Federal regulators on Tuesday announced they had approved the disaster plans for the nation's eight largest and most complex banks outlining the strategies they would deploy if they fell into bankruptcy.
The announcement Tuesday by the Federal Reserve and the Federal Deposit Insurance Corp. came after the two agencies in April 2016 deemed that the plans of five of the eight banks were deficient.
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Congress imposed the requirement to write the plans, dubbed "living wills," in the 2010 Dodd-Frank financial overhaul legislation that sought to avoid a repeat of the 2008 financial crisis.
The aim was to force each of the nation's biggest banks to describe their plans to implement a rapid and orderly winding down under bankruptcy in the event that the institution came under severe financial distress.
While approving the plans of all eight banks, the regulators found in their latest review that the plans of four — Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo — had shortcomings that will need attention in the next round of review.
Regulators found no shortcomings in the plans submitted by the other four — Bank of New York Mellon, Citigroup, J.P. Morgan Chase and State Street.
All eight banks will need to submit their next plans by July 1, 2019.
The goal of the process is to make sure taxpayers will not be faced again with spending billions of dollars to shore up banks considered "too big to fail," a term used to describe a financial institution considered so large and complex that its failure could disrupt the entire financial system.
In a joint statement, the Fed and the FDIC said that the plans from all eight banks still could be improved.
"While significant progress has been made ... there are inherent challenges and uncertainties associated with the resolution of a systemically important financial institution," the regulators said.
The statement noted four specific areas where more progress was needed, including the handling of complex financial instruments known as derivatives, and payment, clearing and settlement activities.