On June 9, FDIC Chairman Travis Hill outlined potential changes to the FDIC’s failed-bank resolution framework, saying the agency should put less weight on detailed narrative resolution plans for large insured depository institutions and instead focus its “IDI Rule” (previously covered by InfoBytes here) on operational information that the FDIC would need to manage an orderly resolution. Hill also said the FDIC was working to propose a “resolution readiness adjustment” that would allow larger banks to reduce quarterly assessments if they show that they can quickly populate a virtual data room or give the FDIC temporary access to third-party service providers or internal systems before a failure. Citing the Deposit Insurance Fund’s improved reserve ratio, Hill said the FDIC expected to propose assessment changes, including raising and indexing the current $10 billion threshold for the large bank scorecard, reducing assessment rates for banks subject to the small bank scorecard by two basis points, and allowing comparable reductions for large banks that opt into the new readiness adjustment.

Hill also described possible updates to recordkeeping and contracting rules, including replacing Part 370 for certain institutions with a modified Section 360.9 framework that would drop independent insurance-determination system requirements, revising the FDIC’s Part 371 qualified financial contracts rule to collect a more focused set of information that banks can produce quickly, and revamping resolution-related procurement to broaden competition and shorten contracting timelines. He also said Congress could consider a de minimis exception to the FDI Act’s least-cost requirement to allow the FDIC to choose a slightly more costly resolution option when the added cost is minimal. Hill also described efforts to expand nonbank participation in failed-bank bidding, including through shelf charters, alliance bids, and asset-pool purchases, and said the FDIC expected to open the pre-qualification process to additional qualifying nonbanks later this year.