Overview of Resolution
Under Title II of the
Dodd-Frank Act
APRIL 2024
CONTENTS
CHAIRMAN’S FOREWORD ..............................................................i
ACKNOWLEDGMENTS .................................................................iii
EXECUTIVE SUMMARY ..................................................................1
INTRODUCTION .........................................................................3
1. OBJECTIVES AND TOOLS OF A TITLE II RESOLUTION ...........................5
Challenges of Resolving Large, Complex Financial Companies..............................5
DFA Framework for Orderly Resolution ...................................................5
TITLE I: RESOLUTION PLANNING ........................................................6
TITLE II: ORDERLY LIQUIDATION AUTHORITY ...............................................8
2. RESOLUTION PLANNING AND POLICY DEVELOPMENTS SUPPORTING THE
APPLICATION OF TITLE II ...........................................................9
Strategy for Mitigating Disruption and Contagion: Single Point Of Entry .....................9
Regulations Supporting Orderly Resolution............................................. 11
Resolution Planning and Firm Capabilities ............................................. 12
International Cooperation ............................................................ 14
3. DECIDING WHETHER, WHEN, AND HOW TO USE TITLE II RESOLUTION
AUTHORITY ........................................................................ 17
Contingency Planning ................................................................ 17
Determining the Resolution Regime: Bankruptcy or Title II ............................... 20
Confirming the Resolution Strategy .................................................... 24
4. OPERATIONAL STEPS FOR A U.S. GSIB TITLE II RESOLUTION ............... 27
Launching the Resolution............................................................. 27
STEPPING IN AS RECEIVER ........................................................... 27
FORMING THE BRIDGE FINANCIAL COMPANY ............................................. 27
APPOINTING NEW DIRECTORS AND OFFICERS ........................................... 28
ESTABLISHING BRIDGE OVERSIGHT .................................................... 30
COMMENCING THE CLAIMS PROCESS .................................................. 32
Stabilizing Operations ................................................................ 33
CAPITALIZING THE BRIDGE FINANCIAL COMPANY AND ITS SUBSIDIARIES ...................... 34
FUNDING THE BRIDGE FINANCIAL COMPANY AND ITS SUBSIDIARIES .......................... 34
MAINTAINING OPERATIONAL CONTINUITY .............................................. 36
PUBLIC FACING COMMUNICATIONS .................................................... 37
Exiting from Resolution .............................................................. 38
ORDERLY WIND DOWN AND RESTRUCTURING OF OPERATIONS .............................. 39
TERMINATING THE BRIDGE ........................................................... 39
SETTLING CLAIMS AND TERMINATING THE RECEIVERSHIP .................................. 42
CONCLUSION.......................................................................... 45
GLOSSARY AND ABBREVIATIONS.................................................... 47
FIGURES
F A: L R R F I U S ......
F B: () P R U.S. F B O ....
F C: S P E S.............................................
F D: R D M R C ................
F E: C C C P P .........................
F F: T T K P T II’ O L A..........
F G: DFA T II R ....................................................
F H: R F GSIB U.S. O ..........................
F I: H D GSIB R U T II A M D? ...............
F J: A M C.........................................
F K: B A B G O—E
D R B FDIC B
F C ...........................................................
F L: FDIC U C S T II R .....................
F M: I E T S--C E .................
F N: T D-F A C H .....................................
F O: A T “O H” GSIB F? ..........................
i | Overview of Resolution Under Title II of the Dodd-Frank Act
CHAIRMAN’S FOREWORD
Central to the mission of the FDIC is managing the
failure of banks and financial companies so as to
protect insured depositors, preserve value, promote
financial stability, and prevent taxpayer bailouts—
what we call an orderly resolution. The failure of
three large U.S. regional banks and one foreign
global systemically important banking organization
(GSIB) in the spring of 2023 is a reminder of the
importance of this mission. These events also
oer an opportunity to review how the FDIC would
manage the resolution of a financial company that
might be significantly larger—a GSIB headquartered
in the U.S. with complex global operations.
Since the passage of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (DFA) in 2010,
the FDIC and the Federal Reserve have reviewed
multiple rounds of GSIB resolution plans—so called
living wills—as required by Title I of the DFA. At the same time, the FDIC has been preparing its own
plans for resolving large, complex financial institutions under the Orderly Liquidation Authority of
Title II of the DFA, a back-up option that brings new tools and powers to bear if needed to protect
U.S. financial stability.
The purpose of this paper is to provide stakeholders in a Title II resolution—customers and
counterparties of the institution being resolved, other financial institutions and investors,
domestic and foreign regulatory authorities and policymakers, and the general public—well-
grounded expectations for how the Title II authority would be applied in practice. Although
this paper focuses on the example of a U.S. GSIB resolution, many of the plans and processes
described are relevant to how the FDIC would respond if called upon to be receiver for other
types of systemically important financial companies.
Since the FDIC’s publication of Resolution of Systemically Important Financial Institutions:
The Single Point of Entry (SPOE) Strategy in 2013,
1
substantial progress has been made within the
banking industry and among regulatory authorities to make GSIB resolution actionable in the United
States. The first and second sections of this paper review the authorities and resources available
to the FDIC and a set of reforms that have made U.S. GSIBs significantly more resolvable. The third
and fourth sections provide more detail than we have previously published on the operational
1
Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy, 78 Fed. Reg. 76614,
December 18, 2013.
ii | Overview of Resolution Under Title II of the Dodd-Frank Act
steps for performing a U.S. GSIB resolution under Title II. In particular, the paper explains why
an SPOE strategy is likely to be the most suitable for a Title II resolution of a U.S. GSIB in a wide
array of potential resolution scenarios, and describes the specifics of how it would be deployed.
The ability of the FDIC and other regulatory authorities to manage the orderly resolution of large,
complex financial institutions remains foundational to U.S. financial stability. While recognizing
the progress that has been made toward enabling such a resolution and ending “too big to fail,”
we also recognize that the resolution of a GSIB has not yet been undertaken. When it becomes
necessary to do so, carrying out such a resolution will come with a unique set of challenges and
risks. But an orderly resolution is far preferable to the alternatives, particularly the alternative
of resorting to public support to prop-up a failed institution or to bailing out investors and
creditors. With this paper we are reairming that, should the need arise, the FDIC is prepared
to apply the resolution regime that the FDIC and many other regulatory authorities in the U.S.
and around the world have worked so diligently to develop.
Setting out clear expectations regarding how the FDIC will handle its role in managing failures
of systemically important financial institutions is itself a key component supporting the execution
of an orderly resolution. I hope this paper contributes to public understanding and further
progress in fulfilling our mission to be able to resolve safely even the largest and most complex
financial institutions, and that it serves as an eective guide for stakeholders to turn to in the
event that Title II is used.
MARTIN J. GRUENBERG
Chairman
April 2024
iii | Overview of Resolution Under Title II of the Dodd-Frank Act
ACKNOWLEDGMENTS
Planning for the resolution of a large, complex financial institution involves hundreds of people
at the firm, in various U.S. agencies and foreign authorities, and across the FDIC. Writing down
and explaining our FDIC planning and preparedness for Title II resolution involved a team of
dedicated people who listened and translated the expert knowledge of many into this relatively
concise account.
I wish to thank the team from the Division of Complex Institution Supervision and Resolution who
spearheaded the draing and review of this paper, including Susan Baker, Betsy Falloon, Steve
Grefe, Bill Pelton, Nathan Steinwald, and Ryan Tetrick. Many others also contributed, including
John Conneely, Andrew Felton, Joanne Fungaroli, Mark Haley, David Kiddney, Cassandra
Knighton, Laura Porfiris, and Jenny Traille.
The paper also benefited from review of colleagues across the FDIC, including from the Division
of Resolution and Receiverships (Audra Cast and Pamela Farwig), the Division of Risk Management
Supervision (Robert Connors), the Division of Insurance and Research (Anthony Sinopole), the
Oice of Communications (Carroll Kim, Amy Thompson, and David Barr), the Oice of Legislative
Aairs (Andy Jimenez), and many others. Extensive legal support and review was provided by
Bruce Hickey, Noah Bloomberg, Angus Tarpley, Vickie Olafson, and others. Kathy Zeidler and Alison
Maynard provided editing and graphic design support, respectively.
We are also grateful to our colleagues at other U.S. agencies and foreign authorities who provided
feedback on earlier dras and continue to work constructively with us on these complex matters.
ARTHUR J. MURTON
Deputy to the Chairman for Financial Stability
Director, Division of Complex Institution Supervision and Resolution
INTENTIONALLY LEFT BLANK
1 | Overview of Resolution Under Title II of the Dodd-Frank Act
EXECUTIVE SUMMARY
In 2008 and 2009, the United States was confronted with its most severe financial crisis since the
Great Depression. The financial instability sparked by the failure (or near failure) of several large,
complex, interconnected financial companies highlighted many risks and challenges to orderly
resolution, including the limited set of options U.S. authorities had to respond to failures that
threatened U.S. financial stability.
O T T II R
Addressing these challenges in a way that maintains the stability of the U.S. financial system
and does not rely on taxpayer support has been a goal of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act or DFA) and related reforms. DFA provided new tools
and authorities to make orderly resolution of systemically important financial companies more
feasible. Title I of the DFA requires certain firms to develop resolution plans that demonstrate how
they could be resolved in an orderly way under their ordinary resolution regime, which for
a U.S. GSIB is generally the U.S. Bankruptcy Code. Title II of the DFA created the Orderly
Liquidation Authority (OLA) as a backup resolution regime if needed to mitigate risks to financial
stability by providing for the appointment of the FDIC as receiver of a failed financial company and
for an Orderly Liquidation Fund (OLF) to serve as a temporary backstop source of liquidity.
R P P D S A T II
Since the passage of the DFA, the FDIC, other regulators, and Title I plan filing institutions have
taken steps that facilitate resolution under Title II authority. In 2013, the FDIC developed the
concept of an SPOE resolution strategy. In an SPOE resolution strategy, only the parent holding
company is placed into resolution, with its subsidiaries remaining open and operating while the
group undergoes restructuring. The SPOE strategy aims to limit disruption and mitigate systemic
risk by maintaining the continuity of the failed institution’s critical operations and material
subsidiaries.
The FDIC, Federal Reserve, and other U.S. authorities have also finalized rules to support orderly
resolution of a large, complex financial company. These rules require increased loss absorbing
capacity with a long-term debt requirement for GSIBs and “clean holding companies” to minimize
complications to bailing in parent holding company creditors; they also require that firms take
steps to avoid mass early termination of certain financial contracts while they are transferred
to a new counterparty during resolution.
Meanwhile, the largest U.S. banking groups, particularly the U.S. GSIBs, have enhanced their
resolvability in various ways through the Title I process. Importantly, these firms have streamlined
their organizational and funding structures, identified options for shrinking and divesting
their businesses in resolution to reduce their systemic footprint, and taken steps to provide for
operational continuity in resolution. They have also developed capabilities to better estimate
material subsidiaries’ liquidity and capital needs in resolution and built governance frameworks
with specific triggers to promote timely action when a firm begins to encounter stress.
Finally, considering the extensive cross-border business undertaken by many large, complex,
financial institutions, U.S. and foreign authorities have developed robust mechanisms to promote
2 | Overview of Resolution Under Title II of the Dodd-Frank Act
international cooperation. Key developments include pre-positioning resources to support
recapitalization of material subsidiaries and regularly meeting to discuss firm-specific resolution
plans and test operational preparedness.
D W, W, H U T II R A
The strategic decision-making process for launching a Title II resolution starts with contingency
planning for a financial company in stress. During this period, the FDIC and other authorities
will assess the situation and evaluate whether a Title II resolution is necessary for this particular
financial company and scenario. If deemed appropriate, authorities will follow the interagency
“three keys” process—which requires recommendations from two federal agencies or oices
followed by a determination by the Secretary of the Treasury, in consultation with the President—
to commence a Title II resolution. If the FDIC were appointed receiver of a U.S. GSIB under Title II,
the FDIC expects to use an SPOE strategy.
O S U.S. GSIB T II R
When launching the resolution of a U.S. GSIB using an SPOE strategy, the parent holding company
is placed into receivership, and its subsidiaries, assets, and certain liabilities are transferred
to a Bridge Financial Company. Most liabilities, especially those due to shareholders and
unsecured creditors, would be le behind in the receivership and absorb the costs of the
resolution. As necessary, the FDIC could use the OLF to provide a backstop source of liquidity
for the Bridge Financial Company.
At the time of its appointment, the FDIC would take steps to stabilize the Bridge Financial
Company and its operations by recapitalizing material subsidiaries with the firm’s internal
resources, providing adequate liquidity to the group, replacing the most senior leaders and
retaining key personnel, communicating with stakeholders, and maintaining operational
continuity. In this way, subsidiaries in which the vast majority of activity takes place would
remain open and operating and able to fulfil their obligations to customers, depositors, and
counterparties.
The FDIC will hold accountable management responsible for the failure, allocate losses
to shareholders and creditors, and return assets and viable operations to private sector control
as soon as possible. Specific resolution actions will likely include winding down certain
operations, restructuring or divesting certain businesses, and marketing and selling assets
in an orderly manner.
Upon exit, any entity (or entities) emerging from the Bridge Financial Company would be expected
to be financially and operationally sound, smaller, and more easily resolvable under their ordinary
regimes. The goal is that they will be non-systemic or, at a minimum, significantly less systemic
than the failed GSIB. Consistent with statutory obligations and the Title II creditor hierarchy,
all losses would be borne by the private sector, primarily the GSIB’s former shareholders and
unsecured creditors, and not taxpayers. In addition, the FDIC would oversee the repayment of any
OLF support, the termination of the Bridge Financial Company, the satisfaction of claims, and the
closing of the receivership. From the point of entry into resolution through the distribution
of proceeds to claimants using a securities-for-claims exchange process, the resolution process
would likely take nine months or longer to complete.
3 | Overview of Resolution Under Title II of the Dodd-Frank Act
INTRODUCTION
Congress’s goals with the passage of the Dodd-Frank Act included promoting the financial stability
of the United States by improving accountability and transparency in the financial system, ending
‘‘too big to fail,’’ and protecting the American taxpayer by ending bailouts. Title II of the DFA
provides certain authorities and tools to support the orderly resolution of large, complex financial
companies
2
when their failure and resolution under otherwise applicable law, in most cases the
U.S. Bankruptcy Code, would have serious adverse eects on financial stability in the United
States. In a successful Title II resolution, the failure of a financial institution will be handled
in a way that reduces the impact on U.S. financial system stability while holding accountable the
management responsible for the failure and allocating losses to shareholders and creditors.
The set of institutions to which Title II would be applied is not pre-determined but rather
is a result of an interagency assessment that must be made at the time of a failure, as described
in the DFA. Title II could apply to any financial company (other than an insured depository
institution (IDI)
3
) whose failure and resolution under the otherwise applicable insolvency regime
would have serious adverse eects on financial stability in the United States (see Figure A: Legal
Regimes for Resolving Financial Institutions in the United States). Within that broad universe of
financial companies, the FDIC and other authorities have prioritized work on U.S. GSIBs
4
given
their large size, extensive interconnectedness, significant roles in financial markets and supporting
economic growth, and requirements under DFA for resolution planning. In some cases, large
nonbank financial institutions with complex operations whose failure could pose a risk to U.S.
financial stability might also be relatively likely candidates for a Title II resolution. In contrast, large
regional banking organizations, which have relatively simple organizational structures concentrated
almost entirely in their lead IDI subsidiaries and limited cross-border activity, are generally best
suited for resolution in which the IDI is placed into receivership under the Federal Deposit Insurance
(FDI) Act and the holding company is placed into bankruptcy, as opposed to an SPOE resolution
under Title II.
