WASHINGTON (CN) – The Federal Deposit Insurance Corp. seeks public comment on a rule that would require banks and other depository institutions that are subsidiaries of larger financial-service companies to submit plans to show how the institution could be separated from its parent company if that company faces financial difficulty.
The plan would need to include a gap analysis that would identify impediments to the orderly stand-alone resolution of the institution, or wind-down of operations of the institution, and identify reasonable steps to overcome any problems identified.
The FDIC says it will use the plans to develop a strategy to deal with any financial difficulties the institution might face after a crisis at its parent company.
The proposal would apply only to banks and other depository institutions with more than $10 billion in assets, owned or controlled by parent companies with more than $100 billion in total assets.
As a result of the recent financial crisis, the financial services sector and banking industry have seen massive consolidation and continued expansion in the scope of insured depository institutions’ activities, operations and risks.
As a result of continued consolidation of the U.S. banking industry, the FDIC’s insurance risk is now concentrated in the largest and most complex insured depository institutions. Almost half of the FDIC’s deposit insurance exposure is accounted for by fewer than 40 large institutions that exist within even larger conglomerate and multinational structures.