US regulators have raised concerns about the contingency plans of JPMorgan Chase, Bank of America, Citibank, and Goldman Sachs for handling trillions of dollars in derivatives. The Federal Reserve and FDIC have deemed the banks’ “living wills” insufficient in outlining how they can unwind their derivatives portfolios without relying on government aid, according to Reuters.

Specifically, Citigroup has been singled out for its inadequate data management and control systems, which are affecting the accuracy of its calculations on the liquidity and capital required to close derivatives positions in the event of insolvency. Derivatives were a key factor in the 2008 financial crisis, increasing systemic risks and causing widespread losses when mortgage assets failed.

According to Reuters, the large banks hold derivatives with trillions of dollars in notional value, and any changes in how they manage risk, liquidity, or contingent liabilities could be costly. Regulators are urging these banks to improve their contingency planning, including ensuring they can secure necessary approvals from foreign governments to implement their resolution plans effectively.

The Dodd-Frank Act, enacted in response to the 2008 crisis, mandates that big banks submit living wills. US regulators have given these banks until September to address their deficiencies. Stay informed by subscribing to our email alerts and following us on X, Facebook, and Telegram for the latest Price Action updates. Remember, all investments carry risks, so conduct thorough research before investing in Bitcoin, cryptocurrency, or digital assets. The Daily Hodl does not provide investment advice and is not responsible for any losses incurred. Please be aware that The Daily Hodl engages in affiliate marketing.