A resolution of any type involves varying degree of costs and uncertainties, and one goal of an orderly
resolution is to keep such costs contained and uncertainties manageable. A Title II resolution
will involve costs being borne by investors and creditors of the failed institution, and it will likely
coincide with a period of market volatility or uncertainty. However, as laid out in this paper, the
FDIC continues to prepare to carry out a Title II resolution in a way that minimizes disruption
to critical operations needed for the functioning of the financial system and that protects the U.S.
economy. The strategies and tools that the FDIC has developed are designed to be adaptable
to a range of scenarios, so that the specific actions the FDIC takes can be responsive to the
facts and circumstances of a particular institution’s failure and conditions in the financial
system at the time. The FDIC continues to develop a range of strategic options and capabilities to
improve resolution readiness so that systemically important financial institutions can be resolved
2
See DFA definition in § 201(a)(11), 12 U.S.C. § 5381(a)(11).
3
Insured depository institutions (IDIs) are resolved under the Federal Deposit Insurance Act (FDI Act).
4
The Financial Stability Board, in consultation with Basel Committee on Banking Supervision and national authorities,
annually identifies a list of GSIBs. In the United States, a banking organization is a U.S. GSIB if it is identified as a global
systemically important BHC pursuant to 12 CFR 217.402.
4 | Overview of Resolution Under Title II of the Dodd-Frank Act
in an orderly manner without jeopardizing U.S. financial stability or relying on taxpayer bailouts.
The goal of this paper is to enhance transparency and promote public understanding of the
resolution process. While this paper focuses on how the FDIC expects to resolve a U.S. GSIB under
Title II, many of the tools and processes described could be applied to resolution of other types
of financial companies. Moreover, while this paper explains the FDIC’s expected approach, FDIC
actions will always depend on the specific facts and circumstances, and, as such, the expectations
laid out in this paper are not binding on the FDIC or any other regulatory authority involved in the
resolution process.
F A: L R R F I U S
Financial companies in the United States are subject to dierent resolution regimes, depending on the
type of firm. Historically, IDIs, broker-dealers, and insurance companies have been subject to special,
sector-specific resolution regimes, while other types of financial companies have been subject to the U.S.
Bankruptcy Code. Since 2010 the DFA’s Title II has provided an option that allows financial companies
that are not IDIs to be eligible for resolution by the FDIC in certain circumstances (see Determining
resolution framework: U.S. Bankruptcy Code vs. Title II). IDIs remain exclusively subject to resolution
under the FDI Act, which contains its own provisions on resolutions involving systemic risk.
5
5
The FDI Act’s systemic risk exception enables the FDIC to choose a resolution transaction that may not be the least
costly to the Deposit Insurance Fund, but would mitigate serious adverse eects on U.S. financial stability.
Type Of Company
Ordinarily Applicable
Resolution Regime
Systemic Resolution
Regime
Insured Depository Institutions Federal Deposit Insurance Act *
Broker-Dealers
Securities Investor Protection Act
(SIPA)*
Title II Dodd-Frank Act
Insurance Companies
State-by-state resolution
regimes*
Bank Holding Companies
U.S. Bankruptcy Code
Other nonbank financial
institutions (e.g., CCPs,
FMUs, other financial holding
companies)
* Sector-specific resolution regimes
5 | Overview of Resolution Under Title II of the Dodd-Frank Act
1. OBJECTIVES AND TOOLS OF A TITLE II
RESOLUTION
The 2008-2010 financial crisis highlighted a number of challenges in resolving large, complex
financial institutions
6
and resulted in the establishment of new legal authorities through the DFA
to make orderly resolution more feasible. This section reviews the challenges that crisis brought
into focus and the key resolution tools in the DFA.
Challenges of Resolving Large, Complex Financial Companies
Resolution of large, complex financial companies presents a set of challenges that regulatory
authorities and financial institutions have been working to address, including the risk of:
z multiple competing insolvency proceedings under dierent insolvency frameworks within
and across jurisdictions;
z ring-fencing of overseas assets by foreign host supervisors, resolution authorities, or third parties;
z disruption of services necessary for the institution’s day-to-day operation, such as personnel,
information technology, contracts, or financial market utility (FMU) access;
z adverse actions by counterparties, such as closing out derivatives contracts or exercising
cross-default rights;
z insuicient financial resources for capital and liquidity to maintain the financial company’s
ongoing business functions and operations; and,
z insuicient information on the impact of the firm’s resolution on the rest of the financial system.
DFA Framework for Orderly Resolution
Title I and Title II of the DFA provide tools to help overcome the aforementioned challenges
and close gaps in the U.S. resolution regime revealed in the 2008–2010 global financial crisis.
7
Specifically, the DFA extended authorities similar to the FDIC’s long-standing resolution and
receivership authority for IDIs under the FDI Act, to support orderly resolution of large, complex
financial companies, including bank holding companies.
6
See Crisis and Response: An FDIC History, 2008–2013, https://www.fdic.gov/bank/historical/crisis/.
7
See Crisis and Response (pages 27–28).
6 | Overview of Resolution Under Title II of the Dodd-Frank Act
TITLE I: RESOLUTION PLANNING
Title I of the DFA requires the largest BHCs and other nonbank financial companies designated
by the Financial Stability Oversight Council (FSOC)
8
for supervision by the Board of Governors
of the Federal Reserve System (Federal Reserve Board or FRB) to prepare resolution plans,
alternatively referred to as living wills, Title I plans, or 165(d) plans.
9
(See Figure B: 165(d) planning
requirements for U.S. and Foreign Banking Organizations).
10
These companies must provide a
plan for their rapid and orderly resolution under the U.S. Bankruptcy Code (or other ordinary
insolvency regime) that demonstrates how their failure would avoid serious adverse eects on
financial stability in the United States. The Title I planning process requires these companies to
demonstrate that they have adequately assessed the challenges that their structure and business
activities pose to orderly resolution, and that they have taken action to address those issues. If
a firm subject to Title I resolution planning requirements fails to take the remediating actions
necessary to become resolvable, U.S. regulators may impose more stringent requirements,
divestitures, or restrictions on the growth, activities, or operations of the company.
Since 2013, the eight U.S. GSIBs and other large banks, including foreign banking organizations
(FBOs) with the largest U.S. operations, have completed multiple rounds of resolution plans that
include both public
11
and confidential sections. To enhance transparency and accountability,
the Federal Reserve Board and FDIC have met repeatedly with the largest of these institutions,
provided multiple rounds of guidance,
12
and published joint letters providing feedback
13
on the
institutions’ Title I plans. These letters include a description of how institutions have improved
their resolvability as well as any weaknesses they need to address. In 2019, the Federal Reserve
Board and FDIC adjusted the frequency and scope of 165(d) plans (see Figure B: 165(d) planning
requirements for U.S. and Foreign Banking Organizations).
14
In addition to improving the likelihood that subject institutions can be resolved through
bankruptcy, the Title I planning process has delivered other benefits. Perhaps most significantly,
measures undertaken by the institutions to enhance their resolvability under the Bankruptcy
Code as part of their Title I planning—such as legal entity rationalization, corporate restructuring,
adherence to the International Swaps and Derivatives Association (ISDA) Resolution Stay Protocols,
and capabilities to estimate the adequacy and location of capital and liquidity resources in
resolution—would also be helpful to the FDIC in a Title II resolution. These organizational and
operational changes have materially improved the resolvability of Title I plan filers regardless
8
Pursuant to § 113 of the DFA, 12 U.S.C. § 5323, these non-bank financial companies are designated by the Financial
Stability Oversight Council (FSOC) for supervision by the Federal Reserve Board if the Council determines that
material financial distress at the non-bank financial company, or the nature, scope, size, scale, concentration,
interconnectedness, or mix of the activities of the non-bank financial company, could pose a threat to the financial
stability of the United States. Note that financial market utilities designated as systemically important by FSOC under
Title VIII of the DFA are not subject to resolution planning requirements under Title I.
9
See Section 165(d)(1), 12 U.S.C. § 5365(d)(1)
10
https://www.federalregister.gov/documents/2019/11/01/2019-23967/resolution-plans-required.
11
https://www.fdic.gov/regulations/reform/resplans/index.html.
12
For examples of guidance see: 85 Fed. Reg. 83557 (2020 guidance for FBOs) and 84 Fed. Reg. 1438 (2019 guidance
for U.S. BHCs). For examples of past FAQs see: https://www.fdic.gov/resources/resolutions/resolution-authority/
faq4covered2018.pdf and https://www.fdic.gov/resources/resolutions/resolution-authority/2017faqsguidance.pdf.
13
The joint feedback letters can be found at https://www.federalreserve.gov/supervisionreg/agency-feedback-letters-
index.htm.
14
Resolution Plans Required, 84 Fed. Reg. 59194–59228, (November 1, 2019), https://www.federalregister.gov/
documents/2019/11/01/2019-23967/resolution-plans-required.
7 | Overview of Resolution Under Title II of the Dodd-Frank Act
of the regime that may be applied. Additionally, Title I resolution plans provide regulators
information about interconnections and interdependencies between institutions and within
individual institutions that is otherwise unavailable, and which can be drawn upon to plan for
a Title II resolution or in response to other events.
F B: () P R U.S. F B O
Biennial Filers Triennial Full Filers
Triennial
Reduced Filers
Category I Category II Category III Other FBOs
Two-year Cycle
Alternating full and
targeted plans
Three-year Cycle
Alternating full and
targeted plans
Three-year cycle
Reduced plans
U.S. GSIBs
U.S.: ≥$700bn total
consolidated assets;
or ≥$100bn total
consolidated assets
with ≥$75bn in cross-
jurisdictional activity*
U.S.: ≥$250bn and <$700bn
total consolidated assets; or
≥$100bn total consolidated
assets with ≥$75bn total non-
bank assets, weighted short-
term wholesale funding, or
o-balance sheet exposure
n/a
n/a
FBO: ≥$700bn in
combined U.S. assets;
or ≥$100 combined
U.S. assets with ≥75bn
in cross-jurisdictional
activity*
FBO: ≥$250bn and <$700bn
in combined U.S. assets;
or ≥$100bn combined U.S.
assets with ≥$75bn total non-
bank assets, weighted short-
term wholesale funding, or
o-balance sheet exposure
FBO: ≥$250bn
global
consolidated
assets, not subject
to category II or III
standards
All metrics are calculated as four-quarter averages. Details on the content expected for the full, targeted, and reduced plans can
be found in 12 CFR Part 381.
* The Federal Reserve proposed to amend the definition of cross-jurisdictional activity in September 2023. See 88 Fed. Reg. 60385
(September 1, 2023) (https://www.govinfo.gov/content/pkg/FR-2023-09-01/pdf/2023-16896.pdf).
8 | Overview of Resolution Under Title II of the Dodd-Frank Act
TITLE II: ORDERLY LIQUIDATION AUTHORITY
Before passage of the DFA, the FDIC’s resolution and receivership authority was limited to IDIs,
using the powers and tools under the FDI Act; the FDIC had no authority to resolve parent bank
holding companies or non-bank ailiates of IDIs. Title II of the DFA extends similar powers
and tools under the FDI Act to financial companies when their failure and resolution under the
Bankruptcy Code (or otherwise applicable law) would have serious adverse eects on financial
stability in the United States. Title II authorities are designed to mitigate risks to financial stability
while safeguarding taxpayer resources. These powers and tools include the ability to step into the
shoes of the failed financial company’s shareholders and management to take control of the failed
institution, establish a Bridge Financial Company to continue operations of the financial company
during the receivership, and manage an administrative claims process that allocates losses to
the shareholders and creditors of the failed financial company. Title II also provides for certain
stays on counterparty actions, including a short-term stay on certain qualified financial contracts
(QFCs),
15
in order to transfer the QFCs and prevent a counterparty from terminating, liquidating,
or netting out solely on the basis of the failure of the financial company and the appointment of
the FDIC as receiver.
16
Title II also encourages and enables the FDIC to coordinate with foreign
authorities in the case of a failure of a financial company with global operations.
17
Title II also authorizes the creation of the OLF to provide a line of credit to the FDIC to serve
as a temporary backstop source of liquidity for the orderly resolution of a failed financial company.
The OLF is made available on terms agreed to by the Secretary of the Treasury, and it is not
designed to fill capital shortfalls or absorb losses. The FDIC expects to use the liquidity provided
by the OLF to stabilize the Bridge Financial Company. The FDIC expects that OLF would be repaid
as the Bridge Financial Company secures liquidity from customary sources or from proceeds
generated through the resolution of the failed financial company. The amount of funding provided
by the OLF is limited by the fair value of the assets of the failed firm, minus a haircut (see Funding
of the Bridge Financial Company and its subsidiaries). Title II also allows for the use of guarantees
backed by the OLF, which may support continuation of ordinary sources of liquidity or reduce
cash needs from the OLF. Taxpayers are protected against any losses from OLF support (see Figure
O: Are taxpayers on the hook for the GSIB failure?). If OLF advances cannot be repaid from the
proceeds of the resolution of the failed financial company, Title II requires that the OLF be repaid
through one or more risk-based assessments on certain financial companies.
18
15
QFCs, as defined in § 210(c)(8)(D) of the DFA (see 12 U.S.C. § 5390(c)(8)(D)), include securities contracts, commodity
contracts, forward contracts, repurchase agreements, swap agreements, and similar agreements the FDIC determines
by regulation, resolution, or order to be QFCs.
16
See DFA § 210(c)(10)(B), 12 U.S.C. § 5390(c)(10)(B).
17
See 12 U.S.C. § 5390(a)(1)(N).
18
See DFA § 210(o), 12 U.S.C. § 5390(o).
9 | Overview of Resolution Under Title II of the Dodd-Frank Act
2. RESOLUTION PLANNING AND POLICY
DEVELOPMENTS SUPPORTING THE
APPLICATION OF TITLE II
Building on the tools and authorities provided in the Dodd-Frank Act, the FDIC, other regulators,
and Title I plan filing institutions have taken steps that improve resolvability generally and that
would support the implementation of a Title II resolution specifically. This section describes these
measures, which include development of the SPOE strategy, supporting regulations and guidance,
enhancements to institutions’ organizational structures and resolution planning capabilities, and
arrangements to support international cooperation.
Strategy for Mitigating Disruption and Contagion: Single
Point Of Entry
The development of the SPOE resolution strategy represented a critical step forward in the FDIC’s
thinking about how to address the challenges of resolving large, complex financial institutions.
19
As previously described by the FDIC in a notice published for comment in 2013, the SPOE strategy
calls for only the parent holding company to be placed into resolution, with its subsidiaries
remaining open and operating while the group undergoes restructuring. Many large U.S. financial
companies conduct their businesses through complex arrays of interconnected entities across
international borders that span legal and regulatory regimes. A large institution’s business lines
may not align to legal operating entities, and the operating entities oen share funding and support
services. These integrated groups make it very diicult to conduct a resolution of one or more legal
entities without disrupting operations across the group. The SPOE strategy is designed to address
this challenge by keeping the material business entities that face customers, counterparties,
depositors, and service providers operating while the parent holding company is in resolution and
a coordinated restructuring is undertaken across the institution.
20
Generally, in SPOE, the FDIC would place one entity (the parent holding company, in the case
of U.S. GSIBs) into resolution, while the ownership interests in the underlying subsidiaries are
transferred from the failed parent to a new Bridge Financial Company (see Figure C: Single Point
of Entry Schematic).
19
Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy, https://www.govinfo.
gov/content/pkg/FR-2014-02-21/pdf/2014-03692.pdf.
20
Outside the United States, most resolution authorities have coalesced around an SPOE strategy for GSIBs with highly
integrated operations. However, some GSIBs operate through subsidiaries or subgroups that are separately managed
and funded in distinct jurisdictions. For those non-U.S. GSIBs, and in coordination with home country authorities,
a multiple-point-of-entry (MPOE) resolution strategy has been adopted, under which certain distinct subsidiaries or
subgroups would undergo resolution through dierent national insolvency regimes.
10 | Overview of Resolution Under Title II of the Dodd-Frank Act
F C: S P E S
The equity and unsecured debt of the failed parent would remain in the original legal entity (now
in receivership) and become claims against the receivership. As claimants, the parent holding
company’s shareholders and unsecured creditors would be structurally subordinated to the
creditors of the rest of the group and would be first in line to bear the cost of the institution’s
failure. During the resolution, the Bridge Financial Company would undergo restructuring,
whereby some of the operations or subsidiaries may be sold, wound down, or liquidated. Proceeds
from the resolution would be used to satisfy claims to the extent of the value ultimately realized
through the resolution.
The SPOE strategy can limit disruption and mitigate systemic risk by maintaining the continuity
of the failed institution’s operations and subsidiaries, including the ongoing relationships with
the institution’s counterparties, internal and external service providers, and key FMUs such as
central clearing counterparties or payment systems. The SPOE strategy also can help services
or operations of the firm critical to the functioning of the financial system continue operating.
By maintaining operational continuity, SPOE also helps to preserve value for claimants against
the failed company, as required by law. SPOE also has the benefit of being less complex
administratively compared to multiple resolution proceedings at operating entities. In addition,
SPOE enables the FDIC to better leverage the personnel, facilities, systems, and other resources
of the institution being resolved rather than relying more extensively on the personnel, systems,
and capabilities of the FDIC. Although the FDIC developed the SPOE strategy originally in the Title
II context, by 2019, all eight of the U.S. GSIBs had also adopted an SPOE approach in bankruptcy
as the preferred strategy in their Title I resolution plans.
Receivership
Equity and certain
liabilities of the failed
parent remain in the
receivership
Parent Bank
Holding Company
Newly Established
Bridge Financial
Company
Insured
Depository
Institutions
Broker/
Dealer
Other
Subsidiaries
Insured
Depository
Institutions
Broker/
Dealer
Other
Subsidiaries
Operating subsidiaries are
transferred to a Bridge
Financial Company
11 | Overview of Resolution Under Title II of the Dodd-Frank Act
Regulations Supporting Orderly Resolution
Since the DFA was enacted, U.S. authorities have implemented a set of regulations that support
orderly resolution of a large, complex financial company, particularly a resolution using an SPOE
strategy, whether under bankruptcy or Title II. The development of these rules has been informed
by industry consultation and collaboration with international standard-setting bodies. These
regulations provide for:
z Increased total loss-absorbing capacity—The Federal Reserve Board finalized a rule that
became eective in 2017 that, among other things, requires U.S. GSIBs and foreign GSIBs
with the largest U.S. operations to maintain minimum amounts of total loss-absorbing
capacity (TLAC), including qualifying unsecured, “plain vanilla” long-term debt (LTD).
21
These
requirements were put in place so that holders of TLAC could bear losses without transmitting
systemic risk. The TLAC and LTD are issued by the parent holding company of U.S. GSIBs and
the U.S. intermediate holding company (IHC) of foreign GSIBs. This structure facilitates the
ability to concentrate loss absorbency in one entity and avoid multiple competing insolvency
proceedings. The calibration of the TLAC and LTD requirements is scaled to provide adequate
capacity to absorb losses and support the institution’s operations during resolution. To further
mitigate risk of contagion, subsequent regulations have also limited exposure of U.S. GSIBs
to TLAC and LTD securities issued by another GSIB
22
and required extensive disclosures about
TLAC and LTD securities’ exposure to loss in resolution.
23
z Simplified “clean” holding companies—Before the crisis, the parent holding companies
of many large, complex financial companies issued an array of short-term financial
instruments and complex liabilities. In the event of resolution, imposing losses on holders
of these instruments or counterparties could have introduced complexities and risks of
market disruption. The Federal Reserve Board’s 2017 TLAC/LTD rule addressed this issue
by requiring the parent holding company of a U.S. GSIB and the top-tier U.S. intermediate
holding companies of foreign GSIBs to avoid entering into certain financial arrangements.
These clean holding company requirements prohibit or limit the parent holding company’s
ability to issue short-term debt to external parties; enter into certain derivatives and other
QFCs with external counterparties; provide certain guarantees of subsidiary liabilities or other
arrangements that create disruptive default, set-o, or netting rights for subsidiaries’ creditors;
or allow their liabilities to be guaranteed by one of their subsidiaries. By preventing U.S. GSIBs
from maintaining these types of contracts at the holding company, this rule helps promote
operational continuity while the holding company is resolved under an SPOE strategy and
ensures that losses are largely borne by the shareholders and unsecured creditors who are
aware of the risks. In doing so, it also concentrates loss absorbency in one entity and avoids
multiple competing insolvency proceedings.
21
See 12 CFR Part 252, Subpart G.
22
See FDIC, Federal Reserve Board, and Oice of the Comptroller of the Currency (OCC) rules 86 Fed. Reg. 708
(January 6, 2021).
23
TLAC issuers must disclose the risk of loss during resolution using multiple methods, including their Exchange Act
Reporting (where the risks are material), individual websites, and TLAC-securities disclosure documents. See 12 CFR
252.65 and 252.167.
12 | Overview of Resolution Under Title II of the Dodd-Frank Act
z Stays on counterparty actions—Mass early termination of QFCs can have disruptive eects by
sparking asset fire sales and transmitting distress across the financial system. The Dodd-Frank
Act provides for a one-business-day stay for Title II resolutions, similar to the stay available under
the FDI Act for the resolution of IDIs. These stays provide time for QFCs to be transferred to a
bridge or other identified third party, allowing the contracts to continue without termination.
24
However, there remained some potential issues that could complicate resolution. Specifically,
these statutory stays would not be applicable in bankruptcy, and there was uncertainty around
whether the Title II stay would be enforced if the QFCs were governed by laws outside the
United States. In 2017, the Federal Reserve Board, FDIC, and Oice of the Comptroller of the
Currency (OCC) adopted rules requiring U.S. GSIBs and the U.S. operations of foreign GSIBs
to amend the terms of QFCs to include stay provisions that would prevent their immediate
cancellation or termination if the institution enters bankruptcy or another resolution process
(such as Title II).
25
Compliance with these rules was in large part accomplished by U.S. GSIBs
through their adherence to the ISDA Resolution Stay Protocols.
26
Together, these measures
bolster the protections in the Dodd-Frank Act against cross-defaults and early terminations
on QFCs domestically and on a cross-border basis, and mitigate the risk of disorderly failure
and asset price volatility.
Resolution Planning and Firm Capabilities
Through the Title I resolution planning process, the largest U.S. banking groups have enhanced
their resolvability in various ways, including streamlining their organizational structures and
developing resolution capabilities to estimate material subsidiaries’ liquidity and capital needs
in resolution. While the strength of these capabilities varies across firms, Title I provides a process
for ongoing supervisory review and improvements. In addition to being critical for a financial
company’s bankruptcy strategy, these enhancements will aid the FDIC in its role as receiver under
Title II, if needed.
Key financial company actions undertaken to improve their resolvability as part of the Title I
resolution planning process include:
z Establishing resolution plans and optionality—As part of the Title I resolution planning
process, institutions have developed plans for their resolution under the Bankruptcy Code
that address their unique structures and business models. (See Figure B: 165(d) planning
requirements for U.S. and Foreign Banking Organizations for a description of which firms are
required to file Title I plans.) The Title I plans of all eight U.S. GSIBs envision using an SPOE
strategy under the Bankruptcy Code. The institutions have also built optionality into their
Title I resolution plans by identifying companies or business lines that could be sold,
providing a range of divestiture and wind-down strategies for various subsidiaries, and
highlighting important businesses or subsidiaries in which a disruption in the continuity
24
DFA § 210(c)(10)(B); 12 U.S.C. § 5390(c)(10)(B) provides authority for the FDIC, in some circumstances, to repudiate or
terminate QFCs of specific counterparties to the BFC. In practice, however, the Federal Reserve’s clean holding company
requirements mean that U.S. GSIBs can hold only a de minimus amount of such contracts at the holding company and
almost all QFCs are held at operating companies, which would remain open, operating, and expected to continue to
perform on all QFC contracts.
25
12 CFR Part 382 (FDIC); 12 CFR 252.81-252.88 (FRB); 12 CFR Part 47 (OCC).
26
ISDA 2018 U.S. Resolution Stay Protocol, https://www.isda.org/protocol/isda-2018-us-resolution-stay-protocol/.
13 | Overview of Resolution Under Title II of the Dodd-Frank Act
of operations may present material risks to U.S. financial stability. The optionality built into
these plans helps the institution and the FDIC, if it were appointed receiver under Title II,
to be more prepared to respond to a variety of institution and market conditions while
mitigating the risk to financial stability.
z Simplifying organizational structures—To make their preferred resolution strategies more
feasible, institutions have developed criteria to evaluate proposed structural changes within
their organizations. Organizational decisions, which had previously been made to manage
only “business as usual” considerations, such as compliance and taxes, now incorporate
considerations of resolvability. These eorts have resulted in reducing the number of legal
entities, simplifying their ownership structure, and updating governance processes to ensure
that resolution considerations are taken into account when divesting of or establishing new
legal entities or when establishing new business lines. Also, to simplify funding structures,
institutions have identified clear paths to deliver funding to their key subsidiaries. Together,
these eorts are designed to simplify the resolution process, support operational continuity,
and reduce frictions related to the provision of capital and liquidity support to material entities.
z Establishing triggers for timely action—To support rapid and orderly resolution under the
U.S. Bankruptcy Code, U.S. GSIBs need to commence the bankruptcy process with enough
resources to fund themselves throughout the resolution process. This not only requires that
the companies have the capability to estimate their resource needs in bankruptcy and have
adequate resources in place, but also that they have the governance mechanisms in place
to commence a timely bankruptcy filing (i.e., while the institution still maintains suicient
resolution resources). As part of the Title I process, institutions develop data systems and
modelling capabilities to estimate and track the amount and location of capital and liquidity
required to execute their preferred resolution strategy under bankruptcy. Institutions connect
these capital and liquidity capabilities to internal escalation triggers, playbooks, and other
governance mechanisms to facilitate the timely consideration of important recovery and
resolution actions by the institution’s board of directors and senior management. In addition,
these capabilities help the institutions actively consider how to strike the best balance between
pre-positioning resources at specific entities versus maintaining additional resources to be
deployed flexibly across the group during resolution.
z Planning for operational continuity—A key advantage of the SPOE strategy is that it provides
for the institution’s subsidiaries to continue operating in order to minimize disruptions to
services that may be important to maintaining financial stability. As part of their Title I process,
institutions explicitly considered and addressed a number of obstacles to continuity of
operations, including how to maintain access to key FMUs and to other critical services both
inside and outside the institution. For FMU access, institutions have developed strategies and
playbooks to maintain the ability to use and provide access to payment, clearing, and settlement
services, including operational and liquidity arrangements that plan for increased margin and
collateral requirements. Institutions have also developed frameworks to document the service
providers that support critical operations, adopted arms-length and resolution-friendly
contract terms for third-party and intra-company shared service providers, pre-positioned
working capital in key service subsidiaries, and developed playbooks and strategies for
retaining key personnel. Overall, these measures are intended to facilitate continuity of
operations, which will help minimize the impact to financial stability resulting from the
institutions’ entry into resolution.
14 | Overview of Resolution Under Title II of the Dodd-Frank Act
z Providing transparency to investors and markets—To address public concerns about
some institutions being “too big to fail,” U.S. authorities have taken measures to promote
transparency about resolution plans. The Federal Reserve Board and FDIC require all
institutions subject to Title I planning requirements to have a publicly available version
of their Title I plan in order to inform the public’s understanding of the institution’s resolution
strategy.
27
(See details on disclosure of authorities’ feedback in the Title I: Resolution
Planning section.)
International Cooperation
Given the cross-border activities of U.S. GSIBs, resolution preparedness requires international
coordination based on strong working relationships. In addition to the resolution planning rules
and related enhancements described above, authorities have built a framework to promote
cross-border cooperation in the event of a U.S. GSIB failure, including:
z Pre-positioning adequate resources—Pre-positioning adequate resources to support
continuity of operations throughout an SPOE resolution helps to reduce the risks of multiple
competing insolvencies and jurisdictional ring-fencing of operations and assets. Some
authorities have issued requirements for subsidiaries to maintain internal total loss-absorbing
capacity (iTLAC).
28
This pre-positioned iTLAC enables losses occurring locally at a foreign
subsidiary to be “passed up” to the parent holding company in the home country. Title I
plan filers also are expected to proactively consider and provide for the amount of capital
and liquidity that needs to be pre-positioned to enable a rapid and orderly resolution under
bankruptcy in their Title I plans—even where there are no foreign requirements to do so.
z Crisis management groups (CMGs)—CMGs bring together “home” and “host” authorities
for regular, institution-specific discussions regarding resolution strategies, cross-border
implementation plans, obstacles to orderly resolution, and progress toward resolvability.
The discussions and relationships built in CMGs strengthen the preparedness of authorities
to coordinate and improve knowledge of—and confidence in—each other’s crisis management
plans and reduce the incentive for the kind of ring-fencing of assets that could further destabilize
the institution or market functioning generally. CMGs are supported by confidential information-
sharing arrangements, including institution-specific cooperation agreements (CoAgs) and a
network of jurisdictional and authority-specific memoranda of understanding (MOUs) designed
to facilitate discussion while protecting sensitive or confidential supervisory information.
27
The public section of the Title I plans are expected to cover, for example, the strategy for continuity, transfer, or
orderly wind down of each material entity; a high-level description of the firm’s intragroup financial and operational
interconnectedness; the liquidity resources and loss absorbing capacity of the firm; the expected resulting organization
upon completion of the resolution process; and how the firm has addressed any deficiencies, shortcomings, or key
vulnerabilities identified in previous plans and steps the firm is taking to improve resolvability under the Bankruptcy
Code. See 12 CFR 381.11(c).
28
For example, the Federal Reserve has required internal TLAC from certain FBOs operating in the U.S. (See 12 CFR
252, Subpart P), and the FDIC and Federal Reserve proposed internal TLAC for certain IDIs in September 2023 (https://
www.federalregister.gov/documents/2023/09/19/2023-19265/long-term-debt-requirements-for-large-bank-holding-
companies-certain-intermediate-holding-companies). Foreign authorities have also required internal TLAC from
certain U.S. firms operating in their jurisdictions: see for example, policies from the United Kingdom (https://www.
bankofengland.co.uk/paper/2021/the-boes-approach-to-setting-mrel-sop) and the Banking Union (https://www.srb.
europa.eu/system/files/media/document/2023-05-15_SRB_MREL_Policy_2023_final%20_clean.pdf).
15 | Overview of Resolution Under Title II of the Dodd-Frank Act
z Cross-border and multilateral engagement—This type of engagement helps U.S. and foreign
regulatory authorities deepen their understanding of resolution processes and necessary
coordination among home and host authorities, improving readiness for resolution.
The principals and sta of the FDIC and other U.S. authorities work closely with foreign
counterparts to plan for cross-border coordination, particularly regarding U.S. GSIBs with
assets and operations in key material jurisdictions. Authorities meet regularly to discuss practical
examples of cross-border cooperation and crisis management and conduct exercises to practice
operationalizing resolution actions. In addition, the FDIC has helped develop international
standards for resolution regimes
29
to support the development and implementation of eective
cross-border resolution practices.
