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U.S. banks post detailed crisis plans to avoid breakup threat

WASHINGTON (Reuters) – The largest Wall Street banks on Monday published detailed manuals of how to shut down their business during a crisis without the help of taxpayer money, a crucial step to prevent being broken up by regulators.

After the 2007-09 financial crisis, the banks were required to submit the so-called “living wills” each year to show how they would proceed though an ordinary bankruptcy during a crisis without quietly relying on government support.

But the Federal Reserve and the Federal Deposit Insurance Corporation last year said they were unhappy about the quality of the plans, urging the banks to improve them, or face tough sanctions including being broken up.

The 2010 Dodd-Frank Act gave the regulators the power to carve up the banks if they deem the living wills “not credible,” though that is only the starting point of a lengthy procedure giving banks several chances to improve.

Last year there was no such joint determination, because while the FDIC did use the term, the Fed did not. It is not clear when the regulators will issue their verdict on this year’s round of submissions, the fourth.

Banks say they have massively improved their resilience to withstand shocks, bulking up on shareholder capital to shield creditors, and earmarking certain bonds as susceptible to losses in return for a higher yield.

“Our (plan) would effectively resolve the firm within a reasonable timeframe, without systemic disruption, without extraordinary governmental support and without exposing taxpayers to risk of loss,” a JPMorgan spokesman said.

The plans contained far more detail than those of last year. Citigroup, for instance, submitted a 102-page document, more than three times as much as the 2014 plan.

What is published on the regulators’ websites, is only the public portion of the plans. The actual documents are thousands of pages, and contain detailed instruction including mundane facts such as how to access computer systems.

The banks are Bank of America, Bank of New York Mellon, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street, UBS and Wells Fargo.

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