WASHINGTON (CN) – Non-bank financial companies with assets greater than $50 billion will have to submit a quarterly “living will” to financial regulators, according to rules proposed by the Federal Reserve and the Federal Deposit Insurance Corporation.
The agencies envision this ‘will’ as a detailed orderly plan for the company’s resolution if it is forced into bankruptcy or requires a bail out by the Federal Government.
The resolution plan must include detailed information showing the credit risk and exposure of the companies and the extent to which banks, insured by the FDIC, and affiliated with the non-bank company are protected from risks associate with the company.
In addition, the resolution plan must list full descriptions of the ownership structure, assets, liabilities and contractual obligations of the company and any collateral debt obligations it has with other institutions.
The proposed rules are mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, in part in response to the collapse of the Lehman Brothers financial services company and the distress of the financial services sector as the extent of collateral debt obligations of investment banks became apparent.
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