The combination of the measures described above addresses or mitigates many of the common
resolution challenges that large, complex financial institutions faced during the U.S. financial
crisis of 2008–2010 (see Figure D: Resolution Developments Mitigating Resolution Challenges).
While meaningful challenges and risks remain that must be anticipated and managed, the
options available today for resolving financial institutions that pose systemic risk are much
more fit-for-purpose than those available during the 2008–2010 financial crisis, and the likelihood
of an orderly resolution in a wide range of scenarios is greatly improved.
29
Key Attributes of Eective Resolution Regimes for Financial Institutions. https://www.fsb.org/2014/10/key-attributes-
of-effective-resolution-regimes-for-financial-institutions-2/.
16 | Overview of Resolution Under Title II of the Dodd-Frank Act
F D: R D M R C
Resolution Tools, Planning and Policy Developments
Resolution
Challenges
Title I
Firms’
Resolution
Planning
Title II
Orderly
Liquidation
Fund
Single
Point Of
Entry
Strategy
TLAC and
Capital And
Liquidity
Pre-
Positioning
Clean Bank
Holding
Company
Rules
QFC Stays
and ISDA
Protocol
Cross-Border
Cooperation
Multiple
competing
insolvencies
Ring-fencing
of foreign
assets
Disruption of
operations
and services
Adverse
counterparty
actions
Insuicient
financial
resources
Contagion
to financial
system
17 | Overview of Resolution Under Title II of the Dodd-Frank Act
3. DECIDING WHETHER, WHEN, AND HOW TO
USE TITLE II RESOLUTION AUTHORITY
This section describes the strategic decision-making process for launching a Title II resolution
of a U.S. GSIB. This process starts with contingency planning for a financial company in stress,
as the FDIC and other authorities will evaluate the situation and work toward consensus about the
best resolution framework and strategy for a particular financial company in a specific scenario.
Contingency Planning
When a U.S. GSIB experiences stress and moves along the crisis continuum from “business
as usual” toward failure, the financial company and its supervisors will be working to address the
issues while simultaneously engaging in contingency planning for various resolution options (see
Figure E: Firm Crisis Continuum and Contingency Planning Phases). The institution is expected
to simultaneously undertake recovery actions and contingency planning for bankruptcy in line
with its Title I planning. While the speed at which a firm proceeds through the crisis continuum
will vary according to the firm’s business model and the nature of the stress, GSIBs have put
governance mechanisms in place that include triggers for timely actions. These actions include
recovery measures, notification to the FDIC and Federal Reserve Board as the institution hits
pre-identified triggers, distribution of resources to subsidiaries to facilitate orderly resolution,
and ultimately a decision to file for bankruptcy, if needed.
In parallel with the recovery and contingency bankruptcy planning actions managed by the
financial company, the FDIC would undertake heightened monitoring and contingency planning
for a Title II resolution in case the financial company’s recovery eorts prove unsuccessful and
the financial company’s resolution under the Bankruptcy Code could have serious adverse eects
on U.S. financial stability. The metrics and triggers under the financial company’s Title I process
would help the FDIC and other U.S. authorities assess available capital and liquidity resources and
the financial company’s proximity to “default or danger of default.”
30
The firm’s trigger framework
will also help inform authorities’ decisions about whether (and when) to put the financial
company into a Title II resolution.
30
Under the Dodd-Frank Act, a financial company is considered to be “in default or in danger of default” if (A) a case has
been, or likely will promptly be, commenced with respect to the financial company under the Bankruptcy Code; (B) the
financial company has incurred, or is likely to incur, losses that will deplete all or substantially all of its capital, and there
is no reasonable prospect for the company to avoid such depletion; (C) the assets of the financial company are, or are
likely to be, less than its obligations to creditors and others; or (D) the financial company is, or is likely to be, unable
to pay its obligations (other than those subject to a bona fide dispute) in the normal course of business.
F E: C C C P P
1
8 | Overview of Resolution Under Title II of the Dodd-Frank Act
FIRM CONDITION
Preparing for Resolution
Loss of market confidence,
failure imminent
Entering into Resolution
New governance; distribute
resources to subsidiaries
Stabilizing Operations
Ongoing stakeholder
engagement and support for
operational continuity
Initiating Contingency Planning
Significant condition impairment;
adverse market reaction
Business-as-Usual Planning
Ongoing recovery and
resolution planning
Restructuring and Wind-down
Using sales, wind-down, or
liquidation to prepare for new
private sector owners and eventual
exit from resolution process
FDIC Contingency Planning for Title II FDIC Execution of Title II (if needed)
Firm Preparation for Bankruptcy (Title I Plan) Firm Bankruptcy (unless Title II)
BAU Stress Entry StabilizationRunway
Firm Recovery Actions
Restructuring and Exit
19 | Overview of Resolution Under Title II of the Dodd-Frank Act
An important part of the FDIC’s contingency planning is early engagement with the appropriate
domestic and foreign supervisory and resolution authorities involved with material parts of the
financial company to discuss the prospects for recovery and to confirm the likely legal regime and
strategy for resolution of the financial company, should it occur. This engagement would leverage
the processes and understandings established among resolution and supervisory authorities
through the financial company’s CMG, the financial company-specific CoAgs, jurisdictional MOUs
for information sharing, and exercises that have documented and practiced steps in cross-border
coordination. Communication and cooperation with these authorities will be important to limit
the disruption to domestic and foreign subsidiaries, and ultimately to continue their operation
as part of the consolidated group under an SPOE resolution.
In considering the appropriate timing to commence resolution, a key challenge will be balancing
the prospects for recovery against the potential risks of delaying entry into resolution—such
as further deterioration of the institution in a way that compromises an eventual resolution and
worsens the outcomes for financial system stakeholders. There is a natural tension between
providing an adequate opportunity for a troubled financial company to recover and timing
the entry into Title II resolution before resources are exhausted. Timely entry would allow more
flexibility in the use of the financial company’s remaining capital and liquidity resources to support
orderly resolution, strengthening the recapitalization of the subsidiaries, and likely reducing the
need for OLF support. In addition, while a financial company may enter Title II resolution before
or aer the commencement of a bankruptcy proceeding, where it has been determined that
Title II resolution is necessary, commencing that process before the firm has filed for bankruptcy
would simplify the resolution process. Finally, based on its long-standing experience resolving
IDIs, the FDIC believes the ideal time to be appointed receiver under Title II would be late on a
Friday aernoon (Eastern Time), immediately aer U.S. financial markets close. The appointment
as receiver late Friday aernoon would provide time, while most global financial markets are closed,
to form a Bridge Financial Company, mobilize resources needed to conduct business beginning on
Monday morning, and communicate with key constituencies (including employees, counterparties,
and claimants) around the globe. The FDIC recognizes that a Friday night appointment may not
be possible in all instances, and the timing will be highly dependent on the nature of the failing
institution, how it fails, and market conditions at the time.
20 | Overview of Resolution Under Title II of the Dodd-Frank Act
Determining the Resolution Regime: Bankruptcy or Title II
As a U.S. GSIB approaches failure, authorities will need to determine the best legal regime
to manage the resolution considering the scenario encountered. As previously noted, for U.S.
GSIBs, which are organized as BHCs, the Bankruptcy Code is the statutory first option for the
resolution of the BHC; Title II is a back-up resolution framework for financial companies when
resolution under ordinary insolvency regimes would have serious adverse eects on financial
stability in the United States. The DFA lays out a clear process to approve the use of Title II
authority that this section explains in detail and that the FDIC believes the relevant agencies
can implement as swily as necessary.
31
The decision to undertake a Title II resolution is made
pursuant to a multi-agency process provided in Title II of the Dodd-Frank Act. This process is oen
referred to as the “three keys process,” because it requires recommendations from two federal
agencies or oices followed by a determination by the Secretary of the Treasury, in consultation
with the President, to commence a Title II receivership (see Figure F: The Three Keys Process for
Title II’s Orderly Liquidation Authority). There is no ex-ante list of financial companies that would
be resolved under Title II: the authorities involved in the three keys process would consider only
whether to place a specific financial company into Title II resolution as the financial company
approaches default or danger of default.
The specific agencies or oices responsible for key turning depend upon the type of financial
company in question. In all cases, the Federal Reserve Board is one of the recommending
agencies. In most cases, the FDIC would be the second recommending agency. However, if the
financial company or its largest domestic subsidiary (by assets) is a broker-dealer or an insurance
company, the second recommending role would be filled by the U.S. Securities and Exchange
Commission (SEC) or the Director of Treasury’s Federal Insurance Oice (FIO), respectively. In
both of these cases, the statute requires that the FDIC be consulted on the recommendations.
These recommendations must cover eight criteria (see Figure G: Required Elements of a Title II
Recommendation), including whether the company is “in default or in danger of default,” the
eect a default of the financial company would have on U.S. financial stability, why an insolvency
proceeding under the Bankruptcy Code is not appropriate, and the nature and extent of the
planned actions expected to be taken regarding the financial company.
31
The three keys process in DFA is similar to the voting process for approving the systemic risk exception in the FDIA
which the agencies have invoked on a rapid timeframe including in the first quarter of 2023.
21 | Overview of Resolution Under Title II of the Dodd-Frank Act
F F: T T K P T II’ O L A
As a U.S. GSIB approaches “default or in danger of default,” the FDIC will continue toundertake
contingency planning for the firm’s failure. To inform its views on potential Title II recommendations,
the FDIC expects to evaluate, among other things, (1) the financial company’s ability to recover
from financial distress and (2) whether its bankruptcy plan would be successful considering
prevailing market conditions. In assessing the bankruptcy plan, the FDIC would evaluate whether
the financial company’s projected capital and liquidity resources could meet its estimated needs
in resolution. The FDIC will look to supplement this evaluation with supervisory data and insights
from relevant authorities, particularly those in the financial company’s CMG. In evaluating the risk
The U.S. District Court of the District of Columbia’s (USDC DC’s) review is limited to the Secretary’s determination that (1) the
covered financial company is in default or in danger of default and (2) the covered financial company satisfies the definition of
a financial company under section 201(a)(11).
Banking
Organization
or Other
Broker/Dealer
Insurance
FRB
2/3 Board Vote
FRB
2/3 Board Vote
FRB
2/3 Board Vote
FDIC
2/3 Board Vote
SEC
2/3
Commissioners
Vote
FIO
FIO Director
Airmation
In consultation with FDIC
In consultation with FDIC
+
+
+
Court shall
immediately provide
the Treasury
Secretary (1) a
written statement
of each reason
supporting its
determination and
(2) an immediate
opportunity to
amend and refile
the petition
Judicial
Process
US District
Court District
of Columbia
FDIC appointed
receiver
Title II
Yes
Yes
Firm Board
Acquiesces or
consent?
Secretary of
Treasury in
consultation with
the President
makes a
determination
under section
203(b)
Yes
No
No
Largest U.S.
Subsidiary
(by total assets)
Recommendations Determination & Appointment
USDC DC:
determination
arbitrary and
capricious?
within 24
hours
22 | Overview of Resolution Under Title II of the Dodd-Frank Act
to U.S. financial stability, FDIC would consider, among other things, whether (and, if so, how)
resolution under the Bankruptcy Code could disrupt the financial company’s critical operations,
material entities, and core business lines, and whether that disruption would have serious
adverse eects on financial stability of the United States. The FDIC also would evaluate whether
actions contemplated in its own planning for resolving a financial company using its Title II
authorities would avoid or mitigate potential serious adverse eects on the financial stability
of the United States.
The FDIC expects that a key driver in deciding the appropriate resolution regime is likely to be
an assessment of whether the financial company has access to suicient liquidity to fund its
own orderly resolution or if backstop liquidity from the OLF will be necessary, and the level of
confidence in this analysis. A U.S. GSIB’s resolution estimation capabilities, developed as part
of its Title I planning, would provide a robust starting point for the evaluation of both its liquidity
needs in resolution and the suiciency of its capital resources to assure adequate recapitalization
of subsidiaries. The FDIC would build on these capabilities and use other information to consider
a range of projections of financial resource needs in both bankruptcy and Title II scenarios
to support its evaluation of the appropriate resolution regime and strategy.
With the recommendations submitted by the appropriate key turners, the Secretary of the
Treasury, in consultation with the President, would determine whether seven statutory
requirements are met, including that no viable private sector alternative is available to prevent
the default of the financial company, that the failure of the company and its resolution under the
Bankruptcy Code (or otherwise applicable law) would have serious adverse eects on the financial
stability of the United States, and that the actions planned to be taken under Title II would avoid
or mitigate such adverse eects (see Figure G: Determination by the Secretary of the Treasury).
The Treasury Secretary will notify the financial company of a determination. If the financial
company’s board of directors does not consent or acquiesce to the appointment of the FDIC
as receiver under Title II, Treasury would submit a petition to initiate a 24-hour judicial review
process. This judicial review is limited to the question of whether the Secretary acted in an
arbitrary and capricious manner in determining that the financial company is in default or danger
of default or meets the applicable definition of a financial company. At the end of this period,
absent adverse judicial action, the FDIC is appointed receiver.
23 | Overview of Resolution Under Title II of the Dodd-Frank Act
F G: DFA T II R
Required Elements of a Title II
Recommendation
Determination by the Secretary of the
Treasury
The written recommendation to the Secretary of the
Treasury must contain the following elements:
1. Default: an evaluation of whether the financial
company is in default or in danger of default;
2. U.S. Financial Stability: a description of the eect
that the default of the financial company would
have on financial stability in the United States;
3. Low- or Moderate-Income/Underserved
Communities: a description of the eect that the
default of the financial company would have on
economic conditions or financial stability for low-
income, minority, or underserved communities;
4. Actions: a recommendation regarding the nature
and the extent of actions to be taken under Title II
regarding the financial company;
5. Private Sector Alternative: an evaluation of the
likelihood of a private sector alternative to prevent
the default of the financial company;
6. Bankruptcy: an evaluation of why a case under
the Bankruptcy Code is not appropriate for the
financial company;
7. Eects on Creditors, Counterparties, and
Shareholders: an evaluation of the eects on
creditors, counterparties, and shareholders of the
financial company and other market participants;
and
8. Financial Company Criteria: an evaluation of
whether the company satisfies the definition
of a financial company
Source: Dodd-Frank Act § 203(a) (12 U.S.C. § 5383(a))
The Secretary of the Treasury, in consultation with the
President, must determine that:
1. Default: the financial company is in default or in
danger of default;
2. U.S. Financial Stability: the failure of the financial
company and its resolution under otherwise
applicable Federal or State law would have serious
adverse eects on financial stability in the United
States;
3. Private Sector Alternatives: no viable private sector
alternative is available to prevent the default of the
financial company;
4. Eect on Creditors, Counterparties, and
Shareholders: any eect on the claims or interests
of creditors, counterparties, and shareholders
of the financial company and other market
participants as a result of actions to be taken under
Title II is appropriate, given the impact that any
action taken under Title II would have on financial
stability in the United States;
5. Mitigate: any actions under section 204 of Title
II would avoid or mitigate such adverse eects,
taking into consideration the eectiveness of the
action in mitigating potential adverse eects on the
financial system, the cost to the general fund of the
Treasury, and the potential to increase excessive
risk taking on the part of creditors, counterparties,
and shareholders in the financial company;
6. Contingent Convertibles: a Federal regulatory
agency has ordered the financial company to
convert all of its convertible debt instruments that
are subject to the regulatory order; and
7. Financial Company: the company satisfies the
definition of a financial company under section 201
Source: DFA § 203(b) (12 U.S.C. § 5383(b))
24 | Overview of Resolution Under Title II of the Dodd-Frank Act
F H: R F GSIB U.S. O
Confirming the Resolution Strategy
In the context of a Title II resolution, the FDIC’s internal planning analyzes financial company-
specific resolution strategies and execution challenges, including options for restructuring. In light
of the advantages of the SPOE strategy, and the policies and innovations that U.S. authorities and
institutions have developed that support that strategy (described in Section 2), the FDIC expects
that for a Title II resolution of a U.S. GSIB, an SPOE strategy will be most suitable in a wide array
of potential scenarios. SPOE involves only the top holding company of the GSIB entering
resolution, allowing material operating subsidiaries to remain open and operating, with one
resolution authority overseeing the financial company’s stabilization and restructuring by stepping
into the shoes of the holding company entering resolution.
