On Feb. 21, the U.S. Department of the Treasury released a report with recommendations for improving the process for managing the resolution of large financial institutions. The report recommends creating a new Chapter 14 of the Bankruptcy Code for distressed financial companies that includes procedural features tailored to the “unique challenges posed by large, interconnected financial companies.” The report also proposes several changes to the Orderly Liquidation Authority provisions in Dodd-Frank, which expand the ability of the Federal Deposit Insurance Corporation to intervene and liquidate financial institutions that pose a threat to financial stability. Treasury said the proposed enhancements to the Bankruptcy Code would reduce the likelihood of having to use OLA, but recommended retaining OLA as an “emergency tool for use under extraordinary circumstances.”
