SOURCE: Federal Reserve Bank of Richmond

Federal Reserve Bank of Richmond

May 20, 2015 09:58 ET

Richmond Fed's Annual Report Looks at a New Tool for Curbing "Too Big to Fail"

RICHMOND, VA--(Marketwired - May 20, 2015) - The Federal Reserve Bank of Richmond today released its 2014 Annual Report, which features the essay, "Living Wills: A Tool for Curbing 'Too Big to Fail.'"

In the essay, Richmond Fed economist Arantxa Jarque and senior editor David Price explore an innovation of the Dodd-Frank Act of 2010, which requires the largest and most complex financial institutions to create resolution plans to follow if the institutions fall into severe financial distress. In these plans, or "living wills," the institutions must give regulators a roadmap for resolving them via the bankruptcy process -- without disrupting the financial system or resorting to public bailouts. Jarque and Price argue that living wills are a tool that regulators can use to curb the "too big to fail" problem by decreasing the odds that policymakers will feel compelled to rescue large, complex firms for fear that their failure would damage the economy.

In addition to the essay and the Bank's financial statements, the Annual Report includes a summary of the region's economic performance in 2014 and an update on activities by the Fed and the payments industry to improve the U.S. payments system.

The Annual Report is available on the Bank's website.

The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.

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