The feasibility of the SPOE strategy is improved when the financial company has suicient
resources to recapitalize subsidiaries to meet minimum capital requirements, and additional
capital to meet market expectations, thus keeping all material operating subsidiaries out
of separate insolvency proceedings.
32
If a financial institution is nearing failure and is under such
severe stress that its existing resources would be insuicient to recapitalize material operating
subsidiaries, then such circumstances may require an alternative strategy in which one
or more material subsidiaries or groups are placed into separate resolution proceedings under
their applicable insolvency regimes. For example, if a U.S. GSIB’s resources were inadequate
to recapitalize the group’s material operating subsidiaries under SPOE, then its U.S. broker-dealer
32
While the SPOE strategy supports the stabilization and continuation of material subsidiaries, the FDIC may initiate
the restructuring process quickly upon entry into resolution which may involve launching an immediate wind down or
separate insolvency proceeding for certain BFC subsidiaries whose operations are not critical or do not contribute to
the value of the group. Approaches to the restructuring and wind down of operations are discussed in more depth in the
Exiting from Resolution section below.
Since the global financial crisis, foreign authorities in charge of the supervision and resolution of non-U.S. GSIBs
also have improved their resolution regimes and the resolvability of systemically important banks.* The FDIC has
participated in the cross-border CMGs of many foreign GSIBs, which has advanced familiarity with those home
authorities’ plans for resolution.
When a foreign GSIB with U.S. operations fails, the FDIC expects that the resolution will be led by the home country
authorities under the strategy they have adopted, most commonly an SPOE strategy that would enable the foreign
GSIB’s U.S. subsidiaries to remain open and operating while the foreign parent is resolved. The foreign GSIB’s U.S.
operations could be recapitalized using internal TLAC that the Federal Reserve has required them to issue from their
U.S. IHC to their top-tier parent (see 12 CFR Part 252) or other capital contributions from the foreign parent,
if necessary.
If these actions are insuicient and the foreign GSIB’s U.S. operations need to be resolved separately, the ordinary
resolution regime would most likely apply (e.g., bankruptcy for IHCs, FDI Act for IDIs, Securities Investor Protection
Act for broker dealers, see Figure A above.) All foreign GSIBs operating in the United States have developed Title
I plans for an orderly resolution under bankruptcy for their U.S. operations. However, just like any other financial
company, the foreign GSIB’s IHC is legally eligible for resolution under DFA’s Title II, if it meets the conditions.
* See Financial Stability Board 2023 Resolution Report https://www.fsb.org/wp-content/uploads/P151223.pdf.
25 | Overview of Resolution Under Title II of the Dodd-Frank Act
or U.S. IDI could be placed into resolution under the Securities Investor Protection Act (SIPA)
or the FDI Act, respectively, while the holding company is resolved under Title II. Or, if resources
do not support suicient recapitalization of a foreign subsidiary, a foreign authority could
initiate a resolution proceeding of a U.S. GSIB’s overseas subsidiary under applicable laws in that
jurisdiction. If a U.S. GSIB were resolved using such an alternative, the FDIC would still be able to
rely on many of the same resources and operational procedures, though there will likely
be additional challenges in stabilizing operations, maintaining operational continuity, and
preserving value for claimants.
F I: H D GSIB R U T II A M D?
If a GSIB were to be resolved using an SPOE strategy, the group’s insured depository institution (IDI) would remain
open and operating and deposits would not bear losses. Your deposits are held by an IDI, not the GSIB parent
holding company that would be placed into resolution. All of the GSIB’s material subsidiaries—including the GSIB’s
IDI which holds your deposits—remain open and operating. You will have full access to your deposits as you need
them.
If a GSIB were to be resolved using an MPOE strategy, certain subsidiaries would be resolved separately. If the GSIB’s
IDI failed, the FDIC would manage its resolution under provisions of the FDI Act.* Since the founding of the FDIC in
1933, no depositor has lost a penny of FDIC-insured funds.
* See Bank Failures (https://www.fdic.gov/resources/resolutions/bank-failures/) and Understanding Deposit
Insurance (https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance/index.html).
26 | Overview of Resolution Under Title II of the Dodd-Frank Act
INTENTIONALLY LEFT BLANK
27 | Overview of Resolution Under Title II of the Dodd-Frank Act
4. OPERATIONAL STEPS FOR A U.S. GSIB
TITLE II RESOLUTION
This section describes the operational steps the FDIC expects to take to implement a Title II
resolution of a U.S. GSIB using an SPOE strategy, which it expects to be the appropriate strategy
to resolve U.S. GSIBs. This discussion starts from the launch of the resolution when the FDIC
is appointed receiver, then discusses the FDIC’s expected steps for stabilization of the operations,
orderly wind down and restructuring, and exit from resolution. The FDIC’s operational processes
for executing a Title II resolution build upon and are informed by such processes for IDIs, but
are significantly dierent given the complex nature of the financial companies involved and the
dierent legal authority that would be applied. While this section focuses on expectations for
implementing the Title II resolution for U.S. GSIBs reflecting their particular characteristics and
resolution plans, many of the processes described are also adaptable to support resolution
of other types of systemically important financial companies under Title II.
Launching the Resolution
Launching a resolution involves a number of steps that happen concurrently. This section
describes the processes that the FDIC, as receiver, undertakes at the beginning of resolution,
specifically: establishing the Bridge Financial Company, its leadership, and governance;
transferring assets and liabilities to the Bridge Financial Company or receivership; and launching
the claims process.
STEPPING IN AS RECEIVER
Upon its appointment as receiver for the failed financial company, the FDIC steps into the shoes
of its oicers, directors, and shareholders, taking control of all assets of the failed company,
including its subsidiaries.
33
As receiver, the FDIC has broad authority to continue operations,
collect debts, and airm or repudiate contracts of the holding company in receivership. The FDIC
as receiver is empowered to charter a new Bridge Financial Company, and to transfer assets and
liabilities from the receivership to the Bridge Financial Company.
34
FORMING THE BRIDGE FINANCIAL COMPANY
Title II provides the FDIC the authority to charter a Bridge Financial Company, appoint its
directors, and establish the terms of its governance.
35
A Bridge Financial Company chartered
and organized by the FDIC is a new legal entity created to facilitate the resolution of a financial
company under Title II. In the expected SPOE approach for a U.S. GSIB Title II resolution, the newly
33
The DFA authorizes FDIC to, “succeed to all rights, titles, powers, and privileges of the covered financial company and
its assets” (§ 210(a)(1)(A)(i) ; 12 U.S.C. § 5390(a)(1)(A)(i)) and “take over the assets of and operate the covered financial
company” and “conduct all business of the covered financial company” (DFA § 210(a)(1)(B)(i); 12 U.S.C. § 5390(a)(1)(B)(i)).
34
DFA § 210(h); 12 U.S.C. § 5390(h).
35
DFA § 210(h); 12 U.S.C. § 5390(h).
28 | Overview of Resolution Under Title II of the Dodd-Frank Act
chartered Bridge Financial Company will become the substitute top-tier holding company, hold
the ownership stakes in subsidiary operating companies, and support the continuation of the
critical operations of the group.
The FDIC as receiver may transfer assets and liabilities of the failed U.S. GSIB to the Bridge
Financial Company at its discretion, and is not required to seek any customer, regulator, or court
approval or consent.
36
Title II requires the FDIC as receiver to observe the principle of equitable
treatment of creditors of the same class in connection with the transfer of assets and liabilities
to the Bridge Financial Company while permitting departure from that principle only in limited,
clearly specified circumstances.
37
In a U.S. GSIB SPOE resolution, the FDIC expects that substantially all the assets of the top-tier
holding company will be transferred to the Bridge Financial Company, which likely will include
the investments in and loans to the group’s subsidiaries as well as cash and securities held by the
holding company. Secured liabilities would likely be transferred to the Bridge Financial Company,
together with the accompanying collateral. Certain obligations to trade creditors needed to continue
the smooth functioning of the Bridge Financial Company may also be transferred. The failed financial
company’s unsecured liabilities (primarily long-term debt, including that issued pursuant to the
Federal Reserve Board’s rule, as discussed above
38
), together with the shareholders’ equity, will
be retained in the receivership.
39
These creditors and shareholders will become claimants against
the receivership estate. The claimants who held those liabilities will bear the losses of the group
in accordance with the statutory creditor hierarchy (see Figure N: The Dodd-Frank Act Creditor
Hierarchy). The value of their claims and the amount of their recoveries will be determined by the
proceeds from the resolution process (see Exiting from Resolution discussion).
Although the Bridge Financial Company is statutorily exempt from regulatory capital
requirements, it will be capitalized because it will receive substantially all of the assets of the
failed U.S. GSIB holding company while leaving its unsecured liabilities, including the long-term
debt required by the TLAC rule, behind in the receivership. As such, the Bridge Financial Company
is expected to be in a better position than the failed GSIB to stabilize the group and support its
material operating subsidiaries.
APPOINTING NEW DIRECTORS AND OFFICERS
Upon appointment of the FDIC as receiver, the board of the failed financial company would cease
and certain oicers responsible for the failure would not be retained by the Bridge Financial
Company. To establish governance for the Bridge Financial Company upon its formation, the FDIC
would install a new board and appoint new individuals to key senior executive roles, including
the CEO and potentially other C-suite oicers. To maintain operational continuity and preserve
value, the FDIC expects that in most cases it would continue the roles of the vast majority of other
managers and employees of the failed financial company in the Bridge Financial Company upon
36
DFA § 210(a)(1)(G) and (h)(5)(D); 12 U.S.C. § 5390(a)(1)(G) and (h)(5)(D).
37
DFA § 210(h)(5) and 12 CFR 380.27.
38
The Federal Reserve Board’s clean holding company requirements limit the amount of non-TLAC liabilities that a U.S.
GSIB can issue to 5 percent of the firm’s TLAC; these other unsecured liabilities would remain in the receivership.
39
In deciding which assets and liabilities to transfer to the Bridge Financial Company and which to leave in the
receivership, the FDIC is required to treat similarly situated creditors equitably, with limited exceptions, as outlined in
DFA § 210(b)(4), (d)(4), and (h)(5)(E) of the DFA and 12 CFR § 380.27.
29 | Overview of Resolution Under Title II of the Dodd-Frank Act
its formation, provided they are not responsible for the failure. Employees and managers
of the subsidiaries that are not in resolution would largely be unaected. Appropriate steps would
be taken to retain key employees.
40
In establishing oversight and management for the Bridge
Financial Company, the FDIC will be guided by its aim to foster public and market credibility,
leverage private sector experience and skills in fulfilling the resolution strategy, and retain the
resident expertise needed to conduct the day-to-day operations.
F J: A M C
40
Where directors or management of the subsidiaries are interlocking with the holding company, there may be some
management changes at key subsidiaries, but the authorities and responsibilities of those positions would largely
remain the same.
How does the FDIC hold managers
responsible for the failure accountable?
How does the FDIC identify new managers
for failed financial companies?
Upon entry: The Dodd-Frank Act mandates that oicers
and directors responsible for the failure cannot
be retained. The DFA also provides authority for
compensation clawbacks for senior executives who
are considered to be substantially responsible for the
failed condition of the company.
During restructuring: The FDIC will retain authority
to remove directors at will during the bridge period,
and expects to work with the new board and CEO to
identify and remove management responsible for the
firm’s failure. The FDIC may also seek support from
regulators to identify and remove operating subsidiary
management responsible for the GSIB’s failure.
Upon exit: DFA’s statutory creditor hierarchy
subordinates compensation owed to senior executives
and directors of the failed companies to all claimants
except shareholders.
The FDIC maintains a roster of qualified and vetted
individuals who could serve in leadership capacities
at a Bridge Financial Company. During the early phases
of resolution planning, the FDIC would re-evaluate its
existing roster based on the facts and circumstances of
the current market environment and failure scenario
to identify directors and oicers with the most relevant
experience and skills to lead the particular Bridge
Financial Company. The FDIC would seek input from
other U.S. authorities in identifying Bridge Financial
Company director and oicers.
All candidates are expected to receive appropriate “fit-
and-proper” approvals in relevant jurisdictions.
30 | Overview of Resolution Under Title II of the Dodd-Frank Act
ESTABLISHING BRIDGE OVERSIGHT
The unique circumstances of a Title II resolution, and complexity of the institutions that may
be subject to such a resolution, require clearly delineating authorities and roles between the
FDIC and the Bridge Financial Company. The FDIC would formalize the oversight and governance
of the Bridge Financial Company when it is formed through its organizing documents, including
its articles of association, bylaws, and charter. The FDIC must make certain that (1) the Bridge
Financial Company has all the powers and authorities it needs to continue the operations of the
failed financial company’s subsidiaries, (2) the oicers and directors have clear authority
to take necessary actions to run the day-to-day operations, (3) the operations of the Bridge Financial
Company and its subsidiaries align with an Orderly Liquidation Plan (OLP) acceptable to the
Secretary of the Treasury, and (4) the Orderly Liquidation Fund is timely repaid.
41
In connection with the formation of the Bridge Financial Company, the FDIC expects to put in place
an oversight framework whereby the FDIC retains control over major strategic decisions of the
financial company, including key hires, restructuring options, major capital and funding uses, and
retention of certain external consultants (see Figure J: Addressing Management Challenges). At the
same time, the FDIC expects to assign the new board and its management specific responsibilities,
and to direct that they develop and implement specified action plans acceptable to the FDIC
that would lead to the timely, orderly exit from the resolution process. For example, the
FDIC will ask the Bridge Financial Company leadership to review the financial company’s risk
management policies and practices to determine the cause(s) of failure, and to develop and
implement a plan to mitigate risks identified in that review. In addition, the FDIC will ask the
Bridge Financial Company leadership to build out a detailed restructuring plan in line with the
OLP. The Bridge Financial Company leadership will also be responsible for managing capital and
funding to stabilize the financial company’s critical operations, carry out the restructuring plan,
and meet the terms of any Mandatory Repayment Plan (MRP) (see Funding the Bridge Financial
Company and its subsidiaries for more detail on the OLP and MRP).
42
This division of responsibilities will enable the management and sta of the Bridge Financial
Company to conduct most of the day-to-day activities, while the FDIC will guide strategic
decision-making and ensure that the objectives of Title II are met.
41
Before use of OLF resources, an OLP, setting forth the orderly liquidation strategy for the firm and the use of OLF funds,
must be agreed upon with the Secretary of the Treasury. Dodd-Frank Act § 210(n)(9)(A) (12 U.S.C. § 5390(n)(9)(A)).
42
An MRP must be in eect between the FDIC and the Treasury before any OLF funding, in aggregate, exceeds the
initial 10 percent Maximum Obligation Limitation or before OLF funds may be outstanding for longer than 30 days. The
Secretary of the Treasury and the FDIC must consult with and deliver the MRP to Congress. DFA sections 210(n)(6) and
(n)(9), 12 U.S.C. § 5390(n)(6) and (n)(9). See also 12 CRF § 380.10(a) and 31 CFR § 149.3. See Stabilizing the Bridge and its
Operations section for discussion of the terms for use of OLF.
