On August 5, 2014, the Board of Governors of the Federal Reserve System (FRB) and the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) issued a joint press release, which identified shortcomings in largest banks' plans to identify their abilities to wind down operations in the event of material financial distress or failure of the company.

Under final Dodd-Frank rules, large US banks with over $50 billion in consolidated assets (as well as large foreign banks with a US presence and financial institutions designated as systemically significant) are required to submit "living wills" to the federal banking regulators on a periodic basis. These living wills are intended to describe how large financial institutions may be resolved in the event of failure without disruption of the larger financial markets or government intervention (for more information on living wills and orderly resolution, see Practice Note, Living Will Requirements for Financial Institutions).

The press release noted that many improvements have been made from the first round of living will submissions in 2012. However, the regulators also noted many deficiencies that need to be further addressed in the next round of submissions in 2015. Topics that need to be addressed include, but are not limited to:

While the FRB has deemed that the submitted plans are not credible and do not facilitate and orderly resolution pursuant to section 165(d) of the Dodd-Frank Act, the FDIC has only stated that the subject financial institutions must take immediate action to improve their resolvability, which must be reflected in the next round of submissions.

In addition to these generally applicable issues, individual letters have been sent to each of the 11 institutions that fall into the SSFI category, outlining specific aspects of their living will that needs to be addressed. The next round of living wills must be submitted by July 1, 2015, and should demonstrate significant progress to address all identified shortcomings.