans

process but had not yet reached the point of sharing such information 

with the public.

FDIC and the Federal Reserve have incurred costs in their annual review 

of each company’s resolution plan but differ in the extent to which they 

have tracked these costs. Staff resources are one of the most significant 

costs. According to FDIC data, the regulator spent around $3.2 million, 

$3.3 million, and $4.2 million on staff payroll related to resolution planning 

in calendar years 2012, 2013, and 2014, respectively.75 As shown in 

figure 5, FDIC incurred the highest average payroll cost per company in 

2012 for activities related to Wave 1 filers, which generally are the largest 

or most complex companies. Figure 5 also shows that FDIC’s average 

payroll cost related to Wave 1 and 2 filers declined in the subsequent 

year. However, as discussed above, FDIC (like the Federal Reserve) did 

an abbreviated review of the Wave 1 filers’ 2014 plans, resulting in a 

much lower average cost in 2014. FDIC officials told us that they 

expected the resources required to review the resolution plans for Wave 1 

companies to increase in 2015, because the plans contain more detailed 

information to be reviewed, such as project plans. FDIC officials also told 

us that the regulator assigned regional and division staff on a short-term 

basis to review plans submitted by Wave 3 filers to reduce costs by 

avoiding hiring additional staff.

 75We excluded expenses for companies that did not file a 165(d) resolution plan. 

Additionally, FDIC’s payroll cost data included only 108 of the 116 Wave 3 banks that filed 

a resolution plan in December 2013. According to FDIC officials, the absence of the 

remainder of the Wave 3 filers indicates that not all activities had been properly coded. 

Despite FDIC’s acknowledgment of some minor coding errors, we believe our use of the 

data provides a reasonably accurate estimate to illustrate the trends in FDIC’s spending 

on resolution plans.

Resolution Plan Rule 

Imposes Costs on the 

Regulators and 

Companies

Regulator Costs
Page 51 GAO-16-341 Resolution Plans

Figure 5: Federal Deposit Insurance Corporation (FDIC) Payroll Costs Related to 

Resolution Planning per Company by Wave 1, 2, 3, and Designated Nonbank Filers, 

Calendar Years 2012 through 2014

Note: The cost data also include some costs related to FDIC’s review of insured depository institution 

plans of banks that also file a 165(d) resolution plan. The figure only includes payroll costs for years 

in which FDIC was reviewing plans filed by the companies in that wave. FDIC incurred additional 

payroll costs of about $3,000 for 1 Wave 2 company in 2012, about $57,000 for 14 Wave 3 

companies in 2013, and about $3,000 for 4 nonbank filers in 2013.

a

Wave 1 filers include 11 companies that filed their first plans in July 2012.

b

Wave 2 filers include 4 companies that filed their first plans in July 2013.

c

Wave 3 filers include 116 companies that filed their first plans in December 2013, but FDIC did not 

provide data for all of them. Our statistics capture the data for 108 companies. The average is 

calculated using the total number of companies included in the data (108) not the total number of 

Wave 3 filers (116).
Page 52 GAO-16-341 Resolution Plans

d

Nonbank filers include 3 companies that filed their first plans in July 2014. A fourth nonbank financial 

company became subject to the resolution plan requirement in December 2014, but is not included in 

the figure because it did not file a resolution plan in 2014. A court order on March 30, 2016 rescinded 

the fourth nonbank financial company’s designation by the Financial Stability Oversight Council 

(FSOC) and therefore, the requirement to file a resolution plan. However, as of April 4, 2016, the 

court’s decision is open for appeal by FSOC.

In contrast, the Federal Reserve tracks the number of staff assigned to 

review resolution plans but does not track staffing costs specific to 

resolution plan review. According to Federal Reserve officials, instead of 

having a dedicated staff working on resolution plan review, the regulator 

enlists existing staff from various parts of the Federal Reserve System to 

provide appropriate expertise. For its review of the 2015 plans submitted 

by the 11 Wave 1 filers, the Federal Reserve assigned 144 staff. Of these 

staff, 95 of them (66 percent) were from the Federal Reserve banks: 67 

staff were from the Federal Reserve Bank of New York, and 28 staff were 

from the Federal Reserve Banks of Boston, Chicago, Richmond, and San 

Francisco. The remaining 49 staff were from the Federal Reserve Board. 

Federal Reserve officials told us that staffing costs have been consistent 

each year, but work hours have decreased as staff have become more 

efficient at reviewing plans.

