Living wills will be put in place for major financial institutions this summer when the Federal Reserve installs new guidelines.
Ben Bernanke, Chairman of the Federal Reserve, is set to appear before the Senate Committee on Banking, Housing and Urban Affairs where he will discuss the Dodd-Frank legislation on financial reform, according to The Street.
The Federal Reserve is teaming with the Federal Deposit Insurance Corp. in an effort to require systemically important financial institutions (SIFI's) to make better preparations for their resolutions by adopting what are, in essence, so-called living wills, according to the news source.
Bernanke said that putting an end to too-big-to-fail financial institutions requires measures that will not cause serious harm to the financial system at large.
"Thus, the second prong of the Dodd-Frank Act's effort to end too-big-to-fail empowers the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) to reduce the effect on the system in the event of a SIFI's failure through tools such as the new orderly liquidation authority and improved resolution planning by firms and supervisors," Bernanke said.