31 | Overview of Resolution Under Title II of the Dodd-Frank Act
F K: B A B G O—E
D R B FDIC B F C
The FDIC retains
key controls over
strategic decisions
Approval of:
• Restructuring plan consistent with the OLP for reorganization of the Bridge
Financial Company, including material divestitures, mergers, consolidation,
or reorganization of Bridge Financial Company
• Amendments to the Bridge Financial Company’s articles of association and bylaws
• Appointment and removal of the Bridge Financial Company Board of Directors,
CEO, and certain senior executive oicers
• Funding and liquidity plan, including compliance with the MRP, and the approach
to usage and repayment of any OLF advances and any related guarantees
• Key contracts such as the independent auditor and valuation consultant
New Bridge
Financial Company
Board and CEO
oversee day-to-day
operations
Management of:
• Development and implementation of a detailed restructuring and wind-down plan
consistent with the strategic direction provided by the FDIC and outlined in the OLP
• Hiring and firing of oicers and employees (other than designated key oicers)
• Oversight of the group, including subsidiaries and daily operations of the financial
company
• The financial company’s governance framework to oversee the subsidiaries,
subject to changes necessary to accommodate new directors
• Capital and liquidity resources in accordance with the agreed-upon OLP and
approved MRP, including provision of intercompany advances and support for
subsidiaries
• Retention of approved consultants, such as the independent auditor, valuation
consultants, and other professional services
32 | Overview of Resolution Under Title II of the Dodd-Frank Act
COMMENCING THE CLAIMS PROCESS
Similar to IDI resolutions under the FDI Act, the claims process under Title II is an administrative
process handled by the FDIC as receiver, and requires no judicial actions or approvals.
43
The
process the FDIC will use in a U.S. GSIB Title II resolution builds upon the FDIC’s experience
administering claims for IDIs (though it is in some ways simpler due to the absence of deposit
claims at the parent holding company). Under the DFA, as a first step in a Title II claims process,
the FDIC would provide all creditors with notice of the claims bar date by which all claims must
be filed. In addition to mailing notifications, the FDIC anticipates the notice will be provided
in a variety of ways, such as by a website, call centers, and publications. The FDIC expects to use
a 90-day bar date—the minimum statutory period—to support an expeditious resolution.
As a result of the Federal Reserve Board’s clean holding company requirement, U.S. GSIBs have
reduced the kinds of liabilities issued by the parent holding company, which significantly reduces
the number and type of claimants and is expected to simplify the claims process.
The FDIC expects to incorporate elements of the bankruptcy claims process where suitable. For
instance, to improve transparency and eiciency, the FDIC may schedule certain claims that would
be allowed without any filing required, unless a creditor disputes the scheduled amount. Most
claims of bondholders likely will be managed by indenture trustees so that individual bondholders
under such an indenture would not need to file claims. The FDIC also may establish a public claims
registry to make available the amount and status of claims.
The FDIC will establish appropriate procedures and tracking mechanisms to process and make
determinations on filed claims within 180 days. In some instances, upon mutual agreement, the
determination period is extendable beyond 180 days aer a claim is filed.
44
Further, the FDIC will
establish an administrative process for claimants to seek review of disallowed claims. Once this
administrative process is exhausted, claimants who are dissatisfied with the results of this process
may file a case in federal court within 60 days thereaer.
45
The FDIC will satisfy allowed claims with
the proceeds of the resolution in accordance with the statutory claims hierarchy in the Dodd-Frank
Act, as described in the Exiting from Resolution section below. The FDIC also expects to provide
information regarding the receivership on the FDIC’s website and establish a call center to handle
public inquiries. The FDIC may provide claimants with supplemental information, where practical,
to assist in the claimants’ assessment of claim value. To quickly provide the specialized skills
and services to the receiver for a resolution of this magnitude, the FDIC has contracting processes
prepared to support the orderly resolution (see Figure L: FDIC Use of Contractor Support in a Title II
Resolution).
43
See DFA § 210(a)(2)-(7); 12 U.S.C. § 5390(a)(2)-(7).
44
DFA § 210(a)(3)(A)(ii); 12 U.S.C. § 5390(a)(3)(A)(ii).
45
DFA § 210(a)(4); 12 U.S.C. § 5390(a)(4). The FDIC expects to publish the notice during the week following its
appointment as receiver, similar to its practice for IDI resolutions.
33 | Overview of Resolution Under Title II of the Dodd-Frank Act
F L: FDIC U C S T II R
Stabilizing Operations
Activities in the days immediately following entry into resolution will focus on stabilizing the Bridge
Financial Company and its subsidiaries’ operations to support the orderly functioning of the wider
financial system and to preserve value for the receivership estate. The newly formed Bridge Financial
Company itself is a relatively simple entity, and the FDIC expects it will (1) be backed by OLF liquidity
or guarantees to the extent needed and (2) have a strong balance sheet with ample capital resulting
from the reduction in liabilities. The operating subsidiaries transferred to the Bridge Financial
Company that house all the business and operational activity of the group—one or more of
which were the source of the group-wide failure and which may be under distress—will require
the most attention.
Immediate actions will be taken to use the internal resources of the group to recapitalize these
subsidiaries, provide liquidity support, and maintain continuity of operations. These actions will
be complemented by a comprehensive communications eort coordinated among the FDIC,
other authorities, and the Bridge Financial Company aimed at providing clarity and confidence
in the resolution to a range of critical stakeholders—sta of the Bridge Financial Company and
its subsidiaries, customers, counterparties, various authorities, and the wider public. These
actions are designed to enable subsidiaries to maintain their authorizations to operate from their
respective supervisors and establish market confidence that allows for ongoing operations and
business activity.
To quickly provide the specialized skills and services to the receiver, the FDIC has contracting processes prepared
to support orderly resolution. The FDIC may use these contracts for:
Claims—supporting the claims administration and noticing process
Executive Search—identifying C-suite and board of directors for the Bridge Financial Company
Strategic Communications—developing communications strategies associated with managing and executing
resolutions
Human Resources Management—including on-boarding and o-boarding, establishing retention and
compensation plans, and ensuring continuity of payroll and benefits and systems and benefits administered for the
receivership
Receivership Financial Accounting and Reporting—including financial accounting and reporting, tax accounting,
and valuation of financial instruments
Financial Advisory Services—supporting strategic planning; valuations; restructuring, divestitures, and sales;
complex financial analysis; and receivership asset management
34 | Overview of Resolution Under Title II of the Dodd-Frank Act
CAPITALIZING THE BRIDGE FINANCIAL COMPANY AND ITS SUBSIDIARIES
The balance sheet of the Bridge Financial Company is composed of substantially all the assets
of the failed U.S. GSIB, while unsecured liabilities of the failed holding company, including the
long-term debt required by the TLAC rule, are le behind in the receivership. This results in the
Bridge Financial Company beginning with strong capitalization that should promote market
confidence in the bridge and its material operating subsidiaries, positioning it to begin the process
of winding down operations and restructuring viable businesses for an eventual exit from the
resolution process.
In the run-up to resolution, the financial company will be using its estimation and forecasting
capabilities developed as part of its Title I planning to calculate realized and projected losses
across subsidiaries. The financial company will evaluate its needs against its mix of pre-positioned
resources at material subsidiaries and additional contributable resources that can be deployed
flexibly across the group. At the same time, the FDIC will leverage the capabilities of the financial
company and other information it and other supervisors provide, to inform an FDIC estimation
of the realized and projected level of losses across subsidiaries. The FDIC will then work with
domestic and foreign supervisors to establish expectations and specific options for addressing
any capital shortfalls.
Depending on the failure scenario, actions may be needed immediately upon entry into resolution
to recapitalize material subsidiaries that have suered losses. Recapitalization will be to a level
suicient to meet local regulatory requirements (confirmed by subsidiary supervisors) to remain
open and operating, and to engender market confidence. If, for example, a U.S. GSIB enters Title
II resolution with losses at its IDI, the FDIC would use the internal resources of the failed GSIB to
recapitalize the IDI to keep it open and operating (and out of a separate FDI Act resolution). The
specific amount, location, and timing of losses may not be easily predictable, which makes
it important to retain flexibility with unallocated contributable resources. The FDIC would expect
the Bridge Financial Company to first use pre-positioned internal TLAC (for example by forgiving
intercompany loans from the parent holding company) for recapitalization. If additional capital
is needed for regulatory or market confidence purposes, other pre-positioned resources
or unallocated contributable resources could be used.
FUNDING THE BRIDGE FINANCIAL COMPANY AND ITS SUBSIDIARIES
In a Title II resolution, the FDIC would seek to maximize private-sector sources of funding to limit
backstop lending from the public sector. However, if the financial company’s internal resources
and private sources of funding are not suicient or readily available, the DFA authorizes the
establishment of the OLF at Treasury that the FDIC may draw upon, subject to terms agreed
to by the Secretary of the Treasury, to serve as a back-up source of temporary liquidity support
for the resolution.
To meet the Bridge Financial Company’s liquidity needs, such as the operating subsidiaries’
payment and settlement obligations to customers, clients, counterparties, and FMUs, the FDIC
envisions several possible avenues for the Bridge Financial Company to obtain funding and
stabilize its operations throughout resolution, including:
z Customary funding—The FDIC expects that some customary funding sources would remain
in place, as a capitalized Bridge Financial Company (and recapitalized subsidiaries) with access
35 | Overview of Resolution Under Title II of the Dodd-Frank Act
to backstop liquidity or guarantees via the OLF should be a creditworthy entity with ready
access to private sector funding. To the extent that subsidiaries have access to existing funding
sources, including market-based and ordinary public facilities, customary funding sources are
the preferred method of funding.
z Pre-positioned resources and unallocated contributable resources—In connection with the
Title I planning process, U.S. GSIBs have planned for the possibility that customary funding
sources will be unavailable, and all U.S. GSIBs have pre-positioned liquidity at material
subsidiaries for use in resolution. In addition, these institutions have provided for unallocated
contributable resources that are intended to be available in resolution to support its material
entities as needed. These resources would be available for the Bridge Financial Company to
distribute quickly where needed.
z Direct OLF funding—If customary funding and any pre-positioned and unallocated
contributable resources are insuicient to meet the Bridge Financial Company’s liquidity needs,
the OLF can serve as a temporary backstop liquidity source to assure prompt stabilization
and instill confidence in the resolution strategy. The OLF can provide liquidity, as needed and
appropriate, immediately at the point of entry into Title II resolution. (See discussion below
on terms for the use of the OLF.)
z OLF-backed guarantees—Subject to the same requirements for accessing the OLF for
borrowing cash, the FDIC may provide liquidity support through the use of guarantees backed
by its ability to borrow OLF funds. The use of OLF-backed guarantees instead of direct funding
could preserve or induce private-sector financing and may reduce the cash requirements
needed from the OLF.
In the run up to resolution, the FDIC would estimate the expected range of funding needs for the
Title II resolution based on the most recent available financial data. Information from the U.S. GSIB,
supervisors, and market sources would be used to calculate—and regularly update—available
liquidity and funding needs estimates. Models and methodologies developed through the Title I
resolution planning process will provide capabilities and data that the FDIC likely would leverage
to confirm its own projections of the peak funding needs and minimum operating liquidity of the
subsidiaries. In addition, the financial company’s internal cash flow projections would inform
estimates for Title II funding needs. As has been a focus of resolution planning with authorities in
CMGs and other venues, the FDIC expects to communicate and coordinate with U.S. and foreign
authorities to operationalize funding in host jurisdictions, including sourcing of foreign currency
as needed.
The FDIC would use its projections to develop a schedule for borrowing from (and repayment of)
the OLF, consistent with the OLP agreed upon with the Secretary of the Treasury. The amount
of borrowing available will be proportionate to the size of the company that failed. While the
amount of borrowing available may be substantial, it is not unlimited and is subject to a maximum
obligation limitation.
46
The initial funding limit is calculated in a straightforward manner:
it is equal to 10 percent of the financial company’s total consolidated assets based on the most
recent financial statements available. If OLF funding is needed in excess of this initial 10 percent
or for longer than 30 days, the FDIC can obtain funding of up to 90 percent of the fair value
of the financial company’s total consolidated assets available for repayment, subject to an MRP
46
DFA § 210(n)(6); 12 U.S.C. § 5390(n)(6). See also 12 CFR § 380.10 for the FDIC and 31 CFR Part 149 for U.S. Treasury.
36 | Overview of Resolution Under Title II of the Dodd-Frank Act
approved by the Secretary of the Treasury.
47
The MRP would provide a schedule for the repayment
of all OLF obligations, with interest. Ultimately, as the financial company stabilizes, the OLF
borrowings could be repaid either from recoveries on the assets of the failed financial company
or from funds obtained upon re-entry into private funding markets. The terms of each OLF advance
must be agreed upon with the Secretary of the Treasury. DFA expressly requires the interest rate
to include a surcharge to incentivize prompt repayment.
48
Similarly, the FDIC expects guarantees
to be targeted in scope and duration and to incur a fee designed to incentivize a prompt release of
the guarantee. Requirements with respect to collateral also would be agreed upon with Treasury.
MAINTAINING OPERATIONAL CONTINUITY
A critical element of stabilization is maintaining operational continuity for the group’s material
entities and functions. This includes access to FMUs, continuation of critical services, retention
of key employees, and stays on termination rights. Although a U.S. GSIB resolution under Title
II using an SPOE strategy provides a clear path to operational continuity by avoiding multiple
competing insolvencies and keeping the operations of the interconnected group intact, potential
challenges to maintaining continuity must be addressed to stabilize the entity, including:
z Continuity of access to FMUs—Uninterrupted and dependable access to FMUs—the
multilateral systems that provide the infrastructure for conducting payment, clearing, and
settlement activities among financial institutions—will be essential for the stabilization of
Bridge Financial Company operations. As part of their Title I plans, GSIBs have identified
key FMU counterparties, including payment systems, clearing banks, and agent banks, and
have established communication protocols with those counterparties that can be leveraged
in a Title II resolution to inform liquidity provision and communication strategies, helping
to minimize disruption to FMU services.
z Continuity of critical services—In the period immediately following appointment of the FDIC
as receiver and into the stabilization phase, care will be taken to continue the critical services
of the group (shared and outsourced services necessary for the group’s continued operation).
The FDIC expects to leverage the GSIB’s crisis preparations and Title I planning to understand
the group’s operational interconnectedness and the contingency strategies for maintaining
critical services. For example, the U.S. GSIBs have established arms-length terms for ailiate-
shared services and identified key service contracts. As a result of the Title I process, these
contracts contain resolution-friendly language to avoid termination based on resolution
or insolvency, and in some cases, include resolution-friendly assignability terms to permit
assignment of agreements in a divestiture. In their Title I plans, the U.S. GSIBs include estimates
of the working capital needed for the continuation of shared and outsourced services. The FDIC
and Federal Reserve Board have recommended that U.S.GSIBs pre-position enough resources at
subsidiaries that provide critical services to enable them to operate for six months without extra
resources from the parent.
z Retention of key employees—Key employees are essential to continuity of operations because
of their relationships with customers and counterparties, as well as their expert knowledge
of operations, products, and systems. U.S. GSIB retention plans for key employees, for example
in Title I plans, will provide useful insights to the FDIC, including by mapping key employees
47
DFA § 210(n)(6) and (n)(9), 12 U.S.C. § 5390(n)(6) and (n)(9). See also 12 CRF § 380.10(a) and 31 CFR § 149.3.
48
DFA § 210(n)(5)(C); 12 U.S.C. § 5390(n)(5)(C).