In addition to payroll costs, FDIC has incurred other costs related to 

resolution planning. For example, in 2012 FDIC paid a consulting 

company about $278,000, which FDIC officials said provided them with 

insights on the obstacles and challenges that Lehman Brothers faced 

during its bankruptcy. FDIC also incurred approximately $827,000, 

$326,000, and $10,000 in travel costs in calendar year 2012, 2013, and 

2014, respectively.76 FDIC incurred the majority of these travel costs in 

connection to plans submitted by Wave 1 filers. The Federal Reserve did 

not track travel costs specific to resolution plan review, but Federal 

Reserve officials told us that travel costs had increased slightly because 

they increased the number of meetings with Wave 1 companies in New 

York City prior to the July 2015 filings.

All of the 25 companies we interviewed said that they had incurred 

compliance and other costs to prepare their resolution plans, but they did 

not measure costs the same way. Of the nine Wave 1, Wave 2, and 

 76According to FDIC officials, most of the early travel costs were a result of using 

temporary staff from other FDIC regions after enactment of the statute and creation of the 

Office of Complex Financial Institutions.

Company Costs
Page 53 GAO-16-341 Resolution Plans

nonbank filers that provided us with estimates, the cost of preparing 

resolution plans from 2012 through 2015 ranged from about $500,000 to 

about $105 million per plan. However, these estimates varied significantly 

because the companies used different approaches to estimate costs and 

did not always include the same cost components in their estimates. 

Officials from the Wave 1, Wave 2, and nonbank filers we interviewed 

largely separated their resolution plan costs into two categories: (1) 

internal staff and (2) external consultants and attorneys, with some filers 

also including the costs of projects to enhance their resolution 

capabilities. For the low-end cost estimate, the company provided us only 

with data on the fees it paid to external consultants and attorneys. The 

high-end estimate included the cost of internal staff, external consultants 

and attorneys, and capabilities projects.

According to the Wave 1, Wave 2, and nonbank filers we interviewed, 

preparation of the resolution plans requires considerable internal staff 

resources. Most of these companies have created a team of full-time 

employees dedicated to resolution planning—ranging from 3 

professionals to 30 professionals. At the same time, many other staff from 

across the company, such as business line managers and support 

managers from legal, treasury, and technology departments and senior 

management and board members, are involved in the preparation or 

review of the plan. Several companies estimated that hundreds of 

employees worked at least part-time on their resolution plan. The number 

of work hours spent annually on resolution planning varied among the 

companies providing an estimate—ranging from 55,000 work hours to 

about 1 million work hours. The work hours varied, in part because like 

the cost estimates, companies used different methods to estimate work 

hours. For example, one company also included work hours for its 

recovery and resolution plans in other countries in its estimate.

Nearly all of the Wave 1, Wave 2, and nonbank filers we interviewed had

hired outside consultants or attorneys to help them prepare their 

resolution plans, but such costs varied across and within companies. 

Several officials told us that they relied heavily on outside experts for their 

initial plans, because they were unsure of how to comply with the rule or 

did not have the in-house expertise. The amount of consulting or attorney 

fees paid by the companies in a given year ranged from around $500,000 

to $25 million. Two companies’ officials told us that their use of external 

experts had decreased as their companies built up their in-house 

expertise, but officials of another company told us that their company 

spent more on external consultants for its 2015 plan because it was 

undertaking major infrastructure initiatives.
Page 54 GAO-16-341 Resolution Plans

According to most of the Wave 1, Wave 2, and nonbank filers we 

interviewed, their resolution planning costs are increasing, in part 

because of the projects they are undertaking to enhance their capabilities 

to execute the resolution plan. As discussed, such projects include 

enhancing collateral management reporting and management information 

systems. For example, one company estimated that it spent about $50 

million on capability enhancements and expected these costs to triple in 

the next 2 to 3 years. Officials from two other companies also told us they 

expected their internal staff or external costs to increase dramatically as 

they implemented capability-enhancement projects.

According to officials from FDIC and the Federal Reserve, the regulators 

have not considered actions to reduce the compliance costs for these 

filers because companies make their own decisions on how to comply 

with the resolution plan rule based on their structure. FDIC officials said 

that the regulator was not requiring companies to choose a specific model 

for responding to the rule. Federal Reserve officials said that resolution 

planning was a substantial undertaking for many of these companies 

because they had not considered resolvability before and did not have a 

system in place to gather the relevant information. FDIC officials said 

companies should have had some of these systems in place before the 

2008 financial crisis, but the crisis revealed that they often did not.

