Below are answers to some of the most common questions about the IDI resolution planning rule. These responses are provided by FDIC staff and are not formal opinions of, and are not binding on, the FDIC Board. If you have questions that are not addressed here, please contact ResolutionPlanning@fdic.gov.
December 17, 2024
Identified Strategy
Question: Can the FDIC provide additional clarity on what “meaningful optionality” means in the context of the identified strategy for group A CIDIs?
Answer: Meaningful optionality reflects an expectation that an identified strategy be flexible so that it can be adapted to a change in the failure scenario or an unexpected obstacle to its execution. The nature and extent of meaningful optionality will vary based upon the size and complexity of the CIDI.
For instance, in the case of an identified strategy that includes a longer-term bridge bank that terminates through a multiple acquirer exit, for a relatively smaller and less complex CIDI with a focus on traditional banking meaningful optionality might include a breakup between only two business lines or the spinoff or sale of a single separable business unit. For the largest or most complex CIDIs, meaningful optionality might include alternatives such as a breakup by business lines and a regional breakup, or by sale of one or more identified franchise components as options for a sale of the IDI franchise.
In the case of a shorter-term bridge bank ending with a sale of all or nearly all of the IDI franchise in a short period, the identification of franchise components that are readily separable and marketable would provide optionality in the FDIC’s ability to offer the bank with or without various franchise components, which could increase the pool of potential bidders or the range of acceptable bids.
Failure Scenario
Question: Can the FDIC provide further context regarding the expectations for a narrative description of the group A CIDI’s failure scenario? What are the FDIC’s expectations with regard to a benchmark or threshold for capital depletion?
Answer: The identified strategy must take into account that failure of the CIDI will occur under severely adverse economic conditions developed by the Federal Reserve Board of Governors and must assume that the U.S. parent company (if any) is in resolution under the U.S. Bankruptcy Code or another applicable insolvency regime. The failure scenario should be consistent with a bank that has in fact failed. While the immediate cause of failure may be based on liquidity shortfalls, the failure scenario must consider the likelihood of the depletion of capital and losses in the assets of the CIDI, which may include embedded losses that might not have been recognized by the CIDI for financial reporting purposes.
We do not have a benchmark for capital depletion. Filers should justify all assumptions contained in the submission consistent with the conditions of the economic scenario and the nature of the CIDI. There is no specific failure scenario time horizon that a filer must assume in its submission.
Question: Is there any latitude to use a failure scenario different than the most recent Federal Reserve System’s severely adverse economic conditions?
Answer: For the failure scenario, filers must use the Federal Reserve System’s Dodd Frank Act (DFAST) severely adverse scenario. Filers may use either the Federal Reserve’s scenario for the calendar year in which the resolution plan is submitted or the prior year’s scenario. When valuing their assets and deposit franchise, filers should be mindful that this should be done in the context of a severe market environment at the time of failure and throughout the resolution process. Filers may not use internally-developed stress scenarios in lieu of the Federal Reserve severely adverse scenario.
Critical Services
Question: To be considered a critical service per the rule, does the service need to be critical to daily operations, support the identified strategy, or both?
Answer: Critical services include shared and outsourced services and include all services that are critical to daily operations including, but not limited to, back-office services and client-facing services, and, in the case of a group A CIDI, support the identified strategy. Critical services also include all services and operations that are necessary to continue any critical operation conducted by the CIDI that has been included in the most recent resolution plan of the CIDI’s parent company submitted pursuant to Title I of the Dodd-Frank Act. Critical services are broadly defined to include services that are provided by a subsidiary, parent, or parent affiliate (including those that are ultimately provided by a third party).
MIS/Critical Services Support
Question: What is the relationship between the rule’s requirements for management information systems (MIS) and the definition of critical services support? Should MIS be thought of as a subset of critical services support?
