12 18 2014
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WASHINGTON (AP) -- The largest banks must show how they would break up their assets if they were in danger of failing, under a rule approved Tuesday.

The Federal Deposit Insurance Corp. voted to require banks with $50 billion or more in assets to submit so-called living wills. Seven banks with more than $250 billion in assets will have to show their plans by July. The other 30 affected by the rule have until 2013.

The FDIC also proposed a separate rule that would require banks with more than $10 billion in assets to conduct annual stress tests.

The tests show how each bank is positioned to handle worsening economic conditions, such as increasing unemployment and falling home prices. The regulator put the rule out for public comment and is expected to finalize it by July. It will affect roughly 190 banks.

Both rules were mandated under the 2010 financial overhaul.

By requiring banks to have living wills, the government is trying to reduce the need for another Wall Street bailout like the one that took place during the 2008 financial crisis. The 37 banks affected by the rule hold roughly $4.1 trillion in insured deposits, or about 61 percent of U.S. insured deposits as of Sept. 30, 2011.

The largest include JPMorgan Chase Bank, Bank of America, Citibank, Wells Fargo Bank, U.S. Bank, PNC Bank and Bank of New York Mellon.

Annual stress tests help the government monitor the financial strength of banks. The 19 largest U.S. banks already undergo annual stress tests, which are conducted by the Federal Reserve. The proposed stress tests would be in addition to those.

Under the proposal, the banks would be required to submit reports on the results of their stress tests to regulators and to publish a summary of the results.

The results show whether banks have enough cash and cash-like securities on their balance sheets to offset potential losses from risky loans. And they also show whether a bank is in position to withstand an economic downturn.

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