According to most of the Wave 1, Wave 2, and nonbank filers we 

interviewed, the resources devoted to resolution planning have had an 

opportunity cost but have not yet had a clearly measurable effect on their 

business or competitiveness. Half of these companies said that while it 

was too soon to know whether the resolution plan requirement would 

have any negative effects on their competitiveness, they were concerned 

about that potential impact. In contrast, two other companies said that 

compliance did not put them at a disadvantage, with one explaining that 

its competitors had the same requirements. Additionally, most of these 

companies said that they had not had to make many, if any, cost 

adjustments in other areas due to resolution planning. For example, one 

Wave 1 filer stated that resolution plan costs are not a large percentage 

expense for the company overall, representing approximately 2 percent of 

its initiative budget. Nearly all said that complying with the resolution plan 

rule was on par with or less costly than other prudential regulations, such 
Page 55 GAO-16-341 Resolution Plans

as the Comprehensive Capital Analysis and Review (stress testing), 

Basel III capital requirements, and Volcker rule.77

Of the 13 Wave 3 filers that provided us with cost estimates, the cost of 

preparing their initial resolution plan varied widely. Four companies 

estimated that they spent less than $400,000 to prepare their initial 

tailored plans, with two estimating their costs to be $35,000 and $15,000. 

For the other companies that provided estimates, their costs ranged from 

about $1 million to about $6 million, with no consistent difference between 

companies filing a full or tailored plan. Like the larger filers, nearly all of 

these Wave 3 filers hired external consultants or attorneys to help them 

prepare their initial plans, with total fees ranging from $15,000 to $3.5 

million. But nearly all told us that they reduced their use of external 

experts for their subsequent plans and that the cost of preparing their 

subsequent plans declined. Additionally, the number of internal work 

hours associated with resolution planning varied considerably among the 

Wave 3 companies. Of the companies that provided estimates, two 

estimated over 10,000 work hours, three estimated 1,000 to 6,000 work 

hours, and four estimated less than 1,000 work hours to complete the 

resolution plan. Cost estimates varied, in part because companies used 

different approaches to measure costs.

Similar to the larger companies, several of the Wave 3 filers we 

interviewed said that the time and resources dedicated to resolution 

planning represent an opportunity cost. Without the resolution plan 

requirement, the companies could expend these resources and staff time 

 77The Federal Reserve conducts an annual Comprehensive Capital Analysis and Review 

(stress testing) to assess whether bank holding companies with more than $50 billion in 

total consolidated assets have sufficient capital to continue operations throughout times of 

economic and financial stress and that they have robust, forward-looking capital planning 

processes that account for their unique risks. The Basel III framework is a comprehensive 

set of reforms to strengthen global capital and liquidity standards. In 2013, the U.S. federal 

banking regulators adopted regulations to implement many aspects of the Basel III capital 

framework that apply to banks, savings associations, and top-tier U.S. bank and savings 

and loan holding companies (with certain exceptions). Finally, the final rule implementing 

Section 619 of the Dodd-Frank Act, commonly known as the Volcker rule, was adopted by 

the Federal Reserve, FDIC, the Office of the Comptroller of the Currency, and the 

Securities and Exchange Commission on December 10, 2013. The Volcker final rule 

prohibits insured depository institutions and companies affiliated with insured depository 

institutions, from engaging in short-term proprietary trading of certain securities, 

derivatives, commodity futures, and options on those instruments for their own accounts. It 

also imposes limits on banking entities’ investments in hedge funds or private equity 

funds, subject to certain exceptions.
Page 56 GAO-16-341 Resolution Plans

on revenue-generating activities, according to the companies. However, 

most of these companies said that resolution planning had not had a 

measurable effect on their business or competitiveness, and several said 

that they generally had not made cost adjustments in other areas due to 

resolution planning. In comparison to other regulations, several of the 

Wave 3 companies said that complying with the resolution plan rule was 

on par with or less costly than the Comprehensive Capital Analysis and 

Review (stress testing), Basel III capital requirements, and the Volcker 

rule.

According to Federal Reserve officials, the regulators helped to reduce 

the burden on these companies by giving some the option of filing tailored 

plans and exempting others from most of the informational requirements. 

