U.S. Regulators Find 'Shortcomings' in Living Wills of 3 Foreign Banks

By Ryan Tracy 

U.S. regulators said three foreign-owned banks haven't shown they can collapse without causing broader economic damage.

The Federal Reserve and the Federal Deposit Insurance Corp. found shortcomings in the "living wills," or bankruptcy plans, of the U.S. units of BNP Paribas SA, HSBC Holdings PLC, and Royal Bank of Scotland Group PLC. The banks could face sanctions if they don't fix the issues by the end of 2015, when new drafts of the plans are due, the regulators said.

The FDIC found the plans were "not credible," but the Fed stopped short of that finding, regulators said in a news release. If both agencies agree a bank's plan is "not credible," the law requires them to move toward imposing sanctions on the firm, such as forced divestitures.

The Fed and the FDIC made similar findings about big U.S. banks' living wills last summer.

The plans are a requirement of the 2010 Dodd-Frank law. They spell out how a firm would wind down its operations under the bankruptcy code if it got into trouble. The plans must show the bank is able to be unwound without broad negative repercussions.

Write to Ryan Tracy at [e-mail]

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