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Wednesday, July 4, 2012

Bank of America 'living will' outlines plan for a crisis

Photo of Bank of America ATM Machine by Brian ...
Photo of Bank of America ATM Machine by Brian Katt, Framingham Rest Stop, Massachusetts. (Photo credit: Wikipedia)
In a doomsday scenario, Bank of America Corp. might dismantle some units, turn others over to regulators and transfer certain assets to a temporary bank that would ultimately emerge from the meltdown, it said in a report released Tuesday.
The Charlotte bank was one of nine top U.S. lenders to submit the so-called “living wills,” blueprints for how the banks might be unwound if they come close to failure. The exercise, mandated under the Dodd-Frank financial reform law, is meant to show that banks with $50 billion or more in assets aren’t “too big to fail” – and that taxpayers wouldn’t be on the hook for rescuing troubled institutions.
Regulators have said the living wills can help them better understand the structure of complex banks before a crisis occurs, making it easier to wind down the businesses and avoid the market turmoil that followed the 2008 financial crisisYet critics say the reports amount to little more than a hypothetical game plan that wouldn’t help much in the event of another catastrophe. Others say detailing which units banks deem marginal might negatively affect employees or spur pressure from investors to sell off those divisions, even absent severe financial trouble.

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