An increasingly vocal chorus of current and former U.S. regulators says that the biggest banks still have not provided adequate plans to safely wind down in bankruptcy and may need to be restructured to reduce the risk they pose to the financial system, Bloomberg News reported today. Jim Wigand, a Federal Deposit Insurance Corp. official responsible for planning for the potential failures of big banks such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., said that none have yet been able to draw up bankruptcy plans that wouldn’t threaten to detonate the financial system. The plans, known as “living wills,” were a core demand of the 2010 Dodd-Frank Act overhaul of financial oversight, and it gave regulators the authority to require systemically risky banks to restructure if their plans aren’t “credible.” Whether a global financial giant is able to go through an orderly bankruptcy using a living will is still “an open question,” Wigand said. The 11 largest banks filed the first draft of their living wills last year. The banks, which included Bank of America Corp., Barclays Plc and Deutsche Bank AG, are required to file new versions of their living wills on Oct. 1. Another tier of banks with smaller U.S. nonbank holdings, including Wells Fargo & Co. and HSBC Holdings Plc, must file their first plans by July 1.