As previously mentioned, the regulators have exempted 90 Wave 3 filers 

from most plan information requirements. However, FDIC officials said 

that this exemption was related more closely to the companies’ lower 

levels of complexity and effect on U.S. financial stability than it was to 

reducing the companies’ costs. The regulators are considering ways to 

reduce compliance costs for these filers while still obtaining the necessary 

information, according to officials from both FDIC and the Federal 

Reserve.

FDIC and the Federal Reserve have made progress implementing the 

Dodd-Frank Act’s framework for resolution planning for large financial 

institutions. For the smaller financial companies, the regulators have 

taken steps to reduce the burden of planning under the resolution plan 

rule, including by significantly reducing the plan informational 

requirements for the majority of such filers. However, weaknesses remain 

in the following areas:

• Disclosure and transparency. The regulators have not disclosed 

their assessment frameworks and criteria for confidentiality reasons, 

which limits the potential for companies to better achieve the DoddFrank Act’s objective. For example, a better understanding of the 

regulators’ assessment frameworks could give the larger companies a 

more complete understanding of the key factors that can lead to plan 

deficiencies. Likewise, disclosure of the regulators’ criteria could help 

motivate smaller companies to reduce their systemic risk and 

understand how they might qualify to file reduced plans. Greater 

disclosure and transparency also could enhance the accountability of 

the regulators’ decisions by, among other things, better informing the 

public on how the regulators are assessing resolution plans and 

Conclusions
Page 57 GAO-16-341 Resolution Plans

reducing plan requirements for smaller companies, thereby bolstering 

public and market confidence.

• Timeliness of guidance and feedback. FDIC and the Federal 

Reserve have taken about 9 months on average to review resolution 

plans and jointly provide companies with guidance or feedback. 

Because the resolution plan rule requires companies to file plans 

annually, some companies may not have sufficient time to fully 

incorporate such guidance or feedback into their subsequent plans 

and obtain their board of directors’ approval of the plans by the 

submission deadline. For example, some companies completed and 

submitted their 2014 plans before receiving the regulators’ feedback 

on their previous year’s plans, resulting in a less effective and efficient 

use of time and resources for both the companies and the regulators.

We are making the following three recommendations:

To enhance disclosure and strengthen transparency and accountability, 

FDIC and the Federal Reserve should take the following actions:

• Publicly disclose information about their respective frameworks for 

assessing and recommending to their boards whether a plan is not 

credible or would not facilitate an orderly resolution under the Code. 

For example, the regulators could disclose aspects of their 

assessment frameworks as a supplement to their initial guidance 

publicly issued in April 2013.

• Publicly disclose aspects of their criteria used to decide which Wave 3 

companies are allowed to file a reduced plan.

In addition, to strengthen the efficiency and effectiveness of resolution 

planning, FDIC and the Federal Reserve should revise the resolution plan 

rule’s annual filing requirement to provide sufficient time not only for the 

regulators to complete their plan reviews and provide feedback but also 

for companies to address and incorporate regulators’ feedback in 

subsequent plan filings. For example, the regulators could extend the 

annual filing cycle to every 2 years or provide companies at least 6 

months from the date of feedback or guidance to file another plan.

We provided a draft of this report to FDIC and the Federal Reserve for 

review and comment. In their joint written comments (reproduced in 

appendix II), the regulators concurred with our findings and 

recommendations regarding transparency and timeliness. They stated 

that they are committed to enhancing public disclosure around resolution 

Recommendations for 

Executive Action

Agency Comments
Page 58 GAO-16-341 Resolution Plans

planning and plan to make public the information needed to understand 

their frameworks. They also stated that they intend to work to find the 

most appropriate way to ensure that sufficient time is provided for the 

regulators to complete their reviews and for plan filers to incorporate the 

regulators’ feedback in their subsequent plan filings. FDIC and the 

Federal Reserve also provided technical comments on the draft report, 

which we incorporated as appropriate.

We are sending copies of this report to the House Committee on 

Financial Services, FDIC, and the Federal Reserve. In addition, the report 

is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix III.

Sincerely yours,

Lawrance L. Evans, Jr.

Director, Financial Markets and

 Community Investment
Appendix I: Objectives, Scope, and 

Methodology

Page 59 GAO-16-341 Resolution Plans

Our objectives were to examine (1) the processes used by the Federal 

Deposit Insurance Corporation (FDIC) and Board of Governors of the 

Federal Reserve System (Federal Reserve) (jointly, the regulators) to 

review resolution plans; (2) the extent to which the regulators have 

determined whether resolution plans are not credible or would not 

facilitate an orderly resolution under the Bankruptcy Code; and (3) 

stakeholder views on the usefulness of the resolution plans to companies 

and other stakeholders.

