Several of the world’s largest banks – including Swiss banks UBS and Credit Suisse – need to revise their emergency plans after US regulators gave them a failing grade on Tuesday.
The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) came to the conclusion after examining the banks’ “living will” policies. The supervisory authorities found that the banks had unrealistic and inadequate settlement plans for dealing with how clients might behave in a crisis.
In addition, the banks had failed to adjust their corporate structures to facilitate a settlement during economically difficult times. The regulators have now directed them to come up with simpler legal structures.
The so-called living wills were a response to the last major financial crisis, when the collapse of the Lehman Brothers investment bank shook the world economy. In 2012, the authorities demanded that financial institutions come up with detailed contingency plans to show how they would handle a crisis. The banks now have until the middle of 2015 to submit their improved plans.
In addition to UBS and Credit Suisse, other banks include Bank of America, Bank of New York, Barclays, Citigroup, Deutsche Bank, Morgan Stanley and State Street.