Living Will

Living wills, formally called resolution plans, are detailed blueprints required from large financial institutions explaining how they could be rapidly and orderly resolved in bankruptcy without taxpayer assistance or systemic disruption. U.S. banks with over $250 billion in assets must submit plans annually to the Federal Reserve and FDIC. Plans must demonstrate the firm can be resolved under the Bankruptcy Code, not special resolution authority. For example, JPMorgan’s living will exceeds 4,000 pages detailing legal entity structure, critical operations, resolution strategy (single point of entry vs. multiple point), liquidity and capital resources, and operational capabilities for resolution. Key elements include identification of critical operations and core business lines, mapping of legal entities, resolution funding and liquidity (requiring pre-positioned resources), operational continuity arrangements, and governance mechanisms. Regulators can require changes, restrict operations, or mandate divestitures if plans aren’t credible. Living wills aim to eliminate too-big-to-fail by ensuring large banks can fail without bailouts. Critics question whether complex cross-border resolutions would work in practice during actual crises.