To examine the process used by the regulators to review resolution plans 

and the extent to which the regulators have determined whether 

resolution plans are not credible or would not facilitate an orderly 

resolution under the Code, we reviewed Section 165(d) of the DoddFrank Wall Street Reform and Consumer Protection Act, the final 

resolution plan rule, and FDIC’s and the Federal Reserve’s policies and 

procedures. We analyzed the regulators’ internal guidance, training 

documents, and workpapers related to plan reviews conducted for plan 

years 2012 through 2014, guidance and feedback provided to the 

companies, and FDIC’s and the Federal Reserve’s Board meeting 

minutes where credibility determinations were discussed.

To examine what is known about the usefulness of the resolution plans to 

companies and other stakeholders, we selected a sample of 25 

companies that filed a resolution plan in 2014 and interviewed them to 

obtain their views on the benefits, costs, and challenges associated with 

the plans. We selected 10 of these companies from the 18 Wave 1, Wave 

2, and designated nonbank filers, and 15 from the 120 Wave 3 filers. We 

grouped the Wave 1, Wave 2, and designated nonbank filers together 

because they generally represent the largest filers and FDIC and the 

Federal Reserve generally use the same processes for reviewing these 

companies’ plans. From this group, we systematically selected and 

attempted to contact 10 filers. We were able to conduct interviews with 9 

of these companies, and we supplemented the sample with 1 additional 

filer that had been interviewed prior to the sample selection. For the Wave 

3 filers, FDIC provided us with a breakdown of the companies by the type 

of plan they were allowed to file in 2014: (1) 30 companies that filed a full 

resolution plan, (2) 30 companies that were approved to file a tailored 

plan, and (3) 60 companies that were approved to file a reduced plan. 

Within these categories, we randomly selected 4 full plan filers, 3 tailored 

plan filers, and 3 reduced plan filers. In two cases, officials from the 

sampled company declined to participate, so we randomly selected a 

substitute from the same plan type category. We also supplemented the 

sample of Wave 3 filers with 1 full plan filer and 3 tailored plan filers that 

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 60 GAO-16-341 Resolution Plans

had been interviewed prior to the sample selection and 1 full plan filer that 

requested to be included for a total sample of 15 Wave 3 filers. The 

information collected from this sample of companies cannot be 

generalized to the larger population of all companies that are required to 

file a resolution plan. These interviews were also used in our analysis for 

the second objective.

In addition, we judgmentally selected a sample of 20 stakeholders that we 

interviewed to obtain their views on the usefulness of the resolution plans. 

We selected stakeholders who (1) had subject matter expertise, such as 

academics and industry groups; (2) had experience advising companies 

on their resolution plans, such as bankruptcy attorneys and consultants; 

or (3) used the plans in their work, such as credit ratings agencies, 

investors, and creditors. To characterize companies’ and stakeholders’

views throughout the report, we consistently defined modifiers (e.g. 

“nearly all”) to quantify each group of interviewees’ views as follows: “all”

represents 100 percent of the group, “nearly all” represents 80 percent to 

99 percent of the group, “most” represents 60 percent to 79 percent of the 

group, “several” represents 40 percent to 59 percent of the group, and 

“some” represents 20 percent to 39 percent of the group. While the 

percentage of the group of interviews remains consistent, the number of 

interviews each modifier represents differs based on the number of 

interviews in that grouping: 10 Wave 1, Wave 2, and designated nonbank 

filers; 15 Wave 3 filers; and 20 stakeholders. Table 6 provides the number 

of interviews in each modifier for each group of interviews.

Table 6: Definition of Modifiers by Interview Grouping

Number of interviews

Modifier

Percent of 

interviews

Wave 1, Wave 2, 

and designated 

nonbank filers Wave 3 filers Stakeholders

All 100% 10 15 20

Nearly all 80-99% 8-9 12-14 16-19

Most 60-79% 6-7 9-11 12-15

Several 40-59% 4-5 6-8 8-11

Some 20-39% 2-3 3-5 4-7

Source: GAO. l GAO-16-341

Furthermore, we met with officials from the Securities and Exchange 

Commission, the Securities Investor Protection Corporation, the National 

Association of Insurance Commissioners, and two state insurance 

departments about their involvement with resolution plan reviews. We 
Appendix I: Objectives, Scope, and 

