During the financial meltdown in 2008 the largest U.S. banks were deemed too big to fail. In return for bailouts the U.S. government set several regulatory measures. One of them was a so-called living will which is a plan for how to successfully handle a bankruptcy. The news today is that five of the largest banks failed this test. The New York Times reports that 5 Banks fail to pass muster with their living wills.
Five giant banks – including JPMorgan Chase and Bank of America – failed to fulfill a crucial regulatory requirement that Congress introduced after the 2008 financial crisis to help make large financial institutions less of a threat to the wider economy, federal banking regulators said on Wednesday.
Congress demanded that big banks regularly provide regulators with careful plans, also known as living wills, for how they would enter bankruptcy in an orderly fashion.
But the Federal Reserve and the Federal Deposit Insurance Corporation found that the plans of five banks were “not credible” or “would not facilitate an orderly resolution” under the United States bankruptcy code.
The failure of the banks to file satisfactory plans is likely to add fuel to the debate over whether some banks are “too big to fail,” meaning that their collapse would pose such a threat to the wider economy that taxpayers would have to step in to bail them out.
And it is the possibility that the U.S. taxpayer would need to step in once again to bail out large banks that is the concern. This is especially the case the banks’ problems are all too often of their own making. In regard to size which banks are too big to fail?
Ten Largest U.S. Banks
Bankrate.com lists the America’s 10 biggest banks by assets.
In the years since the financial crisis, the nation’s biggest banks have grown substantially bigger. Together, the top 10 largest banks now hold $10.1 trillion in assets.
Of course, every year sees some shakeup in this exclusive club. Larger banks trade places with one another, and smaller banks drop out, replaced by faster-growing rivals.
This year, just to get in, you need at least $253.2 billion in assets, a sum so large that, if converted into $100 bills laid end to end, would reach the moon (with a few thousand miles left over to check out the view).
Here are the 10 largest banks in the U.S. by assets, according to the latest numbers from SNL Financial, a financial industry research firm.
- JPMorgan Chase & Co. – $2.42 Trillion
- Bank of America Corp. – $2.15 Trillion
- Citigroup Inc. – $1.77 Trillion
- Wells Fargo & Co. – $1.75 Trillion
- U.S. Bancorp – $415.94 Billion
- Bank of New York Mellon Corp. – $377.37 Billion
- PNC Financial Services Group Inc. – $362.13 Billion
- Capital One Financial Corp. – $313.7 Billion
- HSBC North America Holdings Inc. – $291.61 Billion
- TD Bank U.S. Holding Co. – $253.1 Billion
And which US banks that are too big to fail actually failed their living will test?
- JPMorgan Chase & Co
- Bank of America
- Wells Fargo
- Bank of New York Mellon
- State Street
At the top of the size list only Citigroup passed. These banks have until October 1 of 2016 to fix their living will plans. Let’s all cross our fingers and hope that the financial system does not crash before then!