Tuesday, Sep 27, 2022

Plan ways to block collapse: US tells five biggest banks

The two-year-old programme,which has been largely secret until now,is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail.

US regulators have directed five of the country’s biggest banks,including Bank of America Corp and Goldman Sachs Group Inc,to develop plans for staving off collapse if they faced serious problems,emphasising that the banks could not count on government help.

The two-year-old programme,which has been largely secret until now,is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

Officials like Lehman Brothers former chief executive Dick Fuld have been criticised for having been too hesitant to take bold steps to solve their banks’ problems during the financial crisis.

According to documents obtained by Reuters,the Federal Reserve and the US Office of the Comptroller of the Currency first directed five banks — which also include Citigroup Inc,Morgan Stanley and JPMorgan Chase — to come up with these “recovery plans” in May 2010.

Subscriber Only Stories
Re-Defining The Tradition In Folk Art: An Art Educator’s PerspectivePremium
Symbiosis School of Sports Sciences (SSSS) launches undergraduate program...Premium
MIT World Peace University launches Five-Year Integrated B.Tech with MBA ...Premium
Bring Home The Ultimate Solution For The Whole Family With Airtel Xstream...Premium

They told banks to consider drastic efforts to prevent failure in times of distress,including selling off businesses,finding other funding sources if regular borrowing markets shut them out,and reducing risk.

The plans must be feasible to execute within three to six months,and banks were to “make no assumption of extraordinary support from the public sector,” according to the documents.

First published on: 11-08-2012 at 12:39:20 am
Next Story

RIL sells stake in Yemen block to Indonesian firm

Latest Comment
Post Comment
Read Comments
Advertisement
Advertisement
Advertisement
X