Regulators Give AIG, Prudential Extra Year to File Living Wills

By Jeff Bater

Insurance giants American International Group and Prudential Financial were granted an extra year to file their living wills to the Federal Reserve, which has begun reviewing the latest regulatory breakup plans of eight megabanks.

The Fed announced July 5 the two insurance companies have until the end of 2018 to submit their next resolution plans, required under the Dodd-Frank Act.

Previously, Prudential and AIG were required to submit their next plans by Dec. 31, 2017.

“The extensions will allow the firms time to incorporate any guidance from the agencies into their next resolution plans,” the Fed said.

An analyst, Jaret Seiberg of Cowen and Co., said the extension supports the view that the Financial Stability Oversight Council is likely to lift the systemically important designations from the two insurers.

“Our view is that if Prudential and AIG were likely to remain SIFIs, then the agencies would have required the submissions as scheduled for December 2017,” he wrote July 5 in a research note. “Then they would have provided feedback to those submissions. This is why we believe this delay is relevant. It is the strongest indication to date that the Federal Reserve and FDIC believe there is at least a chance that FSOC de-designates the insurers.”

Public Portions of Living Wills

Big financial companies must file periodic blueprints with the Fed and the Federal Deposit Insurance Corporation that sketch out how the firms would wind down in the event of material financial distress or failure of the company.

The regulators announced the extension for AIG and Prudential in a news release saying they had posted the public portions of the annual living wills for Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley, State Street Corp., and Wells Fargo & Co.

Those eight firms were required to submit their plans by July 1.

Resolution plans must be divided into a public section and a confidential section. The banking agencies have required each firm’s public section to summarize certain elements of the resolution plan, including the firm’s material entities and core business lines, and information helpful in understanding how the resolution plan would be executed.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor on this story: Michael Ferullo at mferullo@bna.com

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