**Title:** FDIC to Revise Living Will Requirements for Banks
**Meta Description:** The FDIC is changing living will requirements for banks, focusing on rapid resolution plans to prevent deposit runs after failures.
**URL Slug:** fdic-revises-living-will-requirements
**Headline:** FDIC Announces Changes to Living Will Requirements for Banks to Enhance Resolution Plans
The Federal Deposit Insurance Corporation (FDIC) is set to modify its requirements for banks’ living wills, shifting away from hypothetical failure scenarios. Travis Hill, the acting chair of the FDIC, announced that the agency will now prioritize updated resolution plans that provide essential information for quickly marketing and, if necessary, temporarily operating a failing institution. This announcement was made during an American Bankers Association event on Tuesday.
The new guidance, expected to be released soon, will emphasize practical strategies over theoretical discussions regarding the transition of a failing lender into an FDIC-authorized bridge bank. This change comes in response to the significant deposit runs experienced after the collapse of Silicon Valley Bank (SVB) in March 2023, which operated as a bridge bank during its resolution. Similarly, Signature Bank faced substantial post-receivership losses, which accounted for nearly half of its deposits at the time of its failure. Hill noted that these deposit losses diminished the value of the failed institutions and increased costs to the Deposit Insurance Fund.
### Addressing the ‘Melting Ice Cube’ Problem
Hill referred to the challenges faced by bridge banks and conservatorships as the “melting ice cube” problem. This term describes the rapid loss of customer confidence and deposits following a bank’s failure, leading to instability in the banking sector and the broader economy. He emphasized the need for the FDIC to enhance the likelihood of effective resolutions, typically through weekend sales of failing banks. However, he acknowledged that swift acquisitions are not always feasible, necessitating readiness to sell parts of the bank quickly.
In July 2024, the FDIC and the Federal Reserve implemented final guidance aimed at ensuring a smooth and rapid dissolution of U.S. lenders following failures. This initiative was part of the regulators’ response to the swift collapses of SVB and Signature Bank. Hill pointed out that the previous plan did not fully address all lessons learned, particularly regarding the costs associated with operating a bridge bank during the critical initial weekend of a bank’s collapse.
### Conclusion
The FDIC aims to be better prepared for future bank failures, focusing on cost-effective resolution strategies. By revising living will requirements, the agency hopes to mitigate the risks of deposit runs and enhance the stability of the banking system.
### FAQ
**What are the new requirements for banks’ living wills?**
The FDIC is shifting to resolution plans that focus on providing essential information for rapid marketing and temporary operation of failing banks, rather than hypothetical failure scenarios.
