On September 13, 2011, the Federal Deposit Insurance Corporation approved a final rule requiring certain financial institutions to prepare a plan for their dismantling in the event of material financial distress or failure.

On Tuesday morning, the Federal Deposit Insurance Corporation (“FDIC”) Board unanimously approved two rules regarding resolution planning: one rule for large bank holding companies and nonbank financial companies supervised by the Federal Reserve Board of Governors (“FRB”),1 and the other rule for large banks.2

On September 13th, the FDIC voted to approve a final rule to be issued jointly with the Federal Reserve Board that would implement Section 165(d) of the Dodd-Frank Act. That provision requires bank holding companies with assets of $50 billion or more and companies designated as systemic by the Financial Stability Oversight Council to report periodically to the FDIC and the Federal Reserve the company's plan for its rapid and orderly resolution in the event of material financial distress or failure. The Federal Reserve will consider whether to adopt the rule shortly.

The FDIC Board approved a final rule on the orderly liquidation process, which was the culmination of a series of rulemaking efforts begun earlier this year. The rule implements several provisions of Title II of the Dodd-Frank Act. Title II establishes an “orderly liquidation authority” (the “OLA”) through which the FDIC can be appointed as receiver and liquidate a covered financial company, such as a bank holding company, whose failure threatens to have serious adverse effects on financial stability in the U.S.

On August 22nd, the Federal Reserve Board proposed a two-year phase-in period for most savings and loan holding companies ("SLHCs") to file Federal Reserve regulatory reports with the Board and an exemption for some SLHCs from initially filing Federal Reserve regulatory reports. Under the Dodd-Frank Act, supervisory and rulemaking authority for SLHCs and their non-depository subsidiaries was transferred from the OTS to the Board. The Board previously sought comment on whether to require SLHCs to submit the same reports as bank holding companies.

Today, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held a hearing to discuss the role of bankruptcy and antitrust law in financial regulatory reform, particularly with respect to institutions that may be regarded as “too big to fail,” as highlighted during the financial crisis.

Testifying before the Subcommittee were the following witnesses:

Panel I

Yesterday, the Subcommittee on Financial Institutions and Consumer Credit of the House Committee on Financial Services held a hearing entitled “The Condition of Financial Institutions: Examining the Failure and Seizure of an American Bank.” Participants in the hearing examined the current state of U.S.

The FDIC has adopted final rules which provide that the FDIC, as receiver of a covered financial company, may recover from senior executives and directors who were substantially responsible for the failed condition of the company any compensation they received during the two-year period preceding the date on which the FDIC was appointed as receiver, or for an unlimited period in the case of fraud.

The July 6, 2011 Federal Deposit Insurance Corporation Board of Directors (the “FDIC Board”) meeting marked the changing of the guard from Chairman Sheila Bair to FDIC Vice Chairman Martin Gruenberg. Chairman Bair’s valedictory meeting was not merely ceremonial; it also covered several key developments regarding the timing of a final rule on resolution plans under section 165(d) of Title I and a final rule on the Orderly Liquidation Authority (“OLA”) under Title II.

A. RESOLUTION PLANS/ LIVING WILLS

The United States District Court for the Central District of California has granted motions by eight directors and officers liability insurers to withdraw the reference to the bankruptcy court of two coverage actions involving coverage for claims against former directors and officers of a bank holding company.  In re IndyMac Bancorp, Inc., Nos. CV11-02600; CV11-02605; CV11-02950; CV11-02988 (C.D. Cal. May 17, 2011).  Wiley Rein LLP represents an excess insurer and the primary Side A insurer in the litigation.