On October 15, Acting FDIC Chair Travis Hill spoke at a European Union-hosted conference about lessons learned from recent large bank issues. Hill emphasized that the FDIC’s experience in 2023 demonstrated the challenges and costs of relying on a post-failure bridge bank, noting the use of these banks are typically undesirable. He stated that the FDIC’s primary goal for large regional bank resolution planning should be to “maximize the likelihood of the optimal resolution outcome” — which Hill noted was generally a weekend sale — while also being prepared to operate a failed institution temporarily, if needed.

Hill described recent FDIC changes to its insured depository institution (IDI) resolution planning rule (previously covered by InfoBytes here), including waiving the requirement that banks build plans around a bridge bank strategy and allowing institutions to describe potential resolution strategies that “reasonably could be executed by the FDIC.” He noted that the FDIC was considering further amendments to the IDI rule to focus more on operational capabilities and engagement, and less on static plans.

Hill also discussed efforts to improve the FDIC’s bidding process for failed banks, including increasing transparency, updating transaction documents and marketing processes, and developing a pre-qualification process for nonbank bidders. He highlighted the importance of providing timely, high-quality information to potential bidders and noted enhancements to the FDIC’s “least-cost test model” to allow for faster and more complex transaction analysis. Hill added that the FDIC implemented the “Large Bank Ready Reserve” training program to cross-train staff across divisions, enabling rapid resource mobilization during large or multiple bank resolutions. He also highlighted the consolidation and modernization of critical contracts to ensure the agency had the capacity to resolve complex institutions quickly.

On receivership funding, Hill described the liquidity demands following the 2023 issues as costly and unprecedented, noting they required the FDIC to borrow from the Fed at a penalty rate. He explained that the FDIC had been working with the Federal Financing Bank to implement “a rapid process for securitizing assets” from large, failed institutions as a lower-cost funding option. Hill addressed challenges related to cross-border bail-in of debt and the resolution of global systemically important banks, noting ongoing work with a financial stability group.

Finally, Hill discussed resolution planning for central counterparties (CCPs), noting their critical role in financial markets. He explained that the FDIC relies on “recovery and wind-down” plans from CCP supervisors and engages with other regulators to maintain readiness, even though the FDIC does not directly supervise CCPs. He concluded by reiterating the need to incorporate lessons from these recent bank failures into regulatory and resolution frameworks and to maintain close collaboration with international authorities.