Weathering the Storm: Living Will Requirement under Dodd-Frank


On September 13, 2011, the Board of Directors of the Federal Deposit Insurance Corporation (“FDIC”) unanimously approved a final rule implementing Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Rule”). The Dodd-Frank Rule requires (i) bank holding companies with $50 billion or more in assets and (ii) nonbank financial institutions, such as insurance companies and investment banks that are designated as “systemic” by the Financial Stability Oversight Council to create and submit “living wills.”1 The living will must contain the institution’s contingency plan for unwinding its business in a proceeding under the Bankruptcy Code or other applicable insolvency regime (such as a state insurance liquidation statute) in the event of material failure or distress. The general purpose of the living will is to minimize or avoid any systemic risk to the nation’s financial system through the use of strategic pre-failure contingency planning.

The Dodd-Frank Rule sets forth specific requirements for a living will, including:

  • a strategic analysis of the living will’s components;
  • a description of the range of specific actions to be taken;
  • analysis of the company’s organization, material entities, interconnections, interdependencies, and management information systems; and
  • a plan for the resolution of any subsidiary that conducts core business lines or critical operations.

The FDIC may make certain portions of the living will available to the public, but confidential components that include trade secrets and other sensitive information needed in case of material failure or distress will be reviewed only by regulators.2

Under the Dodd-Frank Rule, the deadlines for compliance with the living will requirement are (i) July 1, 2012 for affected institutions with total non-bank assets of $250 billion or more, (ii) July 1, 2013 for affected institutions with total non-bank assets between $100 billion and $250 billion, and (iii) December 31, 2013 for all other affected institutions. Subsequently, affected institutions must update their living wills annually and notify regulators within 45 days of the occurrence of any “material event” under the rule.

The Dodd-Frank Rule will apply to at least 124 institutions, nearly 100 of which are foreign-owned.3 Affected foreign institutions with only minimal United States operations will be permitted to provide less detail in their living wills than living wills submitted by affected United States institutions.

The Federal Reserve was involved in crafting the Dodd-Frank Rule and must approve the rule before it takes effect. The Federal Reserve is expected to consider the rule in the coming days and approve it in its current form.

Additionally, the FDIC approved a similar interim final rule under the Federal Deposit Insurance Act (the “FDIA Rule”) that requires insured depository institutions with $50 billion or more in total assets to submit periodic contingency plans to the FDIC for resolution in the event of the depository institution failure. The FDIA Rule has been synchronized with the Dodd-Frank Rule and has a 60-day comment period. It appears that 34 bank holding companies covered by the Dodd-Frank Rule will also have to submit a separate plan under the FDIA Rule.4

For more information, please contact any of the lawyers listed below.

1 Regulators have not yet designated any nonbank financial institutions as systemically significant.
2 Eamon Javers, “Big US Banks to be Required to Write ‘Living Wills,’”, available at
3 Victoria McGrane, “'Living Wills' Due Next Year,” Wall St. J., Sept. 14, 2011, available here (subscription required).
4 Id.

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