In a joint review conducted by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board, weaknesses have been identified in the resolution plans submitted by four of the largest and most complex banks in the United States.

The review focused on the July 2023 resolution plan submissions of Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase. While no weaknesses were identified in the plans of the other banks, the agencies found shortcomings in the plans of the aforementioned institutions.

Resolution plans, commonly known as living wills, outline a bank's strategy for an orderly resolution in the event of significant financial distress or failure.

The agencies categorized the weaknesses identified in the plans of Bank of America, Goldman Sachs, and JPMorgan Chase as shortcoming, which raises concerns about the feasibility of their respective plans. However, there was a difference in opinion regarding Citigroup's plan. The FDIC deemed Citigroup's plan as not credible or capable of enabling an orderly resolution under the U.S. Bankruptcy Code and considered it a deficiency. On the other hand, the Federal Reserve Board considered it as a shortcoming.

According to the resolution planning rule, when one agency identifies a shortcoming and the other agency identifies a deficiency, the plan is considered to have a shortcoming overall. Hence, Citigroup's 2023 plan was ultimately labelled as having a shortcoming. It is worth noting that Citigroup's 2021 plan also had a shortcoming related to data quality and data management, which remains unresolved.

As part of the review, feedback letters were provided to each of the eight banks, highlighting areas for further development in their resolution strategies and capabilities. For the four banks with identified shortcomings, the letters outlined the specific weaknesses that led to the shortcomings and the required remedial actions to be taken.

The banks are expected to address these shortcomings in their next resolution plans, which are due by July 1, 2025. Additionally, the feedback letters specified that the 2025 plans should include addressing the topics of contingency planning and obtaining necessary foreign government actions to execute the resolution strategy.

Overall, this joint review by the FDIC and the Federal Reserve Board highlights the ongoing commitment of regulatory agencies to ensure the resilience and stability of the banking sector. By identifying weaknesses and providing feedback, they aim to strengthen the resolution plans of these major U.S. banks and enhance their ability to navigate potential financial distress in the future.