US Banks Not Prepared for Another Financial Crisis, Say Federal Regulators
- US Banks Not Prepared for Another Financial Crisis, Say Federal Regulators
by Jana Kasperkevic, http://www.theguardian.com/international
Federal Reserve and FDIC reject ‘living wills’ of Wells Fargo, Bank of America and three others that don’t meet requirements to avoid another bailout
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Some of the US’s biggest banks still lack a proper plan for bankruptcy, in the event of another major financial crisis, US regulators said on Wednesday.
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In the wake of the great recession banks were required to come up with “living wills” to prove they had a credible plan for bankruptcy that would not require another bailout from the taxpayers.
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But after reviewing the plans of five institutions – JP Morgan Chase, Wells Fargo, Bank of America, Bank of New York Mellon and State Street Corp – the Federal Reserve and the Federal Deposit Insurance Corp (FDIC) have determined that the banks have yet to meet that requirement.
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“The goal to end too big to fail and protect the American taxpayers by ending bailouts remains just that: only a goal,” said Thomas Hoenig, FDIC vice-chairman.
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The banks are to submit revised proposals by 1 October.
According to feedback from the regulators, one of the main concerns with JP Morgan’s proposal was the bank’s liquidity in a time of need. Regulators were concerned the bank would not be able to shift money around to fund some of its operation during a time of stress or bankruptcy.
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“Obviously we were disappointed,” said Marianne Lake, JP Morgan’s chief financial officer. “The most important thing is that we work with our regulators to understand their feedback in more detail.”
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Bank of America also needs better processes for estimating its liquidity needs, the regulators said. And while Wells Fargo was deemed to have “firm-wide, high-quality liquid assets”, regulators raised concerns over “quality control, senior management oversight, and recovery and resolutions planning staffing”.
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