FDIC Updates Resolution Plan Rules for Large Banks

The FDIC has updated its guidance for Insured Depository Institution (IDI) resolution plans, commonly called "living wills," for large U.S. banks.

The Federal Deposit Insurance Corporation (FDIC) has issued updated guidance for Insured Depository Institution (IDI) resolution planning, the critical regulatory process often called creating a "living will." The updates apply to large, complex U.S. banking organizations and refine the requirements for how these institutions must plan for their own orderly failure without taxpayer bailouts. This move aims to enhance the resolvability of systematically important banks by addressing lessons learned from recent regional bank stresses and evolving financial system risks.

This regulatory update to a post-2008 crisis framework contrasts with a static rule set, representing an adaptive supervisory approach to financial stability. Issuing this clarified guidance is the critical procedural deliverable to ensure plans remain practical and credible. This matters because effective resolution planning is a cornerstone of ending "too big to fail" by proving large banks can be unwound safely, thereby protecting the Deposit Insurance Fund and maintaining public confidence in the banking system during periods of severe distress.

For large bank compliance officers, risk managers, and board directors, the implications are operational and resource-intensive. This update necessitates a thorough review and likely revision of existing resolution plan submissions, with a focus on data capabilities, cross-border coordination, and liquidity in resolution. The forecast is for increased regulatory scrutiny on the operational continuity and separability of critical services during a hypothetical failure. Decision-makers must prioritize this work alongside other regulatory commitments. The next imperative for the FDIC and the banks is to engage in a rigorous review cycle to test the updated plans' assumptions, ensuring the resolution framework is not just a compliance exercise but a viable financial stability safeguard.