Answer: There is a significant amount of overlap between the information required for key MIS and for critical services support. Filers can include key MIS as a critical service and include it with the description of critical services and critical services support content as long as all required MIS content is included in the submission. Although the rule does not establish benchmarks or standards for identification of “key” MIS, it identifies systems and applications for risk management, accounting, and financial and regulatory reporting, as well as those used to provide the information required in the submission, as examples to provide context for this requirement. The goal of the requirement is to ensure that the FDIC has the information described with respect to systems and applications that it would need to access in resolution. The same information does not need to be provided twice. Clear cross-referencing of the same information is acceptable so long as it is accompanied by appropriate context.
Key Personnel
Question: How wide is the definition of key personnel? How are key personnel and critical services related? What is the relationship between identification of key personnel and development of retention plans?
Answer: The term key personnel means personnel tasked with an essential role in support of a core business line, franchise component, or critical service, or having a function, responsibility, or knowledge that may be significant to the FDIC’s resolution of the CIDI. Key personnel may be employed by the CIDI, a CIDI subsidiary, the parent company, a parent company affiliate, or a third party. The list of key personnel may include a large proportion of staff, but we would expect it would not include all personnel. Individuals who do not have specialized skills, knowledge, or relationships, and who can be easily replaced, are not key personnel. While tellers and branch managers might be relatively easy to replace, you also might consider what core staff is necessary to keep branches open and operating through stabilization and exit of the bridge bank. A list of managers is not sufficient to describe key personnel. Key personnel include, but are not limited to, staff that perform functions like client relationships and sales.
The concept of key personnel is usefully considered in the context of the retention plan. The submission must provide a recommended approach for retaining key personnel during the CIDI’s resolution. A retention plan could take into account the attributes of key personnel, such as specialized skills or knowledge, or whether they have important customer relationships, among other factors, in assessing the recommended approach to retention of such employees.
Franchise Components, Divestiture Options, and Material Asset Portfolios
Question: Can the FDIC provide direction on the distinction among franchise components, material asset portfolios, and divestiture options? Can the FDIC provide further direction with respect to the identification of franchise components, in terms of size and separability of franchise components? If the sale of a business unit or portfolio diminishes the remaining franchise value, should these items be identified as franchise components?
Answer: Franchise components and material asset portfolios that meet their respective rule definitions should be identified by all filers. The concept of divestiture options only arises in connection with identified strategies that involve multiple acquirer exits and would apply, if at all, only to Group A CIDIs.
Franchise components: A franchise component is a business segment, regional branch network, major asset, material asset portfolio, or other key component of a CIDI’s franchise that can be separated and sold or divested. A key characteristic is that franchise components are currently separable and marketable in a timely manner, which is a matter of days or weeks, and not months.
There are no sizing benchmarks for identifying franchise components. The goal is to provide marketing optionality and, potentially, to reduce the size of the IDI franchise so as to increase competitive bidding through identifying options that can be offered separately in a quick sale either during failure weekend or following a short bridge bank period. Franchise components represent options that are readily executable currently, rather than options which would require significant restructuring or which are speculative or merely conceptual.
In assessing whether a franchise component can be sold “in a timely manner,” the CIDI should consider the period of time for marketing the franchise component and closing on the sale. The CIDI can assume use of customary arrangements to accomplish timely separability such as the use of a transition services agreement. Any such arrangement should be described, and the underlying assumptions with respect to the ability to enter into those arrangements should be reasonable and supported and should not introduce conditions that jeopardize the transaction.
The marketing and sale of a franchise component separately from the rest of the bank should not result in a remaining IDI franchise whose value is significantly impaired or that cannot maintain operations as a going concern.
The rule does not specify the number of franchise components that must be identified, nor does it set an expectation that franchise components meet a minimum standard with respect to the overall value of the IDI franchise.
Divestiture options: Divestiture options are saleable components that are part of a multiple acquirer exit strategy that may require restructuring, or present greater obstacles, and require a longer bridge bank period than for the sale of franchise components. For example, a divestiture option might be a sale of a line of business, such as a credit card operation that is not housed in a single subsidiary and shares systems, personnel, and operations with other businesses in the bank. It is possible that one or more material asset portfolios or franchise components are sold before or at exit or might be included in a larger divestiture option considered in a multiple acquirer exit strategy.
