On Tuesday, September 8, the Systemic Risk Council submitted a letter to Janet Yellen, Chairman of the Board of Governors of the Federal Reserve System, and Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation, commenting on the recent release of public “living will” disclosures for 12 large financial firms in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The letter states that the Council is “encouraged” by the “updated and improved public disclosures” and that the “regulated institutions—responding to the agencies’ guidance—have considerably improved the quality of their public disclosure.”
The letter argues that public disclosure of living wills is critical to persuading the public that the “too-big-to-fail” problem has been solved and that the largest financial institutions can be resolved without recourse to taxpayer bailouts. “Although many provisions of the Dodd-Frank Act are intended to address systemic risk, the unique contribution of the living will regime—and particularly the public disclosures mandated by the agencies—is to attack directly the perception that the authorities have no choice but to bail out systemically important financial institutions in times of financial distress.”
The letter also encourages the agencies to mandate use of common definitions and reporting practices so as to facilitate comparison across systemic institutions and assist the public in evaluating the progress made by individual institutions over time.
Read the full letter here: