FDIC relaxes certain large bank resolution plan requirements
FDIC Revamps Large Bank Resolution Planning Approach
The Federal Deposit Insurance Corporation (FDIC) has announced significant changes to its approach to resolution planning for large banks, aiming to streamline the regulatory process and improve efficiency.
These changes, unveiled by Acting FDIC Chair Travis Hill at an American Bankers Association summit in Washington, D.C., focus on easing burdensome requirements for some large institutions and exempting certain ones from parts of the resolution plan rule.
One of the key updates involves the FDIC's revised definition of "key personnel." Now, this term includes those with significant roles for the FDIC's resolution of the bank, but not those who can be easily replaced. The FDIC also aims to deemphasize and broaden the 'strategy' discussion, focusing instead on supplying the FDIC with the information it needs for swift marketing and temporary operation of failed banks.
The main goal for large banks, according to Hill, should be maximizing the likelihood of the optimal resolution option, which is generally a weekend sale. To achieve this, the FDIC has scrapped the requirement for banks to include a hypothetical failure scenario in their resolution plans and waived a requirement of quantitative analysis related to valuation. However, banks must still provide a qualitative description of how they would determine values.
Moreover, the FDIC will no longer require banks to use bridge bank strategies, a move that follows the observation that each failure of a bank after using a bridge bank strategy resulted in deposit runs, which decreased the failed institution's franchise value and increased the cost of failure to the FDIC's Deposit Insurance Fund.
The FDIC has also updated how lenders should classify parts of their business that could be sold in connection with a resolution. Banks are now required to describe one or more potential resolution strategies the FDIC could reasonably execute, rather than a lengthy narrative.
The FDIC's changes aim to focus the resolution planning process on operational information relevant for the FDIC. These updates apply to banks with $50 billion or more in assets, and these banks are given at least 270 days to submit a full resolution plan, or living will. The FDIC may put forth additional updates to the rule as it continues to evaluate other provisions and how they apply to different groups of banks.
In addition to these changes, the FDIC and the Federal Reserve have released public sections of the resolution plans (also known as "living wills") for the largest and most complex domestic and foreign banking organizations, as well as for 12 large insured depository institutions, as of mid-2025. These plans are designed to outline strategies for the orderly resolution of banks under the Federal Deposit Insurance Act or bankruptcy in the event of material financial distress or failure. The transparency of these public sections is intended to foster understanding and preparedness.
These modifications are driven by the need to modernize and improve resilience in the deposit insurance and resolution framework, learning from recent failures and industry input. The FDIC and the banking industry are pursuing recommendations to refine emergency authorities and resolution processes and adjust the deposit insurance framework to better address current risks.
Travis Hill stated that the 2023 bank failures served as a reminder of the costly and damaging nature of bridge bank solutions. These changes reflect a broader ongoing effort to make bank resolution more efficient and less disruptive while maintaining financial stability and protecting the Deposit Insurance Fund.
[1] FDIC, "FDIC and Federal Reserve Publish Public Sections of Resolution Plans for 19 Large Banking Organizations," Press Release, August 5, 2025. [2] FDIC, "FAQs on the 2024 Resolution Planning Rule Updates," FDIC, 2024. [3] FDIC, "Modernizing and Improving Resilience in the Deposit Insurance and Resolution Framework," FDIC, 2024.
The FDIC's recent updates to the resolution planning process for large banks aim to streamline the regulatory process, with a focus on business strategies that could facilitate efficient marketing and temporary operation of failed banks (business, finance). The changes also involve adjusting the classification of parts of a business that could be sold in connection with a resolution, requiring a description of potential resolution strategies that the FDIC could reasonably execute (business, finance).