Methodology

Page 61 GAO-16-341 Resolution Plans

also analyzed the 2015 public plans of all Wave 1 filers and 1 Wave 2 filer 

and the 2014 public plans of all Wave 3 filers and 2 designated nonbank 

filers, and reviewed government, academic, and other studies on 

resolution plans’ implementation and usefulness.1

For our discussion of the extent to which filers have the potential to 

adversely affect the financial system or the broader economy if they 

become distressed, we used data from Bloomberg and the Federal 

Reserve as of the second quarter of 2015 to construct indicators of filers’

size, interconnectedness, and complexity. Our indicator of size is a filer’s 

total assets. Our indicators of interconnectedness are the gross notional 

amounts of credit default swaps outstanding for which a filer is the 

reference entity and a filer’s total debt outstanding, excluding deposits. 

Our indicators of complexity are the number of a filer’s legal entities, the 

number of a filer’s foreign legal entities, and the number of foreign 

countries in which a filer’s foreign legal entities are located. We then 

compared the median values of the indicators for domestic Wave 1 and 2 

filers to the median values for domestic Wave 3 filers. We assessed the 

reliability of the data from Bloomberg for the purpose of constructing our 

indicators of size and interconnectedness by reviewing relevant 

documentation and by electronically testing the data for outliers, missing 

values, and obvious errors, and we found them to be sufficiently reliable 

for this purpose. We assessed the reliability of data from the Federal 

Reserve for the purpose of constructing our indicators of complexity by 

corresponding with Federal Reserve officials, and we found them to be 

sufficiently reliable for this purpose.

For our analysis of FDIC’s payroll expense data, we connected the 

companies for which FDIC reported resolution planning-related expenses 

with the parent companies that are required to file resolution plans under 

Section 165(d) of the Dodd-Frank Act. We then sorted the parent 

companies by filing wave to identify the average, minimum, and maximum 

payroll costs that FDIC staff incurred for each filing wave by calendar year 

(2012 through 2014). FDIC’s data included 11 Wave 1 filers that filed their 

first plans in July 2012, 4 Wave 2 filers that filed their first plans in July 

2013, 108 Wave 3 filers that filed their first plans in December 2013, and 

3 nonbank filers that filed their first plans in July 2014. According to FDIC 

 1

At the time of our review, the 2014 public plans of Wave 3 and designated nonbank filers 

were the most recent available plans. These companies—as well as three of the four 

Wave 2 companies—filed their 2015 plans on December 31, 2015.
Appendix I: Objectives, Scope, and 

Methodology

Page 62 GAO-16-341 Resolution Plans

officials, the absence of the remaining 8 of 116 Wave 3 filers from 

December 2013 indicates that not all activities had been properly coded. 

We excluded expenses for companies that did not file a 165(d) resolution 

plan. Despite FDIC’s acknowledgment of some minor coding errors, we 

believe our use of the data provides a reasonably accurate estimate to 

illustrate the trends in the regulator’s spending on resolution plans.

In addition, we met with officials from the offices of the FDIC and Federal 

Reserve that are responsible for reviewing resolution plans, including 

FDIC’s Office of Complex Financial Institutions and Division of Risk 

Management Supervision, the Federal Reserve’s Division of Banking 

Supervision and Regulation, and the Federal Reserve Bank of New York. 

We discussed their policies and procedures related to plan reviews as 

well as their views on plans’ usefulness.

We conducted this performance audit from November 2014 to April 2016 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from the Federal 

Deposit Insurance Corporation and the Board 

of Governors of the Federal Reserve System

Page 63 GAO-16-341 Resolution Plans

Appendix II: Comments from the Federal 

Deposit Insurance Corporation and the 

Board of Governors of the Federal Reserve 

System
Appendix II: Comments from the Federal 

Deposit Insurance Corporation and the Board 

of Governors of the Federal Reserve System

Page 64 GAO-16-341 Resolution Plans
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 65 GAO-16-341 Resolution Plans

Lawrance L. Evans, Jr., (202) 512-8678, evansl@gao.gov

In addition to the contact named above, Richard Tsuhara (Assistant 

Director), Lisa Reynolds (Analyst-in-Charge), Nancy Barry, Katherine 

Carter, Emily Chalmers, William Chatlos, Risto Laboski, Courtney 

LaFountain, Kun-Fang Lee, Jessica Sandler, and Jena Sinkfield made 

significant contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(100042)
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