Thursday, July 5, 2012

'Living Wills' of 9 largest global banks released

The Federal Reserve and FDIC have released the public portions of the “living wills” of world’s leading banks, detailing as to what would happen if the business goes bankrupt.

The banks under consideration are:

-1- Bank of America,                  -2- Barclays,
-3- Citigroup,                               -4- Credit Suisse,
-5- Deutsche Bank,                     -6- Goldman Sachs,
-7- JPMorgan Chase & Co,       -8- Morgan Stanley
-9- UBS

The documents released, which are required under the 2010 Dodd-Frank Act, do not provide any specific strategies or tactics which the banks would adopt if they become insolvent.

The wills vary from one business to another. U.S. regulators have not given any comments on any of the ‘wills’. Their official feedback is expected to be announced sometime in September.  

Generally speaking, the ‘wills’ state that the banks can be either:
-a- Recapitalized     or       -b- Dismembered    or       -c- Shut down        
-i- with little to no cost to the taxpayer   
-ii- burden will be transferred to the taxpayers

What the banks have said

JPMorgan: "The Resolution Plan would not require extraordinary government support, and would not result in losses being borne by the US government,"

CitiGroup: “[Our plan] identifies a variety of actions that could be taken, each of which demonstrates that Citi is resolvable in a manner that addresses potential systemic disruption in the U.S. or global financial markets without the use of taxpayer funds."

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