Banks’ Living Wills Get Silent Treatment From U.S. Regulators

(Bloomberg) -- This week, for the third time, the biggest U.S. bankshave sent regulators detailed plans for their own demise. The regulators’ response to those filings has been far less detailed.

The bankruptcy plans, known as living wills, are designed to reassure the public and the market that banks are not “too big to fail” and that they could go bankrupt without damaging the rest of the economy. A group of 11 banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. had to file a new round of plans yesterday even though they have yet to get a response from regulators on documents from last year.

The lack of feedback from the the Federal Deposit Insurance Corp. and Federal Reserve has prompted analysts and banking officials to question whether the process is effective. It has also complicated the situation for three systemically important firms that aren’t banks but need to file living wills for the first time this year -- Prudential Financial Inc., American International Group Inc. and General Electric Co.’s financial arm.

“One of the major concerns the banks have had is the absence of feedback concerning prior filings,” said Donald Lamson, who represents financial institutions at Shearman & Sterling LLP in Washington. The banks are left trying to squeeze as much information as they can from the agencies’ examiners and from officials’ public comments, he said.

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