State Street's Bankruptcy Plans Fail Federal Scrutiny

By Rachel Louise Ensign

Regulators told State Street Corp. that it needs to rewrite its plan detailing how it would go through a potential bankruptcy.

The Federal Reserve and the Federal Deposit Insurance Corp. said Wednesday that the bank's so-called living will doesn't meet the requirements of the 2010 Dodd-Frank law, a rebuke that could eventually impose higher capital requirements or other regulatory sanctions on the bank.

Regulators said State Street's contingency plan had improved from its prior plans, but still detailed a number of reasons the plan was "not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code."

The bank said it is committed to addressing the areas outlined by the Federal Reserve and the FDIC by the Oct. 1 resubmission deadline.

The regulators' review is the latest chapter in a continuing discussion since the 2008 financial crisis about whether the largest banks add to overall financial instability or help contain it in times of economic stress.

State Street's plan, which it submitted last summer, detailed what it would do in a worst-case scenario to collapse without needing taxpayer assistance. The Boston bank said that in an emergency, it would try to keep operations at certain lines of its business from being interrupted.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

April 13, 2016 09:08 ET (13:08 GMT)

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