Exclusive: U.S. banks told to make plans for preventing collapse

Tripace · Aug 11, 2012

Exclusive: U.S. banks told to make plans for preventing collapse | Reuters

"Recovery plans are about protecting the crown jewels," said Paul Cantwell, a managing director at consulting firm Alvarez & Marsal. "It's about, 'How do I sell off non-core assets?' The priority is to the shareholders. A resolution plan is about protecting the system, taxpayers and creditors."

The recovery plans requested in 2010, meanwhile, have received little publicity. The names of the banks required to submit them have not been previously disclosed, and Reuters obtained them only through a Freedom of Information Act request.

The Fed supplied Reuters with the letters requesting plans from banks, but not the banks' actual plans because they were deemed confidential supervisory information. The regulator said it was withholding 5,100 pages of information.

Bank of America and Citigroup, in a sense, have already been executing the kind of moves called for in the recovery plans. Both have been selling off non-core operations and assets to streamline their sprawling businesses, after receiving multiple bailouts during the financial crisis.

Bank of America in June 2011 told Fed officials that it could shed branches in some parts of the country if it needed to raise capital in an emergency, a person familiar with the matter said in January. The proposal was part of a series of options provided to the Fed, including issuing a tracking stock for Bank of America's Merrill Lynch operations.

But just because the bank proposed selling branches does not mean it's a desirable move or highly probable, the person said. In the past year, Bank of America has shown progress in building capital without such actions. Its Tier 1 common capital ratio increased to 11.24 percent of risk-weighted assets as of June 30 from 8.23 percent a year earlier.

Tier 1 refers to a bank's core capital and has been the main focus of regulators in assessing a bank's capital adequacy.

The banks' chief risk officers, and in the case of Citigroup, Chief Executive Vikram Pandit, received letters in May 2010 instructing them on what to include in the recovery plans. The requests stemmed from January 2010 crisis management meetings held by regulators. The letters sent to the five banks were nearly identical.

Each plan was to address severe financial stress at the firm, as well as "general financial instability." The plans should be capable of being executed ideally within three months, but no longer than six months, the documents said.

The plans should "make appropriate assumptions as to the valuations of assets and off-balance sheet positions," the documents said.

Recovery plans have been mentioned in public before, but only in passing. In testimony to Congress in July 2010, Fed Governor Daniel Tarullo said the "largest internationally active U.S. banking organizations" were working on recovery plans. The initiative stemmed from work led by the Financial Stability Board, a body that coordinates the work of international financial regulators, he said.

In a presentation in March, JPMorgan Chase said it had a recovery plan in place and said it was ordered by regulators. The presentation was organized by Harvard Law School and was closed to the media at the time, but is available online.
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Yup, go ahead and call Ron Paul crazy one more time. We could use a good laugh!

ProvidencePlant · Aug 11, 2012

Austrians don't know shit Tripace! You didn't know that?

Peter Schiff: Market-Crushing Treasury Collapse To Hit Around 2013 - Forbes

Lay Low · Aug 11, 2012

Lol.. Zombie banks are zombies.

xmaspoo · Aug 11, 2012

Create useless plan to maintain solvency for zombie banks? Check.

Lender of last resort marble palace still open for business? Check.

Public Relations campaign for Too Big To Fail complete? Check.

lightupbong · Aug 11, 2012

xmaspoo said:

Create useless plan to maintain solvency for zombie banks? Check.

Lender of last resort marble palace still open for business? Check.

Public Relations campaign for Too Big To Fail complete? Check.
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New World Order?.......Loading 88%

"By the all seeing eye"

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