By Godson Umejiego, Bureau Chief, The Americas

The Federal Deposit Insurance Corporation (FDIC) today released a comprehensive report on how the FDIC would manage the orderly resolution of a large, complex financial company under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).         

In remarks to the Peterson Institute for International Economics in Washington, DC, FDIC Chairman Martin J. Gruenberg presented the Overview of Resolution Under Title II of the Dodd-Frank Act, the most detailed description to date of the FDIC’s preparedness to use its Title II resolution authority in a manner that promotes financial stability and prevents taxpayer bailouts.

“The ability of the FDIC and other regulatory authorities to manage the orderly resolution of large, complex financial institutions remains foundational to US financial stability,” said Chairman Gruenberg. “An orderly resolution is far preferable to the alternatives, particularly resorting to taxpayer support to prop up a failed institution or to bailing out investors and creditors. With this paper we are reaffirming that, should the need arise, the FDIC is prepared to apply the resolution framework that the FDIC and many other regulatory authorities in the US and around the world have worked so hard to develop.”

The Overview explains how the FDIC would use authorities under Title II of the Dodd-Frank Act, with a particular focus on how it expects to resolve US-headquartered Global Systemically Important Banking Organizations (GSIBs). In addition, the paper:

Provides background of resolution-related authorities in the Dodd-Frank Act;

Highlights key measures that facilitate preparation and implementation of resolution under Title II authority;

Reviews strategic decision-making for the use of Title II authority; and

Explains how the FDIC expects to carry out a Title II resolution of a US GSIB using a Single Point of Entry resolution strategy.