G-SIB Resolution Under Title II

Staff Presentation of the FDIC and CFTC

Market Risk Advisory Committee

June 27, 2016

1 
The views expressed during this presentation are 

solely those of the presenters. The information 

contained herein does not reflect, and cannot be 

relied upon as evidence of, any agency or 

departmental position. 

2
Title II Process under Dodd-Frank Act

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•

•

•

•

Dodd-Frank Title II provides for an alternative to bankruptcy 

of Systemically Important Financial Institutions – an Orderly 

Liquidation Authority – when failure in bankruptcy would 

have serious adverse effects on financial stability in the U.S.

Title II gives FDIC many of the same powers over Systemically 

Important Financial Institutions that it has long exercised in 

managing failed bank receiverships

The Fed and FDIC (and/or SEC, FIO) are responsible for making 

joint recommendation to the Secretary of the Treasury

Secretary of the Treasury makes determination in consultation 

with the President

Financial company offered a judicial hearing, to be held within 

24 hours, only after which FDIC can be appointed as receiver

3 
Three Keys Process

4 

Yes

Key turners 

are:

UST, FRB, 

and SEC, in 

consultation 

with FDIC

Key turners 

are:

UST, FRB, 

and FIO, in 

consultation 

with FDIC

Key turners 

are:

UST, FRB, 

and FDIC

Is the CFC 

or largest

US sub a 

Broker or 

Dealer 

(BD)? 

Is the CFC 

or largest

US sub an 

Insurance 

Company? 

2/3 

Board of 

FRB

2/3 

Board 

of FDIC

2/3 

Board of 

FRB

2/3 

Board of 

FRB

2/3 

Commissioners 

of SEC

Affirmative 

approval 

of Director 

of FIO

Sec of 

Treasury in 

consultation 

w/President 

makes 

determination 

under section 

203(b)

Proceed

and

and

and

No

No

In consultation 

with FDIC

In consultation 

with FDIC

Stop

Start

Yes

Yes

No

Key turners vote on their respective 

recommendation under section 203(a)(2).
Title II Receivership

• Powers are similar to the Federal Deposit 

Insurance Act

– Succeeds to all rights, titles, powers, and privileges of the 

covered financial company

– May organize a bridge financial company

– May transfer or dispose of assets without obtaining consents

– May determine claims against the failed financial company

– May transfer QFCs to a newly-formed bridge financial company 

to prevent the QFCs from being terminated or netted-out

– 90-day stay against termination of contracts (shorter for QFCs)

5
Special Accountability for Company 

Management

• All directors and managers responsible for the 

failed condition of G-SIB must be removed

• Compensation for prior 2 years can be recouped 

from “substantially responsible” senior executives 

and directors

• Claims for wages by senior executives and 

directors subordinated

6
The Orderly Liquidation Fund

• Access to the Orderly Liquidation Fund (OLF) if 

private-sector liquidity is unavailable

• The FDIC must submit an orderly liquidation plan 

and a mandatory repayment plan, which must be 

approved by the Secretary

• The FDIC may issue obligations to the Secretary 

as a means of funding (no more than 10% of total 

assets for up to 30 days; 90% once fair valuation 

of assets available for repayment is completed)

• Industry assessments as backstop if needed to 

ensure the OLF is fully repaid

7
International Engagement

• The FDIC engages with key domestic and 

foreign counterparts to identify issues and 

address obstacles to the successful execution 

of cross-border G-SIB resolution

– Bilateral Outreach 

– Multilateral Outreach

– Institution Specific Engagement

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Bilateral Engagement with Key Foreign 

Authorities

• Ongoing dialogue

• Information sharing agreements

• Tabletop exercises with key foreign authorities 

to develop a better understanding of:

– Respective authorities

– Concerns and issues

– How we would coordinate and communicate

9
Multilateral Outreach

• The FDIC’s engagement includes work under the 

auspices of international member organizations 

such as the Financial Stability Board (FSB) and the 

Basel Committee on Banking Supervision 

– The Resolution Steering Group (ResG)

– Cross-Border Crisis Management Groups for Banks 

– The Cross-Border Crisis Management Group for 

Insurers 

– The Cross-Border Crisis Management Group for FMI

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Institution Specific Engagement

• Crisis Management Groups

– Home-Host Coordination

– Resolution Planning

– Resolvability Analysis

– Engagement with Institutions

• Firm-specific information sharing

– Cooperation Agreements

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