NextFin News - U.S. bank regulators just signed off on the "living wills" of 15 large banking organizations without flagging a single flaw - a clean sweep that includes the resolution of BNP Paribas' lingering 2021 shortcoming and marks another step in the post-crisis shift from emergency firefighting to routine, credible wind-down planning.
The Federal Reserve and the Federal Deposit Insurance Corporation on Tuesday published feedback letters for resolution plans submitted in October 2025, covering 15 banking organizations with more than $250 billion in assets. The agencies "did not identify any shortcomings or deficiencies in these resolution plan submissions," the joint release said, and separately determined that the shortcoming previously identified in BNP Paribas' 2021 plan "has been satisfactorily addressed."
The outcome is notable less for what it reveals about any single bank than for what it says about the state of Dodd-Frank resolution planning more than a decade after the rules were written: the largest, most complex banks - domestic and foreign alike - are increasingly producing plans regulators can accept without public remediation orders. But that very success raises a harder question that the letters do not answer. A clean feedback letter certifies that a plan is better written, not that a bank can actually be wound down in a panic. The real test of living wills is not how they read in calm times, but whether they hold when funding markets freeze, counterparties run, and cross-border resolution authorities disagree - conditions no feedback letter can simulate.
The 15 Firms and What the Letters Actually Say
The September 29 release, timed for 4:00 p.m. EDT, covers two tiers of filers. Five firms received individually addressed letters: American Express Company, Barclays PLC, BNP Paribas, Deutsche Bank AG, and UBS Group AG. The remaining ten - Bank of Montreal, Mizuho Financial Group, Mitsubishi UFJ Financial Group, Northern Trust Corporation, The PNC Financial Services Group, Royal Bank of Canada, Sumitomo Mitsui Financial Group, The Toronto-Dominion Bank, Truist Financial Corporation, and U.S. Bancorp - received a template letter for Category II and III firms, indicating their plans met the agencies' baseline expectations without firm-specific weaknesses.
Under Section 165(d) of the Dodd-Frank Act and the jointly issued Resolution Plan Rule (12 CFR parts 243 and 381), bank holding companies with $250 billion or more in total consolidated assets must periodically file plans describing how they could be resolved "rapidly and orderly" under the U.S. Bankruptcy Code in the event of material financial distress or failure. Triennial full filers submit a full plan every three years, alternating with targeted plans. For the ten Category II and III firms, the agencies noted "meaningful improvements over the Covered Company's prior resolution plan submissions, including further development of the Covered Company's resolution strategy and capabilities." The letters direct these firms to submit their next targeted resolution plan by July 1, 2028.
One firm-specific detail stands out. Royal Bank of Canada changed its preferred resolution strategy from a U.S. single point of entry to a U.S. multiple point of entry approach - a structural choice with real consequences for how losses would be allocated across legal entities in a failure scenario. Single point of entry resolves the parent and pushes losses down; multiple point of entry resolves subsidiaries separately, which can ring-fence operations but complicates coordination.
The BNP Paribas letter, addressed to José Placido, CEO of IHC and CIB Americas at BNP Paribas USA, is the most consequential of the batch. Regulators had flagged a shortcoming in the French bank's 2021 targeted plan because it "failed to explain how the firm's repurchase agreement activity - including daily trading and settlement, oversight, and risk management - would remain uninterrupted in the event of the failure of the firm's U.S. broker-dealer." The 2025 plan described a strategy for affiliates to conduct the majority of those activities after a U.S. broker-dealer failure, and the agencies concluded the submission "satisfactorily addressed the shortcoming."
The Agencies concluded that the 2025 Plan satisfactorily addressed the shortcoming the Agencies identified in the 2021 Plan.
That closure matters. Repo markets are the plumbing of the short-term funding system, and a large foreign bank's inability to keep its repo book functioning through a U.S. broker-dealer failure was exactly the kind of operational gap that could turn a controlled resolution into a disorderly fire sale. Clearing it removes one of the last open items from the 2021 review cycle.
From Crisis-Era Scramble to a Mature Regulatory Routine
Tuesday's clean sweep did not happen in isolation. It follows a May 22, 2026 release in which the same two agencies reviewed the 2025 submissions of the eight largest and most complex domestic banking organizations - the U.S. global systemically important banks - plus 56 foreign banking organizations, again finding no shortcomings or deficiencies. That round also confirmed that derivatives-related weaknesses in the 2023 plans of Bank of America, Goldman Sachs, JPMorgan Chase, and Citigroup had been satisfactorily addressed.
Those 2023-2024 weaknesses are the useful comparison point. In June 2024, the agencies announced they had identified weaknesses in the 2023 plans of all four of the largest U.S. banks - Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase - while finding no weaknesses in the plans of Bank of New York Mellon, Morgan Stanley, State Street, and Wells Fargo. For Bank of America, Goldman Sachs, and JPMorgan Chase, the weaknesses were classified as "shortcomings." For Citigroup, the two agencies diverged: the FDIC determined the plan was not credible and labeled the weakness a "deficiency," while the Board called it a "shortcoming." Under the agencies' rule, when one finds a shortcoming and the other a deficiency, the plan is deemed to have a shortcoming - so Citigroup's 2023 plan carried that designation as well. The remediation items, centered on derivatives portfolios and emergency wind-down plans, were to be addressed in the plans due by July 1, 2025, and the May 2026 release confirmed they had been worked off.
The trajectory is clear: the population of banks with open, publicly disclosed resolution-plan defects has shrunk materially over two review cycles. That is a genuine supervisory achievement. It reflects years of iterative feedback, higher expectations for resolution forecasting systems and data, and banks' growing willingness to staff dedicated resolution-planning functions rather than treat living wills as a compliance exercise.
