The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) requires certain financial firms to periodically submit a resolution plan to the Board of Governors of the Federal Reserve System (the “Fed”) and the Board of Directors of the Federal Deposit Insurance Corporation (the “FDIC,” and together with the Fed, the “Agencies”). Each plan, known colloquially as a Living Will, must describe the firm’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company. These plans provide a blueprint for regulators and bankers for how to unwind these significant institutions with minimal impact to the taxpayer.

Section 165(d) of Dodd-Frank and the Rule promulgated by the Agencies thereunder provide the criteria for which firms must submit a plan to the Agencies. Eventually, all banking organizations with total consolidated assets of $50B or more and nonbank financial companies designated by the Financial Stability Oversight Council (the “FSOC”) must file annually according to a staggered schedule set by the Agencies. The amount and type of information submitted depends on the size of the firm (i.e., smaller firms will generally have smaller and less comprehensive plans). The first-wave filers, or those with $250B or more in nonbank assets, were required to submit their initial plans by July 1, 2012.1 The second-wave filers, or those with between $100B- $250B in nonbank assets, submitted their first plans by July 1, 2013.2 Both groups must submit an updated plan by July 1 annually. The third-wave filers, or those with between $50B-$100B in nonbank assets, filed their initial plans on December 31, 2013, and must file annually by December 31.3 FSOC also designated AIG and GE Capital to submit a plan, which they did on July 1, 2014.

The Agencies must review each plan and determine if the plan is not credible or would not facilitate an orderly resolution. The Agencies have the power to impose: (a) more stringent capital, leverage or liquidity requirements; (b) growth, activities, or operations restrictions; or (c) after 2 years and in conjunction with FSOC, divestiture requirements on firms who submit failing plans.

In August 2014, the Agencies provided mostly negative feedback on the first-wave filers’ 2013 plans (the 11 banks’ second submission). Common criticisms included (i) unrealistic or inadequately supported assumptions about behavior of customers, counterparties, investors, financial market utilities, and regulators, and (ii) the failure to make or identify the kinds of changes in firm structure and practices that would be necessary to enhance the prospects for orderly resolution. The Agencies urged certain banks to establish a less complex legal entity structure; to develop a holding company structure; to amend financial contracts to provide for a stay of certain early termination rights; to ensure continuity of shared services; and to demonstrate operational capabilities for resolution preparedness.

A few days after the Agencies announced the inadequacy of the first-wave filers’ 2013 plans, they also gave feedback on the third-wave filers’ initial submissions. The Agencies provided a tailored resolution plan template for third-wave filers to use in 2015 that focuses on nonbanking operations of the firm and interconnections/interdependencies between nonbanking and banking operations.

Each of these firms now has experience developing this colossal document with critical implications. Moreover, these firms must incorporate all subsequent regulatory guidance from the Agencies into their respective plans. For example, the Fed’s Enhanced Prudential Standards (EPS) under Dodd-Frank, announced in 2012, now applies to foreign-banking organizations (FBOs).4 EPS require substantial organizational shifts including enhanced stress-testing (CCAR), more stringent liquidity and holding company capitalization requirements, and alterations in legal entity structures. U.S. banks already discuss these requirements in their respective plans; FBOs must discuss these changes and adhere to the timeline(s) outlined by the Fed beginning in their 2015 submissions. The Agencies have potent punishment power for inadequate plans, so firms have essentially created a year-round process to ensure they do not submit a failing document.



1 The first-wave filers are: Bank of America, Bank of New York Mellon, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street Corp., and UBS.

2 The second-wave filers are: Wells Fargo, BNP Paribas, HSBC, and RBS.

3 The third-wave filers include approximately 115 firms, the large majority of which are foreign financial firms doing business in the United States.

4 The Board’s Final Rule for foreign banking organizations was issued in February of 2014 as “Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations“.






Buried Alive in Contracts?  How to Unlock Future Savings with  Contract Discovery and Analytics



In the post-2008 financial crisis environment, regulators often require financial institutions to report accurate data about their operations and exposures. Institutions must produce reliable information reasonably quickly, which requires both access to the information and a means to extract pertinent data.


Picture this: during a routine regulatory examination, a global investment bank receives an urgent request from its regulator to provide information about systemic risk inherent in its derivatives contracts, including how many contracts have third party guarantors.

