FDIC wants ‘living will’ for banks

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Stacey Vanek-Smith: The Federal Deposit Insurance Corporation wants to require the country’s 40 largest banks to create a kind of living will in case they run into financial problems. John Dimsdale reports has more Washington.

John Dimsdale: The FDIC wants major banks to be prepared for their own death. The top 40 banks would have to submit a detailed plan for their own dismantling in the event of financial collapse. That would include a way to separate consumers’ money insured by the government from the complex financail institutions that own many federally-insured banks.

FDIC chairman Sheila Bair supports the proposal, saying early planning will help avoid the need for bailouts. But Scott Talbott, with the bank trade association Financial Services Roundtable, worries that the living wills sitting at the FDIC would quickly become outdated.

Scott Talbott: The markets change quickly, as do banks. And so the shelf life of any living will would be short-lived.

He says all the responsibility shouldn’t be on banks — regulators should work with them continuously to plan for problems. The living will proposal is open for a 60-day comment period. After that, the FDIC has the authority to make it a requirement without the need for congressional legislation.

In Washington, I’m John Dimsdale for Marketplace.