FDIC to propose major regional US bank living will reforms

The FDIC will suggest many changes to the "living wills" of smaller U.S. banks.

Martin Gruenberg, the head of the U.S. Federal Deposit Insurance Corporation, said on Monday that a new rule would change how big regional banks make "living wills" if they fail.

U.S. regulators want to make it easier to monitor the banking system, especially after three of the biggest banks in U.S. history went bankrupt in March.

"To that end, the FDIC plans to issue a notice of proposed rulemaking shortly that will be a comprehensive restatement of the rule for notice and comment," Gruenberg said in prepared comments for a speech at the Brookings Institution in Washington.

Late in July, the top three U.S. banking regulators released a joint plan for significant changes to bank capital requirements as part of an international agreement for 2017. The industry has promised to fight against these changes.

Currently, banks have to show officials plans that show how they would close down their businesses if they failed. Gruenberg said on Monday that the idea would make this planning "significantly more effective."

Gruenberg said that the FDIC will ask for plans that give it more choices when it oversees a failed bank's receivership. He also noted that the proposed requirements for a "living will" differ from those for large bank holding companies under the Wall Street Reforms 2010.

Gruenberg said that the proposed rule would force a bank to devise a plan independent of a sale over the weekend.

Gruenberg said that regulators dealing with the failures of Silicon Valley Bank and Signature Bank in March would have benefited from more information on how quickly banks could set up a "data room" for possible buyers and information on continuing operations and internal communications.

Gruenberg said that the plan would also require banks to find parts that could be sold separately. He said this could lower banks' size and "expand the universe of possible acquirers."

He said that the plan would ask banks with more than $50 billion in assets for more details but only for partial resolution plans.

Gruenberg said that at the end of 2022, banks with more than $50 billion in assets made up only 1% of all U.S. banks but held 80% of all uninsured accounts; this made them more likely to be hit by runs.