Or perhaps this: a project team spends six months revising IT platforms to include data from legal agreements, only to have the regulator bring another uncovered product in scope at the last minute.

These common occurrences are requiring us to rethink how we face regulatory inquiries and emerging market events.

Per current de rigueur, most institutions would pull a data extract from whatever systems exist, lining up the data like apples to oranges and hiring human capital – overseas or elsewhere – to review the contracts…. again…for the new required data. This approach is costly, inefficient, and often disorganized. And the whole time, regulators are waiting, wondering why this request was not answered instantaneously….

New technology, particularly Contract Discovery and Analytics software, provides numerous benefits over the current approach. As a regulatory change solutions company who is often hired to clean these messes up, we at 8of9 have everything to gain from this inefficient process. But instead, we’re going to give you some reasons why the financial services industry should NOT hire us (or anyone for that matter) to review contracts manually without a solid software partner to assist.


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By Mary Kopczynski, J.D. Ph.D.  CEO & Founder, Eight of Nine Consulting, LLC


Technology in the contract management space has revolutionized business in almost every sector except for one elusive customer where the stakes could not be higher: the financial services industry. Why? Because when it comes to documents in the financial services sector, they are more than just generic buy/sell arrangements.



Technology in the contract management space has revolutionized business in almost every sector except for one elusive customer where the stakes could not be higher: the financial service industry. Why? Because when it comes to documents in the financial services sector, they are more than just generic buy/sell arrangements. The contract itself is also a product that may evolve and govern future business. This means the solution must not only cover the basic agreement plus the negotiation process; it must also capture the many terms and clauses included in the contract so that it can be acted upon at a later date. Software providers have attempted to produce tools that track certain features, but no product has delivered the complete solution required by the industry.


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How Contract Discovery and Analytics Technology by Seal Software Can Help Financial Institutions face Dodd- Frank’s Resolution and Recovery Planning Requirements



8of9, a regulatory solutions company, has reviewed Seal Software relative to its value in meeting the Resolution and Recovery Planning requirements of the Dodd-Frank Act.


Leveraging Seal Technology For Living Will Projects

A Living Will is a document produced by large financial institutions, giving regulators a roadmap of how to unwind or recover their businesses in a stressed economic scenario. In order to perform this analysis effectively, banks must have real-time awareness of all of their legal relationships with one another (easier said than done). The information gathering process is highly manual, complex, and overwhelming. Seal Software, headquartered in San Francisco, has developed cutting edge technology in contract discovery and analytics that accelerates access to critical contract information buried within unstructured contractual documents. This has enabled organizations to uncover key terms that could dramatically impact their business, empowering them to take informed action or respond to time-sensitive (regulatory) requests. 8of9 has reviewed Seal’s technology with respect to financial derivative contracts as a whole, but has recently considered the value proposition of using Seal technology on Living Wills projects to identify where and how using Seal can make the process more efficient.


Background on Resolution and Recovery Plans (“Living Wills”)

The 2008 financial crisis and ensuing civic criticism of Wall Street stirred regulators to reflect on the causes of the economic turmoil and develop ways to stabilize immense financial institutions to safeguard the world’s economy. The demise of Lehman Brothers in particular proved the potentially hazardous entanglement amongst financial institutions. Regulators and lawmakers determined that one of the largest obstacles to preventing the collapse was the inability of regulators and bankruptcy courts to wind-down banks in the event of economic turmoil without significantly impacting Main Street. These events prompted the Financial Stability Board (FSB) of the G-20 to declare in September of 2009 that “all systemically important financial firms should develop internationally-consistent firm-specific contingency and resolution plans to help mitigate the disruption of financial institution failures and reduce moral hazard. US Lawmakers responded in the 2010 Dodd-Frank Act by requiring each systemically important financial institution (“SIFI”) to create and submit to regulators a Resolution and Recovery Plan (“RRP”), colloquially dubbed a “Living Will.” Section 165 of Dodd-Frank obliges covered companies to submit an annual RRP to the Federal Reserve Board (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), and the Financial Stability Oversight Committee (“FSOC”, and together with the FRB and FDIC, the “Agencies”).


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