Government Accountability Office (GAO) published its report on Tuesday. The agency said large banks in the US do not have sufficient information how US financial regulators evaluate their crisis plan. Therefore, GAO suggested regulators to publish more information.
Reuters reported that as the nonpartisan agency that audits federal programs and offices, GAO suggest regulators to disclose their frameworks. In its report released on Tuesday, GAO said that US Federal Reserve and the Federal Deposit Insurance Corp (FDIC) have not disclosed the framework to determine which plan is credible.
In the Dodd-Frank Act, its section 165 imposes large bank holding company to submit resolution plan, known as living wills. This resolution plan consist of how the banks can wind down their operations during a crisis without bailout from public money. However, the banks have limited information of the framework that financial regulators use to evaluate their plan.
"Without greater disclosure, companies lack information they could use to assess and enhance their plans," GAO report said. "The regulators view such information as confidential, but a federal directive on open government recognizes that transparency promotes accountability by providing more information on government activities."
As a result of insufficient information, five largest US banks have failed to provide their resolution plan. On Wednesday, Federal Reserve and FDIC said JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Bank of New York Mellon Corp. and State Street Corp. must resubmit their resolution plan by the Oct. 1 deadline. CNBC reported that none of eight largest US banks fared well in the evaluations, as plan from Goldman Sachs and Morgan Stanley were also deemed not credible and Citigroup passed but with shortcomings.
In the statement FDIC said that the agency and Federal Reserve are committed to carry statutory mandate to protect taxpayers money used to bailout large banks. Nevertheless, all resolution plan from those banks have certain inadequacies.
"Each plan has shortcomings or deficiencies," FDIC Vice Chairman Thomas Hoenig said. "No firm yet shows itself capable of being resolved in an orderly fashion through bankruptcy. Thus, the goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal."
In a conference call on Wednesday, JPMorgan Chairman and Chief Executive Officer Jamie Dimon told Bloomberg, "We're going to do everything possible to fix this issue." While chief financial officer Marianne Lake said the bank is disappointed, but it only require a modest expense to fix the plan.
GAO suggested financial regulators to disclose more information on their policy. While five large US banks do not have enough plan to manage their operation during crisis.
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