37 | Overview of Resolution Under Title II of the Dodd-Frank Act
to material entities and critical operations. The FDIC has identified a range of employee
retention strategies to continue operations uninterrupted.
z Temporary stays on termination rights—In a Title II resolution, QFC stays would be enforceable
domestically and on a cross-border basis, thus mitigating risk to operational continuity. For
GSIBs, the vast majority of QFCs sit at the operating subsidiary level rather than at the parent
level; in some cases, the parent may provide guarantees or credit support to the subsidiaries’
QFC obligations. Title II includes a stay that would prevent any cross-default related to the
guarantees or credit support provided to the subsidiaries’ QFCs.
49
The statutory framework
is further supported on a cross-border basis by the ISDA Resolution Stay Protocols. Under
these statutory and contractual provisions, the counterparties do not have any right to
terminate or exercise other remedies because of the insolvency or financial condition of the
financial company or the appointment of the FDIC as receiver for the financial company as
long as (1) the guarantee or credit support and all related assets and liabilities are transferred
to—and assumed by—a Bridge Financial Company or other qualifying acquirer within one
business day, or (2) the FDIC, as receiver, otherwise provides adequate protection regarding
the obligations supported by the guarantee or other credit support.
z Maintaining continued authorizations—As part of contingency planning and stabilization
activities, the FDIC and the Bridge Financial Company will work with domestic and foreign
authorities to ensure that regulated entities continue to meet all conditions for continued
authorizations, and that authorities continue to allow normal operating actions on that basis.
Beyond demonstrating compliance with typical supervisory and regulatory requirements, the
change in control of the group’s operations from the failed financial company to the Bridge
Financial Company is expected to involve additional approvals, including coordination to have
new board members and managers deemed “fit and proper.”
PUBLIC FACING COMMUNICATIONS
Coordinated, consistent, and timely communications to the broad array of stakeholders will be
critical to stabilizing the financial company’s operations, retaining employees to continue critical
operations, and reassuring the failed financial company’s customers, counterparties, regulatory
authorities, and the general public. U.S. authorities would coordinate the announcement of the
FDIC’s appointment as receiver, initiating public messaging to all stakeholders. The FDIC expects
initial communications would include the following elements:
z Coordination—domestic and international authorities are coordinating to implement an
orderly resolution plan, and subsidiaries are meeting their regulatory requirements and remain
open and operating;
z Continuity—key operations and functions will be stabilized, and over time, through the process
of restructuring, will either continue or wind down in an orderly manner;
z Recapitalization and funding—the group, including its major domestic and foreign operating
subsidiaries, has been recapitalized and has access to suicient liquidity to meet its obligations
and operate its businesses; and
z Accountability—shareholders and creditors will bear the costs of the resolution, and
management responsible for the failure will be held accountable.
49
DFA § 210(c)(16),12 U.S.C. § 5390(c)(16).
38 | Overview of Resolution Under Title II of the Dodd-Frank Act
A key challenge with respect to communication is coordinating messaging across multiple time
zones with stakeholders across the globe. The FDIC has existing relationships with strategic
communication contractors to support the FDIC’s Title II communication planning and preparations
(see Figure L: FDIC Use of Contractor Support in a Title II Resolution). The FDIC would also leverage
the communication plans and crisis communication capabilities developed by the U.S. GSIB,
included as part of the Title I process. Starting on the date of appointment, targeted messaging
will be provided to the public, customers, counterparties, and employees in coordination with
host authorities and the Bridge Financial Company. In addition, the FDIC would fulfill its statutory
reporting requirements
50
and timely respond to other oversight requests.
During stabilization, communications are expected to focus on the Bridge Financial Company
operations and actions taken to hold accountable management responsible for the failure.
As the Bridge Financial Company carries out restructuring by winding down or selling business
lines and assets, both the Bridge Financial Company and the FDIC will proactively communicate
progress, likely with more specific operational and resolution details, including allocation of
losses to shareholders and creditors of the failed financial company through the claims process.
Communications will continue aer the termination of the Bridge Financial Company with
messaging to claimants and other external stakeholders regarding ongoing activities of the
receivership (which continues separate from the Bridge Financial Company), congressional
reporting, ongoing litigation, or remaining asset liquidations.
Exiting from Resolution
The FDIC would seek to exit the resolution as soon as practicable and return the assets and
restructured operations to private-sector control, aer addressing the cause of failure and
ensuring that ongoing operations no longer pose a serious adverse risk to U.S. financial stability.
The manner and timing of settling claims and exiting resolution will be outlined in the OLP agreed
to with the Secretary of the Treasury. Once the Bridge Financial Company is open and operating,
the Bridge Financial Company management will develop a detailed plan for implementing
that strategy by restructuring the Bridge Financial Company and exiting from resolution. This
restructuring plan, which will be subject to the FDIC’s approval and oversight, will describe the
plan for winding down certain entities or lines of business and how remaining operations would
be restructured and returned to private-sector control.
50
The Department of the Treasury is responsible for reporting to Congress within 24 hours of the appointment of
the FDIC as receiver. 12 U.S.C. § 5383(c)(2). The FDIC is responsible for a report to the Senate Committee on Banking,
Housing, and Urban Aairs and the House Financial Services Committee not later than 60 days aer the appointment
(and amended no less than every quarter, “as necessary”). 12 U.S.C. § 5383(c)(3). In addition, if the FDIC requires more
than three years to resolve a failed financial company under Title II, the statute provides for two one-year extensions. For
the first one-year extension, the FDIC must certify in writing to the Senate Committee on Banking, Housing, and Urban
Aairs and the House Financial Services Committee that the continuation of the receivership is necessary to, among
other reasons, protect the stability of the financial system of the United States. DFA § 202(d)(2); 12 U.S.C. § 5382(d)(2).
For the second one-year extension, the Secretary of the Treasury must concur and the FDIC, within 30 days, must file a
report with those committees describing the need for the extension and the specific plan for concluding the receivership
before the end of the extension. DFA § 202(d)(3); 12 U.S.C. § 5382(d)(3).
39 | Overview of Resolution Under Title II of the Dodd-Frank Act
ORDERLY WIND DOWN AND RESTRUCTURING OF OPERATIONS
Once the operating subsidiaries are stabilized, the FDIC as receiver and Bridge Financial Company
management expect to focus on developing and implementing the restructuring plan. The
restructuring plan must be consistent with the FDIC’s overall resolution strategy as described
in the OLP, and will be subject to review, approval, and monitoring by the FDIC. The restructuring
and exit plan will preserve optionality and flexibility, so that actions (and the time needed to
execute) can be responsive to the circumstances during resolution, prevailing market conditions,
and the judgement of authorities. Decisions regarding the restructuring plan would also include
assessments of the systemic impact of various options, such as the substitutability of critical
operations or the possible impact on markets.
The FDIC will have analyzed the possible restructuring, divestiture, and wind-down actions to occur
in resolution before the failure and incorporated its expectations into the resolution strategy for the
financial company. For resolution of a U.S. GSIB, the starting point for this analysis will draw on the
divestiture and wind-down options provided by the financial company in its recovery and Title I
resolution plans. The type and extent of restructuring will depend on the nature of the financial
company’s business, the causes of failure, and the economic and market conditions at the time.
For example, an appropriate restructuring plan for specific types of operations could include:
z Sales of subsidiaries or specific business lines (e.g., for relatively independent asset
management vehicles or wealth management businesses);
z Wind down/liquidation of specific portfolios, business lines, or subsidiaries in an orderly
manner (e.g., for market-oriented trading operations housed in broker-dealer subsidiaries);
z Break-up of certain operating subsidiaries for sale or spin-o (e.g., for regional retail banking
franchises); or
z Resolution proceedings for specific subsidiaries (e.g., for an insolvent subsidiary not critical
to the ongoing operations or value of the group).
51
Any restructuring will aim to maintain value, continue or transition critical operations, address the
cause of failure, and ensure that the entity or entities emerging from the Bridge Financial Company
can be eectively resolved under the Bankruptcy Code (or other applicable regime) in an orderly
fashion. Ongoing restructuring and divestiture requirements could also continue aer exit from
resolution via conditions placed on acquirers or other supervisory or regulatory requirements.
TERMINATING THE BRIDGE
During the bridge phase, the FDIC as receiver will be working to return assets and operations
to private-sector control and to terminate Bridge Financial Company status.
52
To exit from
resolution, the FDIC would require the Bridge Financial Company 1) to engage an independent
51
While implementing the OLP, the FDIC might find that an insolvent (or soon to be insolvent) GSIB subsidiary would
take resources away from stabilizing the group. If risks of cross-default, interconnectedness, and contagion could be
mitigated, that insolvent subsidiary could be resolved under applicable law to preserve the viability of the rest of the
group or its most systemically important functions. The applicable resolution framework would be a function of the type
of subsidiary (see Figure A).
52
By statute, a Bridge Financial Company must be terminated not later than two years following its charter. That period
may be extended by the FDIC for no more than three additional one-year periods.
40 | Overview of Resolution Under Title II of the Dodd-Frank Act
valuation advisor to conduct an enterprise valuation and 2) to obtain audited financial statements
prepared in accordance with U.S. Generally Accepted Accounting Principles that would
demonstrate the fair value of the Bridge Financial Company’s operations. The FDIC would then
evaluate the enterprise valuation and obtain an opinion from its own independent valuation
advisor. The FDIC expects to use this information to determine the best way to return the financial
company’s operations to private control and terminate the Bridge Financial Company.
While the Bridge Financial Company could be terminated through a public sale or merger,
53
this
exit option might not be feasible. While a small share oering could help with price discovery and
demonstrating private demand for the company’s shares, placing a controlling stake in such
a resolved financial company could be diicult for public markets or industry acquirers to absorb
in a timely manner.
Considering these challenges, the FDIC is preparing to exit from a Bridge Financial Company using
a securities-for-claims exchange. In this approach, a BHC (or successor company or companies)
would issue new debt and equity securities to the receivership, which would distribute them
to satisfy the claims against the receivership in accordance with the statutory creditor hierarchy.
The claimants become the new owners of or creditors to the successor company (or companies),
and can retain or monetize their new securities holdings according to their preferences. This
approach eectively completes the “bail-in” of creditor claims by allocating losses to claimants
according to the DFA creditor hierarchy and putting the remaining claimants (e.g., the former
debtholders and other creditors) in the position of equity and debt holders in the successor company
(or companies). Once the securities are distributed, the Bridge Financial Company’s bridge status
is terminated and the successor company or companies will be owned by the former claimants.
A Title II SPOE resolution using a securities-for-claims exchange is sometimes referred to as
a “closed-firm bail-in,” as the securities distributed to satisfy claims are issued aer the financial
company has been placed into receivership and its operations are moved to a Bridge Financial
Company.
54
While the timeline may vary depending on the scenario, completion of all the steps
needed for the securities-for-claims exchange—making claims determinations, estimating
valuation of any successor company (or companies), and issuing and distributing new securities
to claimants—will be arranged during the bridge period, which is likely to take at least nine
months. This will allow suicient time for the FDIC and the Bridge Financial Company to meet all
of the requisite federal securities law requirements for a securities-for-claims exchange, including
issuing audited financial statements, prospectuses, and necessary disclosures for the successor
company (or companies) to comply with the requirements of the Securities Act of 1933.
53
DFA provides for two thresholds for termination of bridge status related to stock ownership. At the FDIC’s election,
the bridge status may be terminated when a majority of the capital stock of the Bridge Financial Company is sold to a
company other than the FDIC or another Bridge Financial Company. When 80 percent or more of the capital stock is sold
to a person other than the FDIC or another Bridge Financial Company, the bridge status is automatically terminated.
Where the bridge status is terminated, the Bridge Financial Company may be reincorporated under the laws of any state,
and the resulting corporation becomes the successor to the Bridge Financial Company.
54
This contrasts with an “open firm bail-in” process in which TLAC debt instruments are converted to equity to eect
a recapitalization of an existing legal entity at or close to the time of failure of the financial company. This alternative
process is envisioned by some foreign regulatory authorities to carry out an SPOE resolution of GSIBs headquartered in
their jurisdictions. See https://www.fsb.org/2021/12/bail-in-execution-practices-paper/.
41 | Overview of Resolution Under Title II of the Dodd-Frank Act
F M: I E T S--C E
In this example of a securities-for-claims exchange, the Bridge Financial Company would prepare, issue,
and register the exchange of securities of the restructured successor company (or companies). Securities
in the successor company, along with any cash proceeds from the restructuring of the failed company,
would be distributed by the receivership to claimants according to the DFA creditor hierarchy. Losses will
be borne according to the priority of claims under DFA. This is a highly stylized example that does not
attempt to capture all restructuring, winding down, sales, or liquidations that may occur before exiting
from the Bridge Financial Company.
(Liabilities, equity)
Failed Bank
Holding
Company
Bridge
Financial
Company
(Liabilities, equity)
(Cash and
securities issued)
Distributable
Proceeds
(Claims)
Receivership Losses
Net cash
proceeds from
dispositions of
assets
Successor
company
debt securities
Successor
company
equity
securities
Secured and
general unsecured
liabilities
(including OLF)
Equity
Unsecured
liabilities
(e.g., TLAC debt)
Subordinated
unsecured
liabilities
(e.g., TLAC
debt)
Equity
Unsecured
liabilities
Subordinated
unsecured
liabilities
Equity
Losses are borne
in accordance
with the DFA
priority of claims
(see Figure N)
Distribution of cash
and securities to
claimants
Losses
42 | Overview of Resolution Under Title II of the Dodd-Frank Act
SETTLING CLAIMS AND TERMINATING THE RECEIVERSHIP
The Dodd-Frank Act establishes the order of priority in paying all claimants of the receivership
(see Figure N: The Dodd-Frank Act Creditor Hierarchy).
55
The Dodd-Frank Act also generally
requires the FDIC to observe the principle of equal treatment of creditors of the same class.
56
The
FDIC will pay allowed claims against the receivership on a pro rata basis to the extent that assets
in the receivership estate are available following full payment to all more senior classes of claims.
Administrative expenses of the FDIC and any obligations to the United States will be paid in full
before any other claimants are paid (see Figure O: Are taxpayers on the hook for the GSIB failure?).
The FDIC expects that OLF borrowings will have been repaid by this time through the return to
customary funding sources or proceeds of the resolution including the liquidation of assets.
In the unlikely event that this does not occur, and the assets of the Bridge Financial Company,
its subsidiaries, and the receivership are insuicient to repay fully the OLF, the FDIC is required
to impose one or more risk-based assessments on eligible financial companies within a five-year
period to repay any amounts borrowed from the OLF without loss to the taxpayer.
57
The specific combination of cash and securities used to satisfy allowed claims would vary,
depending on the method used to terminate the Bridge Financial Company and the type of assets
available in the receivership estate. For example, if the Bridge Financial Company is terminated
via the securities-for-claims process described above (see Figure M: Illustrative Exit through
a Securities-for-Claims Exchange), the allowed claims could be satisfied with securities issued by
the bridge’s successor company (or companies). There may also be other assets in the receivership
to be distributed, such as proceeds from liquidations or sales of business lines that may be in the
form of cash or securities.
Once the FDIC as receiver has determined the final valuation of the assets to be used to satisfy
claims,
58
distributed the assets to claimants, completed any accounting and auditing processes,
and resolved any ongoing litigation matters, the receivership would be terminated. The Dodd-
Frank Act requires the receivership to be terminated within three years, but provides for two one-
year extensions under certain conditions.
59
55
See DFA § 210(b)(1), 12 U.S.C. § 5390(b)(1); see also 12 CFR § 380.21.
