Banking Crisis

US Extends Banks' Living Wills Deadline

Tom Burroughes, Group Editor, 4 September 2018

articleimage

The official organisations said that the extension gives UBS, Credit Suisse, Deutsche Bank and Barclays more time to explain responses to their latest submissions, and to produce their next plans.

Four of Europe’s largest banks have won an extension to a US deadline for filing resolution plans – “living wills” – in the event that they go bust, part of moves drawn up over the past decade to ensure there is not a repeat of the 2008 financial tsunami.

The Federal Reserve Board and the US Federal Deposit Insurance Corporation last week announced the extension to 1 July 2020 from 31 December, 2019. The official organisations said that the extension gives UBS, Credit Suisse, Deutsche Bank and Barclays more time to explain responses to their latest submissions, and to produce their next plans.

The US living wills regime, required under the 2010 Dodd-Frank legislation enacted after the collapse of several firms and massive bank bailouts, must describe what a company should do to wind up its affairs as smoothly as possible if it goes bust. 

UBS was bailed out by the Swiss government when bets that the bank had made on sub-prime mortgages and associated financial instruments went dramatically wrong a decade ago. Policymakers have been concerned that unless living wills are set up, there remains a high risk that banks will be bailed out again if markets go wrong, creating a dangerous expectation that banks will never go bust. The “too-big-to-fail” mind-set has been blamed for encouraging imprudent risk-taking in the years up to 2008. On 15 September 2008, Lehman Brothers went bankrupt, and scores of other firms were bailed out in North America and Europe. 

Additionally, the US Federal Deposit Insurance Corporation extended the next filing due date for all insured depository institution resolution plan submissions to no sooner than 1 July, 2020.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes