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15 Regional Banks Get Fed Nod on 'Living Wills,' NTRS Fails

Zacks Equity Research

Last week, U.S. banking regulators, the Federal Reserve and the Federal Deposit Insurance Corp (“FDIC”), passed 15 regional banks on their "living wills" but found a fault in the plan of Northern Trust Corporation NTRS after completing the evaluation of the 2015 resolution plans. Both the regulatory agencies have found some shortcomings in Northern Trust’s plan which needs to be submitted, as revised, by Dec 2017.

The plan, better known as “living will,” lays out the strategy for a company’s fast resolution under bankruptcy in the event of failure of the company or severe financial stress. Under provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the banks (with total consolidated assets of $50 billion or more) are required to submit living wills. The main objective behind the submission of living will is to avoid re-run of the 2008 financial crisis and reduce risks of further bailouts.

A systemic resolution, maximizing the sale value of a failed bank and minimizing creditor losses, would help in efficient handling of bank failures. Moreover, the FDIC will have the power to liquidate a bank if its collapse knocks down the country’s financial stability.

The other 15 regional banks which have gained passing grades, include American Express Company AXP, Ally Financial Inc. ALLY, BB&T Corp. BBT, Capital One Financial Corp. COF, Comerica Inc. CMA, Discover Financial Services DFS, Fifth Third Bancorp FITB, Huntington Bancshares Inc. HBAN, KeyCorp KEY, M&T Bank Corp. MTB, Regions Financial Corp. RF, SunTrust Banks, Inc. STI, The PNC Financial Services Group, Inc. PNC, U.S. Bancorp USB and Zions Bancorporation ZION.

Among these banks, Comerica, Regions Financial and SunTrust Banks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For the 15 regional banks, which passed without shortcomings, the regulators have reduced expectations in their 2017 resolution plans related to the size and complexity of the banks. Thus, information to be submitted by these banks by Dec 31, 2017 will be minimized.

On the other hand, the U.S. regulators permitted one-year extension till Jul 2018 to four foreign banks to improve their resolution plans in order to comply with regulations as were directed in 2014 to operate their U.S. businesses under one corporate entity. These banks include Barclays Plc BCS, Credit Suisse Group AG CS, Deutsche Bank AG DB and UBS Group AG UBS.

The Fed and Federal Deposit Insurance Corp guided these banks as "to reflect the significant restructuring that they have undertaken to form intermediate holding companies."


Hypothetically, it is easy to say that resolution plans should be made in a way such that they do not adversely affect the overall financial system. However, in practice, it is difficult to mitigate the harm, as banks depend considerably on mutual businesses.

Nevertheless, we believe ‘Living Wills’ will help the regulators to wind up banks, in case of failures, to some extent. Most importantly, the advance precautions will surely entail into lesser involvement of taxpayers’ money for bailing out troubled financial institutions.

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BB&T Corporation (BBT): Free Stock Analysis Report
PNC Financial Services Group, Inc. (The) (PNC): Free Stock Analysis Report
Comerica Incorporated (CMA): Free Stock Analysis Report
U.S. Bancorp (USB): Free Stock Analysis Report
M&T Bank Corporation (MTB): Free Stock Analysis Report
SunTrust Banks, Inc. (STI): Free Stock Analysis Report
KeyCorp (KEY): Free Stock Analysis Report
Fifth Third Bancorp (FITB): Free Stock Analysis Report
Credit Suisse Group (CS): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
Barclays PLC (BCS): Free Stock Analysis Report
Deutsche Bank AG (DB): Free Stock Analysis Report
Huntington Bancshares Incorporated (HBAN): Free Stock Analysis Report
Northern Trust Corporation (NTRS): Free Stock Analysis Report
Regions Financial Corporation (RF): Free Stock Analysis Report
Zions Bancorporation (ZION): Free Stock Analysis Report
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