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GAO-20-608R 1 (2020-07-21)

handle is hein.gao/gaobaebjp0001 and id is 1 raw text is: c AO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 July 21, 2020 Congressional Committees Financial Company Bankruptcies: Congress and Regulators Have Updated Resolution Planning Requirements The 2007-2009 financial crisis and the failures of large, complex financial companies led some financial and legal experts to question the adequacy of the U.S. Bankruptcy Code (Code) for effectively reorganizing or liquidating the companies. These experts, along with government officials and members of Congress, responded by proposing changes to the Code and the supervisory process leading to a bankruptcy filing. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established Orderly Liquidation Authority (OLA) as a regulatory alternative to bankruptcy for resolving failed, systemically important financial institutions. Under OLA, the Secretary of the Treasury may appoint the Federal Deposit Insurance Corporation (FDIC) as a receiver to resolve those companies. In addition to OLA, the Dodd-Frank Act requires certain financial companies to file periodic resolution plans with the Board of Governors of the Federal Reserve System (Federal Reserve), FDIC, and the Financial Stability Oversight Council describing how these financial companies could be resolved under the Code in an orderly manner in the event of material financial distress or failure.1 The Dodd-Frank Act also includes a provision for us to study, at specified intervals, the effectiveness of the Code in facilitating orderly liquidation or reorganization of financial companies and ways to make orderly liquidation under the Code more effective.2 This report examines (1) proposed or enacted changes to the Code related to financial companies and OLA since 2015, and (2) regulatory actions related to resolution planning and OLA. For the first objective, we reviewed proposed legislation from January 2015 through April 2020 (in the 114th, 115th, and 116th Congresses) to change the Code that was relevant to liquidation or reorganization of financial companies, prior GAO reports and agency reports, presentations, and speeches, and interviewed officials from the Administrative Office of the United States Courts. For the second objective, we reviewed comment letters to the 2019 proposed Resolution Plans Required rule, and proposed and finalized rules for actions FDIC and the Federal Reserve took related to resolution planning and OLA. Additionally, we reviewed prior 1Pub. L. No. 111-203, Title I, § 165(d), 123 Stat. 1376, 1426-1427 (201 0)(codified at 12 U.S.C. § 5365(d)). 2Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 202(e), 124 Stat. 1376, 1448- 1449 (2010). Also see GAO, Financial Company Bankruptcies: Information on Legislative Proposals and International Coordination, GAO-15-299 (Washington, D.C.: Mar. 19, 2015); Financial Company Bankruptcies: Need to Further Consider Proposals' Impact on Systemic Risk, GAO-I 3-622 (Washington, D.C.: July 18, 2013); Bankruptcy Agencies Continue Rulemakings for Clarifying Specific Provisions of Orderly Liquidation Authority, GAO-i 2-735 (Washington, D.C.: July 12, 2012); and Bankruptcy: Complex Financial Institutions and International Coordination Pose Challenges, GAO-11-707 (Washington, D.C.: July 19, 2011). GAO-20-608R Financial Company Bankruptcies Page 1

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