NEW YORK--(BUSINESS WIRE)--The Federal Deposit Insurance Corporation (FDIC) board voted on the final rules requiring large US banks to file dissolution plans with regulators, outlining a liquidation strategy in the event of bank failure. Under the rule, banks with more than $50 billion in assets will be required to provide details on the specific measures they would take to execute a rapid and orderly resolution in the event of material financial distress or failure. This requirement, colloquially referred to as a “living will,” was part of the 2010 Dodd-Frank Reform Act.
Mike Seery, Director of Corporate recovery and restructuring at financial advisory firm Kinetic Partners, commented that “the rule’s provisions will likely require banks to explicitly define the priority of their creditors and the financial support due to their subsidiaries and affiliates. Those measures should help to rationalize bank’s capital structures. There was an overriding suspicion in the wake of the financial crisis that senior management at many of these large institutions – Citi, Merrill, AIG to name three – had only a tenuous understanding of what was on their balance sheets. Size and complexity made it difficult to grasp the overall, and interconnected, risks these managers were taking. Living wills should help both management and regulators better assess these risks.”
Mr. Seery added: “Many observers believed that US financial regulatory oversight diminished significantly in the years before the financial crisis, principally through congressional lobbying and a too-trusting belief in free markets. Those critics were right. The key point is that the inequity inherent in ‘too big to fail’, on the one hand, and the potential devastation from the failure of a behemoth bank, on the other, must be addressed. Moral hazard did not cause the US financial crisis, but it clearly played a significant role in it.”
About Kinetic Partners (www.kinetic-partners.com):
Kinetic Partners is a global professional services firm providing regulatory consulting & compliance, corporate recovery & forensic services, remedial, risk consulting & monitoring, tax and audit & assurance services to the asset management, investment banking and broking industries. Launched in 2005, Kinetic Partners has grown rapidly, and has a team of 115 across its five offices in London, Dublin, Cayman, New York and Geneva. Kinetic Partners services over 1,000 clients, and has attained a reputation as the leading provider of professional services in its chosen market sectors.
2011 winner of Hedgeweek's "Best regulatory advisory firm" in the US
2010 winner of Funds Europe's "European advisory firm of the year"
2009 and 2010 winner of HFM Week's "Best regulatory advisory firm" in Europe and US
2008 winner of Fund Domiciles "Best consulting firm" in Ireland and Cayman