Is 500 Hours Enough Time?

We are living in a belts-and-suspenders world now, and the living will is no exception.

Before the Dodd-Frank Act was signed into law on July 21, the FDIC proposed requiring insured depository institutions with $10 billion in assets that are controlled by holding companies with $100 billion in assets to submit a living will. The FDIC's May 11 proposal would require a living will from roughly 40 companies within six months of the rule's adoption. These documents would be updated annually, with certain, unidentified elements updated more frequently. The FDIC said its goal is to understand "business lines, operations, risks, activities and exposures" and determine the nature and extent of an insured institution's relationships with affiliates and to identify concentrations of risks. Just eight comment letters were filed by the July 16 deadline, most suggesting the FDIC should withdraw its proposal in light of the broader mandate in Dodd-Frank.

Michael H. Krimminger, a deputy to the FDIC chairman for policy, said the agency plans to press ahead. "I would anticipate we would go ahead with the May proposal," he said. "There is clearly a need to make sure there is a way to be sure we can protect the Deposit Insurance Fund. I don't think they are redundant. They relate to similar issues but different needs."

The American Bankers Association in its comment letter noted yet another belt: in October the Financial Stability Board, an international coordinating body for supervisors, is set to propose its own plan to address many of the same issues. The ABA called the FDIC's information requirements "vague, overbroad, duplicative and inappropriately burdensome," and all but laughed at the FDIC's estimated 500-hour timetable. "This is a gross underestimation of the time that would be spent in complying with the proposed rule," ABA Vice President Mary Frances Monroe argued.

"The FDIC must have a realistic sense of the burdens it is imposing in considering the optimal cost/benefit balance."