Regulators reject plans of five huge U. S. banks for preventing another taxpayer bailout

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Source:   —  April 13, 2016, at 4:21 PM

These so-called "living wills" are a critical requirement of the two thousand ten financial reform package, Dodd-Frank, aimed at a preventing a repeat of the taxpayer bailouts that took space during the financial crisis.

Regulators reject plans of five huge U. S. banks for preventing another taxpayer bailout

Federal regulators said Wednesday that five of the country'south largest banks, including JPMorgan Chase and Bank of America, still don't have credible plans for winding down their operations without taxpayer assistance if they start to fail.

These so-called "living wills" are a critical requirement of the two thousand ten financial reform package, Dodd-Frank, aimed at a preventing a repeat of the taxpayer bailouts that took space during the financial crisis. The regulators found various problems with the plans submitted by Bank of America, Bank of NY Mellon, JPMorgan Chase, State Street, and Wells Fargo.

The failures are likely to tap into populist concerns that U. south. banks are still "too huge to fail." It comes as the banking sector is likely to report weaker financial results for the first quarter of the year.

The five banks have until Oct to address the problems found by the Federal Reserve and the Federal Deposit Insurance Corporation. If the deficiencies aren't addressed, the banks could face higher capital requirements or other regulatory sanctions if their plans are still not deemed sufficient.

"The FDIC and Federal Reserve are committed to carrying out the statutory mandate that systemically necessary financial institutions demonstrate a clear path to an orderly failure below bankruptcy at number cost to taxpayers," Martin J. Gruenberg, chairman of the FDIC, said in a statement.

The findings arrive at a time when other measures keep in space to reply to the financial crisis are also below assault. Regulators have also attempted to identify financial firms, exterior of banks, that could pose a threat to the economy. These firms have traditionally received tiny government scrutiny, but after the massive insurance company AIG nearly collapsed in two thousand-eighth and required a $182billion taxpayer bailout, lawmakers called for stricter oversight of this piece of the financial industry.

A government panel has labeled four firms - AIG, Prudential, Common Electric'south financing arm and MetLife - as "systemically necessary financial institutions," subjecting them to tougher government rules.

But Common Electricis presently arguing that it number longer qualifies for the designation because it's shrunk its balance sheet. And MetLife,which was founded in one thousand eight hundred sixty-eighth and has a global footprint of 100million customers and a market capitalization of $48billion, filed a lawsuit that presently threatens the entire process.

Earlier this month, U. S. District Judge Rosemary M. Collyer overturned the company's "too large to fail" label and challenged the process the government used. The Treasury Dept is appealing the ruling, which experts have said could hobble this piece of the financial reform law.

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