In a sweeping rebuke to Wall Street, U.S. regulators said that 11 of the nation's biggest banks haven't demonstrated they can collapse without causing damaging economic repercussions and ordered them to try again, the Wall Street Journal reported today. The Federal Reserve and the Federal Deposit Insurance Corp. said that bankruptcy plans submitted by big banks make "unrealistic or inadequately supported" assumptions and "fail to make, or even to identify, the kinds of changes in firm structure and practices that would be necessary to enhance the prospects for" an orderly failure. The regulators raised the specter of slapping banks with tougher rules on capital and leverage or restrictions on growth — and even eventually forcibly breaking them up — should they fail to make significant progress to address the shortcomings by July 2015. The findings applied to 11 banks with assets greater than $250 billion, including Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corp., and the U.S. units of Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, and UBS AG. The 2010 Dodd-Frank law required banks to submit an annual "living will" detailing their operations and exposures as well as how they could be dismantled without relying on government support in the event they reach the brink of failure.
