In wake of the recent financial crisis, the Federal Reserve System has agreed on a new ordinance requiring the country’s largest bank providers to draft a ‘living will’. The rule requires documented plans in hopes to help slow down any future meltdowns.
The blueprints main course of action will address what actions to take if the bank starts to fail. This requirement was mentioned in the Dodd-Frank financial reform law. Banks must update their plan annually.
Now that the rule is official, banks must begin submitting their proposals by July 2012, starting with banks who have more than $250 billion in assets.
The Federal Deposit Insurance Corporation co-authored the rule with the Fed and approved the motion in September. It is expected that 37 different banks will have ‘living wills’. Banks with assets under $50 billion will not be subject to the new rule.