IFR reported last month that a potential divergence is occurring between US and non-US banks operating in the US with their living wills. Observers noted that the regulator has spent considerable time and effort with domestic banks to shore up the strength of their living wills to a high level of detail and breadth. By comparison, the level of detail within the living wills for non-US banks operating was markedly lower, essentially limited to "... descriptions of bank operations ... and relied heavily on the use of liability bail-in processes in their own markets".
Further complicating matters is the increasing use by non-US banks to set up intermediate holding companies to house their activities. A key feature of the new plans include relatively "clean holding companies, with limited short term debt obligations that could be put into a bankruptcy re-organisation". The IFR notes that living wills can be used to usher in other changes, such as the elimination of early derivative termination clauses. Living wills can have widely different outcomes for banks, including orderly wind-down, disposals/IPO (e.g., for wealth management, retail banking or trustee businesses), and full resolution. More on the Fed's resolution plans can be found here: http://www.federalreserve.gov/bankinforeg/resolution-plans.htm.
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