But the improvement is also, in part, a function of what the letters measure. Feedback letters assess the quality of the written plan and the credibility of the described strategy against a defined rulebook. They are not stress tests of execution. A plan can be thorough, internally consistent, and still fail in practice if the assumptions underneath it - about market liquidity, counterparty behavior, or home-country resolution cooperation - prove wrong.
The Second-Order Question: Does a Clean Living Will Make Failure Safer, or Just More Legible?
Here is the second-order tension the clean-sweep narrative glosses over. Resolution planning has two distinct effects, and they do not always point in the same direction.
The first is mechanical: better plans make a wind-down more executable. Clearer legal-entity structures, pre-positioned liquidity, identified critical operations, and tested resolution strategies all reduce the probability that a failing bank's collapse becomes a systemic event. This is the channel the agencies are betting on, and the improving quality of submissions suggests it is working.
The second effect is behavioral, and it cuts the other way. As regulators and markets grow more confident that large banks can be resolved without taxpayer bailouts, the perceived backstop behind those banks shifts. Investors may price less tail-risk premium into bank funding; creditors may monitor less aggressively; and the banks themselves may take on marginally more complexity, knowing the resolution playbook is better rehearsed. In other words, the very credibility that makes resolution more feasible can also make the system more willing to tolerate the conditions that require resolution in the first place.
This is not a new idea - it is a form of moral-hazard feedback, the same dynamic that made "too big to fail" so durable. The difference now is that the backstop is no longer an implicit promise of rescue; it is an explicit, rule-based expectation of orderly failure. That is a stronger foundation than the pre-2008 regime. But it is still a foundation built on assumptions that have never been tested at scale. No U.S. global systemically important bank has ever been resolved under the Dodd-Frank framework. The living-will regime is, in that sense, an unproven machine that regulators are increasingly confident about because its blueprints keep improving.
The cross-border dimension sharpens the point. For foreign banking organizations like Barclays, Deutsche Bank, UBS, BNP Paribas, and the Canadian and Japanese firms in this batch, resolution depends on coordination between U.S. authorities and home-country regulators. A U.S. multiple point of entry strategy - the approach RBC adopted - explicitly contemplates that U.S. operations could enter bankruptcy separately from the global parent. That is prudent planning. It is also an admission that home-country resolution may not deliver what the parent's plan assumes, and that ring-fencing by national authorities remains a live risk.
The Counter-Thesis: Maybe the Letters Are Supposed to Be Boring
The strongest argument against reading too much into this release is also the simplest: boring feedback is the point. Resolution planning was never designed to generate headlines. Its success condition is invisibility - a regime where large banks can fail without drama, because the wind-down mechanics were agreed in advance. From that perspective, a string of clean letters is not evidence of regulatory leniency; it is evidence that the system is maturing as intended, and that the era of public shortcomings was a transitional phase, not a permanent feature.
There is real force to this view. The 2024 shortcomings were specific and consequential - derivatives data, wind-down playbooks, repo continuity - and the banks fixed them on the regulators' timetable. That is exactly how the framework is supposed to work: identify gaps, require remediation, verify closure. The fact that the same banks now pass without comment is a feature, not a bug.
But this argument has a limit, and it defines the falsifying signal for the "maturing regime" thesis. If resolution planning is genuinely converging on credible, executable wind-downs, then the next time a large bank actually approaches failure, regulators should be able to execute - or at least credibly simulate - a resolution without resorting to emergency measures outside the plan. The observable test is not another clean feedback letter. It is a supervisory resolution simulation or a real-world stress event in which the pre-agreed strategy demonstrably holds. Conversely, the thesis fails if the next material bank distress episode forces ad hoc interventions, cross-border coordination breaks down, or critical operations - like repo trading - seize up despite what the plans describe. Until such a test occurs, the clean-sweep conclusion rests on documented intent, not demonstrated execution.
What Comes Next: The 2028 Cycle and the Unfinished Agenda
Looking ahead, the timeline is set. The ten Category II and III firms in this batch must submit targeted resolution plans by July 1, 2028, and the agencies may identify targeted information requirements no less than 12 months before that deadline. The G-SIB cohort, which files every other year, will face its next full review on a separate cadence. BNP Paribas and the other foreign full filers are on the same 2028 targeted-plan track.
Three issues remain on the agenda even as the feedback letters stay clean. First, resolution planning for nonbank financial companies and large regional banks outside the G-SIB tier remains less mature than the global-bank framework - a gap that mattered in 2023 and has not fully closed. Second, the interaction between U.S. resolution strategies and home-country regimes for foreign banks remains the single largest untested assumption in the whole system. Third, the behavioral feedback loop - the possibility that confidence in resolvability encourages more risk-taking - is not something a feedback letter can monitor, and it is not clear any single agency owns it.
For investors, the practical takeaway is narrow but real. A clean resolution-plan review is not a catalyst for bank earnings or capital returns, and it should not be read as one. It is a supervisory milestone that reduces a specific class of tail risk - the risk that a bank's own wind-down plan is so deficient it triggers regulatory sanctions or forced restructuring. That risk is now lower for the 15 firms in this batch than it was two years ago. It is not zero, because no plan survives first contact with a genuine panic, and the history of financial crises is the history of plans that looked adequate until they were not.
The bottom line: the living-will regime has graduated from writing plans to closing them out - but a clean letter proves the blueprint is sound, not that the building can survive the earthquake it was designed for.
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