Systemically important financial institutions in the U.S. may have to simplify their business if they can’t provide viable plans for unwinding themselves in a crisis, according to a senior official at Federal Deposit Insurance Corp.
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“Ultimately, a SIFI could be required to restructure its operations if it cannot demonstrate it is resolvable in an orderly manner under the Bankruptcy Code,” Michael Krimminger, the FDIC’s chief counsel, will tell
a House Financial Services subcommittee today at a hearing in Washington. The Financial Institutions subcommittee is discussing whether Dodd-Frank has ended the idea that some firms are “too big to fail.”
The Dodd-Frank Act requires firms deemed systemically important to file plans with the FDIC and the Federal Reserve, laying out how they could be resolved if they should collapse. Lawmakers gave the FDIC authority to resolve complex firms aiming to prevent a repeat of the market tumult that followed the September 2008 bankruptcy of Lehman Brothers Holdings Inc.
Companies with at least $50 billion in assets will be required to provide information on debt, funding, capital and cash flows. Firms that fail to file workable resolution plans could be subject to increased capital, leverage or liquidity requirements, and restrictions on growth or operations.