Material asset portfolios: Material asset portfolios are all pools or portfolios of assets, such as loans or securities, that may be sold by the bridge depository institution or the receivership and are significant in terms of income or value. Material asset portfolio information provides a breakdown of significant asset classes regardless of whether or not they are identified as franchise components or included in divestiture options, and as such is not necessarily connected with the identified strategy.
In some cases, a material asset portfolio may be a franchise component, where it is readily separable and meets other standards for franchise components set out in the rule. In other cases, a material asset portfolio will be an important part of a business segment or highly related to interconnected relationships such that it is not a suitable franchise component. The required information for material asset portfolios must be provided for each such portfolio whether or not it is a franchise component. An example of a material asset portfolio that might not be a useful franchise component might be a loan portfolio that is important to a business segment that could not be sold in a timely manner and could not be separated without destroying the value of the business segment. Where there is overlap with the material asset portfolios that are franchise components, the information can be provided once and cross-referenced, if appropriate.
Valuation
Question: What are the expectations for the level of detail for valuation analysis and the ability to refresh the valuation analysis? What are the expectations for the type(s) of valuation methodologies that CIDIs should employ?
Answer: The rule requires a description of the approaches the CIDI would employ for determining the values of the franchise components and the IDI franchise as a whole, including the underlying assumptions and rationale. The rule requires that the analysis be supported by observable and verifiable capabilities and data, as well as reasonable projections. The rule also requires filers to provide supporting documentation for valuation analysis in an appendix to the resolution plan, including liquidity and deposit runoff assumptions and underlying support.
The rule allows the CIDI to choose the approach best suited to the valuation being conducted, so long as the CIDI provides support for the approach being utilized to develop a range of value outcomes. The emphasis is on capabilities, reasonableness of assumptions and methodologies, supporting the analysis with adequate detail, and providing for a range of value estimates – rather than single point valuation. The valuation information and capabilities will be useful to the FDIC in developing comparative valuation estimates to arrive at the least costly transaction among available, feasible resolution options.
Economic Effects
Question: Should economic effects of the CIDI’s failure be aligned with the bank’s failure scenario?
Answer: The economic effects of resolution content requirement is distinct from the failure scenario that is used to develop the identified strategy for group A CIDIs’ resolution plans. The failure scenario is required to take into account that failure of the CIDI will occur under severely adverse economic conditions developed by the Board of Governors of the Federal Reserve System pursuant to 12 U.S.C. 5365(i)(1)(B).
Separate from the identified strategy, every CIDI is required to identify the activities of the CIDI that are material to a geographic area or region in the U.S., a business sector or product line in that geographic area or region or nationally, or to other financial institutions. The full resolution submission should discuss whether the identified services or functions are readily substitutable by other providers and other mitigants to the potential impact of the termination of those activities in the event of failure of the CIDI. Given that the FDIC will seek to resolve a CIDI in a way that minimizes the disruptive impact of the resolution to the extent possible, the FDIC must be aware of the CIDI’s activities that are most likely to have significant disruptive effects if terminated in resolution, such as where a CIDI provides a unique function or is a dominant provider of a particular service.
Communications Playbook
Question: In the case of a resolution plan submitted by a group A CIDI that includes an identified strategy, should the communications playbook be specific to the identified strategy?
Answer: The communications playbook content is required in all full resolution submissions, including informational filings as well as resolution plans. The communications playbook should not be dependent on the identified strategy. It must describe the CIDI’s current communications capabilities and must include the elements specified in the rule. The playbook information should be applicable to any resolution scenario or strategy.
Interim Supplement
Question: Please explain the expectations for CIDIs that are required to file interim supplements in July 2025 prior to filing their first full resolution submissions.
