Still too big

Big Banks still too big to fail

Bank of America, JP Morgan, other banks fail key regulators test.

By Zachary Warmbrodt

Regulators on Wednesday flunked most big banks on a key test of whether they're still too big to fail as they rejected their plans for winding themselves down in a crisis.

The vote of no confidence raises questions about whether the system put in place by the 2010 Dodd-Frank law is going to prevent another bank bailout.

"The goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal," Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp. said in a statement.

The FDIC and the Federal Reserve released their assessment of banks' plans for breaking themselves up, required under Dodd-Frank, just as most are due to begin reporting their quarterly earnings. The regulators said JPMorgan Chase, Bank of America, Wells Fargo, Bank of New York Mellon and State Street failed to show that they could be safely unwound during bankruptcy — and deemed their plans "not credible."

The plans rejected Wednesday are banks' second try after regulators criticized their first drafts in 2014.

The agencies are requiring the banks to address the shortcomings by Oct. 1 or face tougher requirements for the kinds of assets they must hold. The determination also puts the banks on the path to a potential government-imposed breakup.

The agencies found problems with the living wills of Goldman Sachs and Morgan Stanley, but stopped short of jointly flunking them. The agencies found shortcomings with Citigroup's plan but neither agency deemed the plan "not credible."

A senior agency official said the five banks that failed should be able to make the required changes by Oct. 1 but it might entail some difficult choices for some of the banks.

The deadline for the eight banks to submit their next full living wills, in which regulators want the firms to address the shortcomings, is July 1, 2017.