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The Dodd–Frank Wall Street Reform and Consumer Protection Act established a statutory requirement for covered companies to develop plans for their rapid and orderly resolution. Currently, covered companies are bank holding companies that have either total consolidated assets of at least $250 billion, or between $100 billion and $250 billion that have been designated by the Federal Reserve to be subject to the resolution planning requirement.1 The standard of review is whether a plan is not credible or would not facilitate an orderly resolution of the firm under bankruptcy.

I support staff’s recommendation that the �౦��Ϸ���� Board identify a shortcoming in the most recent Citigroup plan submission arising from weaknesses in the firm’s data integrity and data quality management processes that could adversely affect its ability to produce timely and accurate data and could degrade the timeliness and accuracy of key metrics that are integral to executing the firm’s resolution strategy. This shortcoming requires urgent attention by the firm’s senior management and board of directors.

As a more general matter, firms must have not only well–developed written plans and playbooks that outline their general strategies for achieving a rapid and orderly resolution, firms must also have the operational capabilities to execute their resolution strategies. Simply stated, if a firm lacks the ability to successfully execute its resolution strategy, the credibility of a firm’s plan for its rapid and orderly resolution under the Bankruptcy Code would be called into question.

There are a number of ways in which the adequacy of firms’ capabilities can be demonstrated. One way is with internal testing initiated by the firms. The stronger programs are joining these testing efforts with risk–management cultures that self-initiate remediation plans to correct any weaknesses noted.

A crucial complementary approach is for regulatory authorities to evaluate firms’ abilities to execute their resolution strategies. These independent supervisory analyses may consider factors such as the accuracy of key data elements and the firms’ ability to incorporate changes, such as those pertaining to economic conditions or counterparty behavior.

The supervisory work may also include evaluating the firms’ ability to recognize the onset and escalation of financial stress in a sufficiently timely manner to allow them to mitigate financial, operational, legal, and regulatory vulnerabilities; prepare for resolution; begin resolution proceedings at the proper time; and continue operations through the points of stabilization and resolution conclusion.

Going forward, the agencies expect to expand their evaluation of Title I resolution plan submissions with more granular reviews of firms’ internal testing results and to conduct their own independent capabilities assessments.

These letters adopted today will provide direct feedback to firms about the agencies’ expectations and are a significant step toward enhancing the firms’ compliance with the statutory mandate. I support their issuance and would like to thank �౦��Ϸ���� and Federal Reserve staff for their thoughtful and collaborative work on these important issues.

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  See Federal Reserve Regulation QQ, 12 CFR Part 243, and �౦��Ϸ���� Regulation 12 USC Part 381, implementing (DFA), as amended by the (EGRRCPA). The DFA requires certain nonbank financial companies, and bank holding companies with total consolidated assets of $250 billion or more, to submit resolution plans periodically to the �౦��Ϸ����, the Federal Reserve Board, and the Financial Stability Oversight Council. In addition, under EGRRCPA, the Federal Reserve Board may apply any enhanced prudential standard (including the Section 165(d) resolution plan submission requirement) to any firm with total consolidated assets equal to or greater than $100 billion but less than $250 billion if the Federal Reserve Board determines that application of the prudential standard is appropriate to prevent or mitigate risks to the financial stability of the United States, or to promote safety and soundness.