Feds Criticize Big Banks' Plans To Avoid Next Fiscal Crisis

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Regulators are not happy with the "living wills" big banks were supposed to come up with. The wills are more like bankruptcy plans detailing how a bank could be closed without disrupting the economy.


Federal regulators sharply criticized 11 major banks yesterday. The feds say these banks still have not adequately prepared for another big financial disaster like the crisis that hit in 2008. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: As part of the Dodd-Frank financial overhaul, big banks are required to draw what are called living wills says Karen Shaw Petrou of Federal Financial Analytics.

KAREN SHAW PETROU: They forced the biggest banks, essentially, to plan their own funerals - to make it clear how, under stress, they could be shut down without taxpayer funds.

ZARROLI: Yesterday, the Federal Reserve and Federal Deposit Insurance Corporation said the latest plan, submitted by the banks, are not credible. In unusually tough language, they said the banks don't explain how their structure would enable an orderly resolution during a crisis and make unrealistic assumptions about how customers would behave. And they told the banks to rewrite the plans. If the banks can't explain how they would survive a crisis without a government bailout, they could face tougher capital requirements or worse, Pertrou says.

PETROU: In the next year, we are going to see some or all of these institutions restructure some key operations, start to put some activities on the block and, otherwise, deal with the really strong warning that if you don't do this, we, the Fed and the FDIC, will make you.

ZARROLI: The banks criticized yesterday include JPMorgan Chase, Bank of America, Goldman Sachs and Citigroup. None of them commented on the regulators rebuke. Jim Zarroli, NPR News, New York.

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