Bank investors suffered another round of negative headlines on Wednesday as the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) ruled that five out of the eight “too big to fail” U.S. financial institutions have issued “living will” breakup plans that do not pass regulatory standards.
The Fed and the FDIC jointly ruled that the plans of Bank of America Corp BAC 0.99%, Bank of New York Mellon Corp BK 0.55%, JPMorgan Chase & Co. JPM 1.15%, State Street Corp STT 0.85% and Wells Fargo & Co WFC 1.11% must be amended for the banks to avoid stricter regulatory oversight.
Of the remaining three “too big to fail” institutions, Goldman Sachs Group Inc GS 1.49%’s plan was deemed not credible by the FDIC, Morgan Stanley MS 1.57%’s plan was ruled not credible by the Fed, and Citigroup Inc C 0.13% had the only plan approved by each agency.
But before Citigroup shareholders get too excited, the agencies noted deficiencies in all of the living wills.
“No firm shows itself capable of being resolved in an orderly fashion through bankruptcy,” FDIC Vice Chairman Thomas Hoenig said.
How much should investors worry…
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