Federal financial services regulators have approved regulations that could shape the “living wills” that are supposed to explain how large, failing financial institutions can be safely dismantled.

The Federal Deposit Insurance Corp. (FDIC) says the new final living will rule will implement Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Dodd-Frank Section 165(d) requires a company designated as systemically significant by the Financial Stability Oversight Council (FSOC) to give the FDIC and the Federal Reserve Board a regularly updated living will, or a plan for the company’s “rapid and orderly resolution in the event of material financial distress or failure.”

The FDIC will be issuing the rule jointly with the Federal Reserve Board, FDIC officials say.

The FDIC and the Federal Reserve Board will require that a resolution plan include a strategic analysis of the plan’s components; a description of the range of specific actions to be taken in the resolution; and analyses of the company’s organization, material entities, interconnections and interdependencies, and management information systems.

Companies with $250 billion or more in nonbank assets must submit plans on or before July 1, 2012, and companies with $100 billion or more in total nonbank assets must submit plans on or before July 1, 2013.

Companies that are mainly banks must submit plans on or before Dec. 31, 2013.

The living wills must be updated annually.

“A company that experiences a material event after a plan is submitted has 45 days to notify regulators of the event,” officials say.

Separately, the FDIC board also has approved an interim final rule that will require insured banks with $50 billion or more in total assets to submit periodic contingency plans to the FDIC for resolution in the event of the depository institution failure. The interim rule has a 60-day comment period.

The living will filing schedule is staggered because “a number of commenters questioned the regulatory burden analysis and felt that the estimated time to respond was significantly below the time that would actually be required to respond,” FDIC officials say in a preamble to the interim final rule.

The change should give most financial institutions much more time to prepare their first living wills, officials say.

The FDIC wants financial institutions to ask questions, and wants to help financial institutions to improve the living wills over the time, not to go out of its way to find that living wills are deficient, officials say.

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