After looking into the abyss during 2008, America's largest financial institutions were prodded by their old friend Congress to look into estate planning. In fact, Congress even got a little insistent and drafted the banks a little reminder called the 2010 Dodd-Frank Act.
But we all know that no one likes to think about death, and that makes knuckling down and drafting a will very difficult to do on an emotional level. So understandably it took the seven largest banks roughly four years to give regulators a peek at their living wills. Unfortunately for everyone, those wills were deemed to suck, and the banks were sent back to really think about how they could safely die without, like, crashing the global economy.
Last July, everyone had handed in their second drafts. Today, regulators from the Fed and FDIC shared their opinions of "SIFI Living Wills 2.0"...
The agencies have jointly determined that each of the 2015 resolution plans of Bank of America, Bank of New York Mellon, JP Morgan Chase, State Street, and Wells Fargo was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, the statutory standard established in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The agencies have issued joint notices of deficiencies to these five firms detailing the deficiencies in their plans and the actions the firms must take to address them. Each firm must remediate its deficiencies by October 1, 2016. If a firm has not done so, it may be subject to more stringent prudential requirements.
But hey, at least Goldman Sachs and Morgan Stanley were told that their plans only kinda blew...
The agencies jointly identified weaknesses in the 2015 resolution plans of Goldman Sachs and Morgan Stanley that the firms must address, but did not make joint determinations regarding the plans and their deficiencies. The FDIC determined that the plan submitted by Goldman Sachs was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, and identified deficiencies. The Federal Reserve Board identified a deficiency in Morgan Stanley's plan and found that the plan was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code.
And one bank even managed to get regulators to approve its living will; perennial winner and everybody's favorite, Citigroup!
Neither agency found that Citigroup's 2015 resolution plan was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, although the agencies did identify shortcomings that the firm must address.
So, less a full-throated approval than a "We guess Citi's plan isn't not credible." Sounds like Michael Corbat is getting a taste of what we like to call a "Brian Moynihan Compliment."
Speaking of BriMo, it stands to reason that Wall Street's answer to Eeyore was maybe anticipating this living will thing not working out, but it must have been a pretty ugly scene in the rooms where Jamie Dimon or Lloyd Blankfein were told that their submissions failed. And it must gotten downright gory when they learned that only Citi was approved.
But we can only imagine the moment of blissful schadenfreude that filled the big office at Citigroup, where someone was heard to shriek "It's Corby time!" before dancing The Sprinkler on his desk.