Answer: Because of the staggered approach to submissions and review by cohort, some filers will be submitting an interim supplement prior to filing the first full resolution submission under the rule. This reflects the purpose of the interim supplement, which is to ensure that the FDIC has access to valuable information to assist with resolution planning, in consideration of the three-year submission cycle for these filers. The interim supplement requirements are focused on data rather than narrative to provide the FDIC with more current data in certain areas where the information tends to be more dynamic, and where more current information would be beneficial to the FDIC’s resolution planning. All of the elements of the interim supplement are a subset of items required in a full resolution submission. Accordingly, preparing your interim supplements may facilitate filers’ work on the full resolution submissions for 2026.
Engagement
Question: Can the FDIC provide insight into the scope and timing of engagement?
Answer: Engagement will focus on resolution-related topics that the FDIC wants to probe to deepen our knowledge of a CIDI. Engagement can occur at any time, including prior to, during, or after the submission review period to provide additional insights to the FDIC and inform areas of interest for future submissions. Engagement can take a variety of forms, such as a scheduled conference call or in-person meeting. Engagement is meant to allow the FDIC to gain additional context around matters in the submissions, as well as to indicate particular areas of interest or where further explanation would be helpful in future submissions. We expect to provide timely advance notification of the scope and timing of any engagement.
Capabilities Testing
Question: Can the FDIC provide insight into the scope and timing of its capabilities testing program? How often will these tests be conducted?
Answer: Horizontal capabilities testing is generally expected to take place following the FDIC’s receipt of the full resolution submission and concurrently with the full resolution submission review. Thus, for group A CIDIs that are required to submit a resolution plan on or before July 1, 2025, it is currently anticipated that the first capabilities tests will be undertaken with those CIDIs. Currently, it is expected that other group A CIDIs will not participate in capabilities testing prior to their initial full resolution submissions.
The FDIC expects capabilities testing with group B CIDIs will be a key component of its resolution planning for such firms and expects to conduct capabilities testing with most group B CIDIs in each cycle as well. It is anticipated that the first capabilities tests for group B CIDIs will begin in early 2026.
As of the date of this response, we are in the process of developing our capabilities testing program, including the scope of future tests. Examples of capabilities the FDIC may test include, but are not limited to, establishing and populating a virtual data room, key depositor reporting, and mapping of critical services. For all CIDIs’ first full resolution submission, we anticipate providing insight into the capabilities test prior to the submission date of the full resolution submission. While the rule does not limit the frequency of capabilities tests, the FDIC expects to conduct horizontal testing once with each triennial filer during the first full resolution submission review process. The scope and extent of testing for biennial filers will be considered in coordination with capabilities tests performed in connection with resolution plans submitted pursuant to Title I of the Dodd-Frank Act.
Financial Information Date
Question: For the July 1, 2025 submission, what is the as-of date that filers should use for financial data and other plan information?
Answer: Per (g)(1) of the rule, the submission must, to the greatest extent possible, use financial information as of the most recent fiscal year-end for which the CIDI has financial statements or, if the use of financial information as of a more recent date as of which the CIDI has financial statements would more accurately reflect the operations of the CIDI on the date of the submission, financial information as of that more recent date.
Submission Format
Question: Does the FDIC have a format preference for appendices versus information contained within the submissions?
Answer: When providing statistical information, such as payment, clearing, and settlement (PCS) activity value and volume information or QFC exposures, it is preferable to include this information in a table. In addition, we welcome filers to submit this information in a spreadsheet format (e.g., Excel) as an appendix to the submission. Regarding narrative, such as playbooks or procedures manuals, for ease of review, it is most helpful for the FDIC that the CIDI include this information in a self-contained manner within a specific section of the submission. It is also acceptable to provide information such as playbooks or procedures manuals as an appendix to the submission.
Rule Applicability – Asset Thresholds
Question: What are the total asset thresholds that determine when a bank becomes a CIDI and when should new group B CIDIs expect to be notified regarding the date their initial full resolution submission is due?
Answer: The rule applies to all CIDIs with at least $50 billion in total assets, based upon the average of total assets reported over the four most recent Consolidated Reports of Condition and Income. Once a bank crosses this threshold, the FDIC will provide notification of the date the bank’s initial full resolution submission is due, which will be no earlier than 270 days from the date it becomes a CIDI.