Big banks will soon have to turn in their plans for how they'd go out of business, if they ever have to.
Big banks including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley face a Monday deadline for submitting "living wills" to federal regulators. The requirement is part of the Dodd-Frank banking law, which was passed two years ago but is being implemented piecemeal.
The living wills are meant to prevent a repeat of the fall 2008 financial crisis, when the government didn't have a game plan for how to wind down troubled banks, and instead ending up giving taxpayer-funded loans to many of them. That sparked the doctrine of "too big to fail," where the banks were bailed out because the government believed that letting them collapse would hurt too many other companies.
In their living wills, the banks will have to detail their assets and debts, and how they're tied to other companies, among other requirements. If the Federal Reserve and Federal Deposit Insurance Corp. decide that the plan isn't adequate, they can require the banks to raise more capital, tamp down on growth, or even sell off units.
On one side, the banking industry has criticized the living wills as a pretext for allowing the government to split up big banks. On the other side, different critics say that the living wills don't go far enough, because they don't address the underlying issue that banks are too big.
Smaller banks will have to submit living wills next year.
JPMorgan Chase shares added 79 cents, or 2.2 percent, to $36.50. Bank of America gained 13 cents to $7.75, while Citi added 31 cents to $27.04.
Goldman shares rose $2.34, or 2.6 percent, to $93.97, and Morgan Stanley rose 37 cents, or 3.7 percent, to $13.88.
