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

Problem Institutions and Bank Failures

Bank Failures by Resolution Type *As of 21 October 2011

Key Lessons Learned 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 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

Reform Measures End Too-Big-to-Fail Limit Financial Leverage 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

New Roles and Responsibilities of the FDIC under Dodd-Frank 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 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

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

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Ten Largest International Financial Institutions Total assets, year-end 2010* Country of headquarters Number of countries with operations BNP Paribas $2,680.3 France > 80 Deutsche Bank 2,556.2 Germany 74 HSBC Holdings 2,454.7 UK 87 Barclays 2,332.7 > 50 Royal Bank of Scotland Group 2,276.2 39 Bank of America Corporation 2,264.9 United States > 41 Mitsubishi UFJ Financial Group 2,183.9 Japan > 40 Crédit Agricole 2,137.5 70 JPMorgan Chase 2,117.6 > 60 Citigroup 1,913.9 160 * USD in millions Source: U.S. Government Accountability Office

THANK YOU Fred Carns | +1 (202) 898-3930 | frcarns@fdic.gov 10