56
While the DFA permits departure from this principle in specified circumstances that benefit the recoveries of
all creditors, the FDIC has further limited its discretion to treat similarly situated creditors dierently by issuing a
rule stating that holders of long-term senior debt (defined as unsecured debt with a term of longer than one year),
subordinated debt, or equity are not eligible for any additional payments or preferential treatment as provided for
in DFA. See DFA § 210(d)(4), 12 CFR 380.27. Any deviation from the principle of similar treatment of similarly situated
creditors must be reported to Congress. See DFA § 203(c)(3).
57
See DFA § 210(o); 12 U.S.C. § 5390(o).
58
The FDIC will rely on the same independent valuation expert hired to value the Bridge Financial Company.
59
DFA § 202(d), 12 U.S.C. § 5382(d). Note that DFA § 202(d)(4) provides that these time limits may be further extended
solely for the purpose of completing ongoing litigation under certain conditions.
43 | Overview of Resolution Under Title II of the Dodd-Frank Act
F N: T D-F A C H
F O: A T “O H” GSIB F?
The statutory creditor hierarchy for financial companies resolved under Title II is as follows:
i. Administrative expenses of the receiver
ii. Amounts owed to the United States
iii. Wages, salaries, or commissions earned by an individual [that is not an executive or director] , subject
to monetary caps
iv. Contributions owed to employee benefit plans, subject to monetary caps
v. Other general or senior liability of the covered financial company
vi. Obligations subordinated to general creditors
vii. Wages, salaries, or commissions, including vacation, severance, and sick leave pay earned, owed to senior
executives and directors of the covered financial company.
viii. Obligations to [equity owners] … of the covered financial company.
Source: DFA § 210(b)(1) (12 U.S.C. § 5390(b)(1))
No. Taxpayers shall bear no losses.
The first priority claims to be paid are the FDIC’s administrative expenses as receiver and any amounts owed to the
United States, including any outstanding funding from the OLF.
In the unlikely event that the value of the resolved firm is insuicient to repay these amounts in full, the rest of
the claimants would receive nothing. The Dodd-Frank Act requires the FDIC to recover any shortfall to the OLF by
imposing one or more risk-based assessments on certain financial companies, namely, bank holding companies
and other financial companies with $50bn or more in total consolidated assets and any non-bank financial
company designated by the Financial Stability Oversight Council for enhanced supervision by the Federal Reserve.
Source: DFA § 214(c) (12 U.S.C. § 5394(c))
44 | Overview of Resolution Under Title II of the Dodd-Frank Act
In summary, by the end of a GSIB Title II resolution, the Bridge Financial Company’s bridge
status has been terminated and the operations of the former financial company are returned
to private control. The FDIC’s receivership expenses and any amounts borrowed from the OLF
have been repaid in full. The GSIB’s former shareholders and creditors have borne losses
in a manner consistent with the statutory obligation to treat similarly situated creditors the same
and respects the creditor hierarchy. Allowed claims have been satisfied by either cash, securities,
or other compensation, and the receivership has been terminated. The entity (or entities)
emerging from the Bridge Financial Company will be financially and operationally sound, smaller,
and more easily resolvable under their ordinary regimes. The goal is that they will be non-systemic
or, at a minimum, significantly less systemic than the failed GSIB, and would be subject to all
applicable supervisory and resolution planning requirements.
Upon exit, any entity (or entities) emerging from the Bridge Financial Company are expected to be
materially dierent from the failed GSIB and could be resolved without resorting to the OLA. From
the point of entry into resolution through the distribution of proceeds to claimants through
a securities-for-claims exchange process, the FDIC expects the resolution will take at least nine
months to complete, with certain activities continuing aer this point at a successor company
(or companies) and in the receivership.
45 | Overview of Resolution Under Title II of the Dodd-Frank Act
CONCLUSION
Since the U.S. financial crisis of 2008–2010, the FDIC has made significant progress in developing
its approach to resolution under Title II. The legal framework provided by the Dodd-Frank Act
combined with supporting regulation, resolution planning capabilities, and supervisory cooperation,
has provided a solid foundation. The FDIC has prepared to take on its statutory role as receiver
under Title II by developing resolution strategies, building out processes, and preparing for exigent
circumstances.
While the FDIC’s Title II tool kit remains unused, the work and plans described in this paper have
contributed to addressing the “too big to fail” problem. The transparency provided on the FDIC’s
approach to resolution in Title II will make more readily apparent to firms and investors that even
large, complex, and interconnected financial companies can be resolved in an orderly fashion,
with losses borne by the private sector and not taxpayers.
However, resolution planning for large, complex financial institutions remains an ongoing
eort—even when times are good. Complex financial institutions are constantly changing, with
new business lines, products, risks, and subsidiaries. All of these changes require thoughtful
consideration of the impact on the resolvability of a financial company and the FDIC’s contingency
plans to resolve a financial company under Title II.
The FDIC continues to have an ambitious work plan to maintain and build its readiness to step
in as receiver for a financial company under Title II of the DFA. FDIC readiness eorts in recent
years have focused on operationalization and exercises covering key OLA readiness processes.
Internally, the FDIC continues to refine its processes and analysis to be prepared to execute its Title
II resolution roles and responsibilities. The FDIC also works regularly with interagency colleagues
to review the plans and processes required to eectively prepare for and carry out a Title II
resolution. Finally, considering the extensive cross-border operations of many systemically
important financial institutions, the FDIC works to maintain relationships with international
supervisory and resolution counterparts, including through senior level exercises, vulnerability
discussions, and international standard setting, such as in the Financial Stability Board’s
Resolution Steering Group. Going forward, the FDIC will remain vigilant, flexible, and focused
on mitigating systemic risk that may arise from the failure of large, complex financial institutions.
46 | Overview of Resolution Under Title II of the Dodd-Frank Act
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47 | Overview of Resolution Under Title II of the Dodd-Frank Act
GLOSSARY AND ABBREVIATIONS
Term Abbreviation Definition
Bail-in
An informal term that refers to the practice of making shareholders
and certain creditors, rather than taxpayers, absorb losses of a failed
firm.
Bail-out
An informal term that refers to the practice of a party (oen an
oicial sector entity) providing capital to a failing firm to cover past
losses and keep the company running.
Bridge
Financial
Company
A legal vehicle chartered by the FDIC used to facilitate the resolution
of a financial company under Title II.
Business-as-
usual
BAU Non-stressed, normal operating conditions.
Claimant
The holder of a claim against the receivership estate of the
failed financial company. Claimants may include creditors or
shareholders of the failed financial company who may be entitled to
compensation from the proceeds of the resolution.
Claims bar date
Generally, the date aer which claims filed against the receivership
estate will be disallowed.
Compensation
clawback
A provision of the Dodd-Frank Act requiring the recovery of
compensation from any current or former senior executive or
director substantially responsible for the failed condition of the
covered financial company. 12 U.S.C. § 5390(s)
Cooperation
Agreements
CoAgs
Documents designed to facilitate institution-specific information
sharing and cooperation among authorities, such as Crisis
Management Group members.
Crisis
Management
Groups
CMGs
Oicial sector groups that bring together home and key host
authorities of specific Global Systemically Important Financial
Institutions to enhance cooperation regarding resolution planning
and implementation.
Critical
operations
Term used in guidance to filers of Dodd-Frank Act Title I plans to
refer to the activities, services, or operations of a financial company,
the failure or discontinuance of which would pose a threat to the
financial stability of the United States.
Dodd-Frank
Wall Street
Reform and
Consumer
Protection Act
Dodd-Frank Act or
DFA
Legislation enacted as a response to the financial crisis of 2008.
Among its numerous provisions, DFA provides authority to the FDIC
to resolve large, complex financial institutions if their failure would
pose systemic risk to the U.S. financial system.
Federal Deposit
Insurance Act
FDIA
The resolution framework applicable to insured depository
institutions.
Financial
Market
Utilities/
Financial
Market
Infrastructure
FMU / FMI
Companies that perform a variety of functions in the market,
including the clearance and settlement of cash, securities, and
derivatives transactions; many FMUs are central counterparties
and are responsible for clearing a large majority of trades in their
respective markets. Internationally, FMUs are oen referred to as
Financial Market Infrastructures (FMIs).
48 | Overview of Resolution Under Title II of the Dodd-Frank Act
Term Abbreviation Definition
Financial
Company
According to the Dodd-Frank Act, any company that (1) is
incorporated or organized under any provision of federal or state
law; (2) is (a) a bank holding company, (b) a nonbank financial
company supervised by the Federal Reserve Board, (c) any company
that is predominantly engaged in activities that the Federal Reserve
Board has determined are financial in nature or incidental thereto,
or (d) any subsidiary of any company described in (a)–(c) that is
predominantly engaged in activities that the Federal Reserve Board
has determined are financial in nature or incidental thereto; and (3)
is not an insured depository institution.
60
Financial
Stability Board
FSB
An international standard-setting body that seeks to strengthen
financial systems and increase the stability of international financial
markets by establishing standards, monitoring best practices, and
promoting cross-border cooperation.
Foreign
Banking
Organization
FBO
A banking organization whose ultimate parent is headquartered
outside the United States. FBO operations can encompass a wide
variety of banking and nonbanking activities, through subsidiaries,
branches, agencies, or representative oices.
Global
Systemically
Important
Banking
Organizations
GSIB
A banking group included on the Financial Stability Board’s annual
list of GSIBs.
61
This list is developed based on an assessment
methodology designed by the Basel Committee on Banking
Supervision. Authorities generally apply additional supervisory or
regulatory requirements to GSIBs.
Insured
depository
institution
IDI
Any bank or savings association the deposits of which are insured by
the FDIC pursuant to the Federal Deposit Insurance Act.
Intermediate
Holding
Company
IHC
Legal entity that sits in the ownership chain between a top-tier
parent entity and one or more subsidiaries. Regulation YY requires
foreign banking organizations with U.S. non-branch assets of $50
billion or more to establish an IHC.
International
Swaps and
Derivatives
Association
Resolution Stay
Protocols
ISDA protocols
Common template text used to facilitate compliance with specific
requirements on the terms of swaps, repos, and other qualified
financial contracts. Market participants adhering to the 2018 ISDA
U.S. Resolution Stay Protocol ensure that the terms of their covered
agreements comply with certain rules
62
that:
• limit the ability of counterparties to exercise default rights
related, directly or indirectly, to an ailiate of covered entities
entering into a resolution proceeding under Dodd-Frank Act
(DFA) Title II, the Federal Deposit Insurance Act (FDIA), or the U.S.
Bankruptcy Code, and
• limit restrictions on transfer rights once an entity has entered
into a resolution proceeding under DFA Title II, FDIA, or the U.S.
Bankruptcy Code.
60
See DFA § 201(a)(11); 12 U.S.C. § 5381(a)(11).
61
https://www.fsb.org/2022/11/fsb-publishes-2022-g-sib-list/.
62
Board of Governors of the Federal Reserve System (12 CFR §§ 252.2, 252.81-88), the Federal Deposit Insurance
Corporation (12 CFR §§ 382.1-7), and the Oice of the Comptroller of the Currency (12 CFR §§ 47.1-8).
49 | Overview of Resolution Under Title II of the Dodd-Frank Act
Term Abbreviation Definition
Large, Complex
Financial
Institutions
An informal term used in this paper to refer to financial institutions
or financial companies with multiple material subsidiaries, complex
lines of business, or more than $100 billion in total assets.
Mandatory
Repayment
Plan
MRP
An agreement between the Treasury Secretary and the FDIC that
provides a specific plan and schedule to achieve the repayment of
the outstanding amount of borrowing from the Orderly Liquidation
Fund.
Material
entities or
material
subsidiaries
Under Title I resolution planning, an institution-identified legal
entity that is significant to the activities of an intuition’s core
business line or critical function.
Multiple
Point of Entry
Strategy
MPOE
A resolution strategy in which a group’s resolution would be
implemented by placing distinct subsidiaries or subgroups into
dierent insolvency regimes at the beginning of the resolution
process, and managing multiple resolution processes independently.
Orderly
Liquidation
Authority
OLA
Administrative authority provided to the FDIC under Title II of the
Dodd Frank Act to resolve a financial company in the event that
resolution under the ordinary insolvency regime (usually the U.S.
Bankruptcy Code) would have serious adverse eects on financial
stability in the United States.
Orderly
Liquidation
Fund
OLF
A mechanism for the provision of temporary public funding from
the U.S. Department of the Treasury to support the resolution of a
financial company under Title II of the Dodd Frank Act that must be
repaid from the proceeds of the resolution or assessments on certain
financial companies.
Orderly
Liquidation
Plan
OLP
A plan acceptable to the Secretary of the Treasury detailing the
provision and use of the Orderly Liquidation Fund and an outline of
the resolution strategy for a financial company placed into Title II
resolution.
Qualified
financial
contracts
QFCs
Any securities contract, commodity contract, forward contract,
repurchase agreement, swap agreement, and any similar agreement,
as defined in section 210(c)(8)(D) of Title II of the Dodd-Frank Act.
Generally, QFCs are subject to dierent stay treatment, among other
provisions. In addition, certain financial companies are subject to
requirements for QFC recordkeeping pursuant to 31 CFR part 148.
Receiver
An entity with the legal responsibility to manage a resolution
process. The FDIC is the receiver under Dodd-Frank Act Title II.
Receivership
The residual estate of a failed company against which former
shareholders and creditors may have claims.
Resolution
plans/ Title I
plans/ 165(d)
plans/ Living
Wills
Plans required under Dodd-Frank Act Section 165(d) for certain
nonbank financial companies and bank holding companies with
total consolidated assets of $250 billion or more, to be submitted
periodically to the FDIC and the Federal Reserve Board. These plans
cover preparations for the company’s rapid and orderly resolution
under the U.S. Bankruptcy Code.
Ring-fencing
(1) When host authorities require resources to be retained in their
own jurisdictions before or during a resolution or (2) when host
authorities take unilateral action to place hosted operations into
resolution in the host jurisdiction.
50 | Overview of Resolution Under Title II of the Dodd-Frank Act
Term Abbreviation Definition
Securities-
for-claims
exchange
The use of equity securities of the successor company (or
companies) of a Bridge Financial Company to satisfy the claims
against the receivership in accordance with the statutory creditor
hierarchy. The claimants become the new owners of the successor
company or companies.
Single Point of
Entry Strategy
SPOE
A resolution strategy in which a top tier legal entity (such as the
parent holding company in the case of U.S. GSIBs) would be placed
into resolution while its material subsidiaries remain open and
operating through the transfer of the interests in the underlying
subsidiaries to a bridge entity, which would then manage an orderly
resolution of the group.
Securities
Investor
Protection Act
SIPA
The ordinary resolution framework applicable to failed U.S.
broker-dealers, administered by the Securities Investor Protection
Corporation.
Three Keys
Process
The statutorily required multi-agency process to appoint the FDIC as
receiver under Title II. The process requires recommendations from
two regulatory bodies and a determination by the Secretary of the
Treasury, in consultation with the President.
Total Loss-
Absorbing
Capacity
TLAC
An international standard developed by the Financial Stability
Board for adequate loss absorbing capacity for Global Systemically
Important Banking Organizations in resolution, implemented in the
United States by Federal Reserve Regulation YY.
External TLAC
External TLAC includes equity and long-term debt instruments
issued by the resolution entity to the market that will be available
to absorb losses in resolution, in accordance with the applicable
statutory creditor hierarchy.
Internal iTLAC
Internal TLAC includes instruments issued internally within a
corporate group to facilitate the shi of losses from operating
subsidiaries to a holding company and to support the
recapitalization of those subsidiaries so they can stay open and
operating during resolution of the parent holding company.
FDIC-014-2024
