NEW YORK (TheStreet) -- The Federal Deposit Insurance Corp. and the Federal Reserve issued a joint press release on Friday announcing the procedure for receiving and evaluating initial resolution plans, known as "living wills."
Financial institutions with $250 billion or more in assets must submit the plans on Monday. These are the largest banks operating in the U.S. and includes those considered "too big to fail."
The living wills are supposed to outline how these banks can be unwound in an orderly fashion in a crisis. They're intended to prevent the kind of market chaos that followed the failures of Bear Stearns and Lehman Brothers.
The FDIC and Federal Reserve will review each living will to determine whether the plan is credible and facilitates an orderly bankruptcy.The program, which is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will eventually cover all bank holding companies with assets of $50 billion or more and includes nonbank financial companies that are under the supervision of the Federal Reserve and FDIC. Updated living wills are required annually. Each living will has two sections. One will be released to the public, and the other will be kept confidential. The public section contains a description of the company's core businesses and information about assets, liabilities, capital, and major funding sources. The public portions of the living wells that are submitted Monday will be released by the end of Tuesday. Following is a table of information from the second-quarter 2012 FDIC Quarterly Banking Profile for the Big Institutions. JPMorgan Chase (JPM) ($35.73) is the largest FDIC-insured "too-big-to-fail" financial institution, with $1.976 trillion in assets. The bank is rated a hold according to ValuEngine and is 21.1% undervalued, but it has limited upside over the next 12 months even though it has a price-to-earnings ratio of 8.4. How will JP Morgan explain its "London Whale" derivatives loss of $2 billion, which is projected to rise to $9 billion? My semiannual value level is $29.81 with semiannual and annual risky levels at $39.47 and $41.66, respectively.
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