14:07 GMT +320 July 2018
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    Three European Banks Lack Credible Distress Plans - US Federal Reserve

    © REUTERS / Stefan Wermuth
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    The US Federal Reserve stated that France’s BNP Paribas, the United Kingdom’s HSBC Holdings and the Royal Bank of Scotland were not credible and did not facilitate an orderly resolution under the US bankruptcy code.

    WASHINGTON (Sputnik) — France’s BNP Paribas, the United Kingdom’s HSBC Holdings and the Royal Bank of Scotland failed to meet US federal regulations by submitting unrealistic plans for handling major economic crises, the US Federal Reserve said in a press release.

    “The plans submitted by these three filers are not credible and do not facilitate an orderly resolution under the US bankruptcy code,” the press release, issued on Monday, said.

    All three plans suffer from unrealistic assumptions about the “likely behavior of customers, counterparties, investors, central clearing facilities, and regulators,” the release added.

    The US Dodd-Frank Wall Street Reform and Consumer Protection Act requires every bank with assets of $50 billion or more to file a roadmap for weathering bankruptcies and other financial disasters, the Federal Reserve explained.

    “Each plan, commonly known as a living will, must describe the company's strategy for rapid and orderly resolution under the US bankruptcy code in the event of material financial distress or failure of the company,” the release said.

    The Federal Reserve said the three foreign banking organizations must address the defects and improve their resolution plans by the end of the year.

    On March 11, the Federal Reserve singled out two other European Banks, Germany’s Deutsche Bank and Spain’s Santander Holdings, for failing an annual US financial stress test because of objectionable capital planning processes.

    The Federal Reserve is the Central Bank of the United States that is responsible for the nation’s monetary policy, for setting interest rates and regulating banks.


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