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Fred S. Carns Federal Deposit Insurance Corporation Role of Deposit Insurance in Bank Resolution Framework Lessons from the Financial Crisis November 13-16,

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Presentation on theme: "Fred S. Carns Federal Deposit Insurance Corporation Role of Deposit Insurance in Bank Resolution Framework Lessons from the Financial Crisis November 13-16,"— Presentation transcript:

1 Fred S. Carns Federal Deposit Insurance Corporation Role of Deposit Insurance in Bank Resolution Framework Lessons from the Financial Crisis November 13-16, 2011 JODHPUR, INDIA

2 2 Problem Institutions and Bank Failures

3 3 Bank Failures by Resolution Type *As of 21 October 2011

4 4 Key Lessons Learned 1.To restore discipline in the marketplace, large, complex banks and other financial companies must be allowed to fail if they become nonviable –The absence of effective resolution tools led directly to government bailouts –Bailouts were necessary under the circumstances, but brought serious adverse consequences for the financial system –Cross-border cooperation is essential to the orderly liquidation of large, international financial institutions 2.Failure to manage excessive debt and leverage is dangerous –The single most important element of a strong and stable banking system is its capital base Supervisors need to enforce hard and fast objective capital standards

5 5 Reform Measures End Too-Big-to-Fail –Subject SIFIs to heightened supervisory oversight by the Federal Reserve –Require SIFIs to develop and maintain resolution plans –Orderly Liquidation Authority given to the FDIC to execute a SIFI resolution Limit Financial Leverage –Basel III –Collins Amendment –SIFI surcharge Fortify the U.S. deposit insurance regime –Increase coverage –Change funding strategy International Initiatives –FSB Key Attributes for Effective Resolution Regimes –Report and Recommendations of the Basel Committee CBRG

6 6 New Roles and Responsibilities of the FDIC under Dodd-Frank Strengthened back- up authority – Special examinations – Back-up enforcement actions Deposit insurance fund – Minimum reserve ratio – Eliminates maximum limit – Permanent increase in deposit insurance coverage – Change in assessment base Expanded receivership authorities – Orderly liquidation of SIFIs – Authority to remove SIFIs from bankruptcy process (shared) Resolution plans – Living wills submitted to the FRB, FSOC and FDIC – Failure to submit plan may result in further restrictions

7 7 The FDIC has taken several actions in line with its expanded powers Final Rules Orderly Liquidation Authority provisions Minimum risk-based capital requirements Reserve ratio Resolution plans – joint final rule Proposed Rules Orderly Liquidation – maximum obligation limitations Prohibitions on Proprietary Trading ("Volcker Rule") Other Initiatives Establishment of the FDIC Systemic Resolution Advisory Committee

8 8 Non-Voting Members Voting Members FSOC Committees

9 9 Ten Largest International Financial Institutions Financial Institution Total assets, year-end 2010* Country of headquarters Number of countries with operations BNP Paribas $2,680.3France> 80 Deutsche Bank 2,556.2Germany74 HSBC Holdings 2,454.7UK87 Barclays 2,332.7UK> 50 Royal Bank of Scotland Group 2,276.2UK39 Bank of America Corporation 2,264.9United States> 41 Mitsubishi UFJ Financial Group 2,183.9Japan> 40 Crédit Agricole 2,137.5France70 JPMorgan Chase 2,117.6United States> 60 Citigroup 1,913.9United States160 Source: U.S. Government Accountability Office * USD in millions

10 10 Fred Carns | +1 (202) | THANK YOU


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