Bank Living Wills Approved: What It Means for Trade Credit

On May 22, 2026, the Federal Reserve and the Federal Deposit Insurance Corporation jointly announced that they found no shortcomings in the resolution plans submitted by the nation’s eight largest banks and 56 foreign banking organizations. Commonly called living wills, these plans detail how each institution could be safely wound down during severe financial distress without triggering a broader crisis or requiring a taxpayer bailout. The agencies also confirmed that previously cited deficiencies at Bank of America, Goldman Sachs, JPMorgan Chase, and Citigroup have been fully resolved. That is a meaningful regulatory milestone, and it carries real implications for businesses that rely on bank-backed trade finance and credit facilities. 

What regulators reviewed and what they found 

The Fed and FDIC review living will submissions under the Dodd-Frank Act on a periodic basis. Each plan must show how a systemically important bank could be unwound in an orderly way without destabilizing the financial system. 

In 2024, four major institutions received formal shortcoming notices. Bank of America, Goldman Sachs, JPMorgan Chase, and Citigroup were each cited for failing to adequately demonstrate how they would unwind their derivatives portfolios in a failure scenario. Derivatives exposure is one of the most complex and systemically sensitive areas in banking, so regulators treat that gap as a serious concern. 

As of May 22, all four institutions have addressed those shortcomings to the regulators’ satisfaction. Combined with a clean review for the broader group, Reuters described this as one of the most comprehensive sign-offs on large-bank resolution preparedness in recent years. 

Why this matters for trade finance and credit 

For companies that depend on letters of credit, bank guarantees, or trade finance lines from the largest financial institutions, bank stability is a counterparty risk issue, not just a regulatory headline. If a major bank were to enter distress in a disorderly way, the knock-on effects for open account trade, supply chain financing, and credit availability could be significant. 

A credible, regulator-approved resolution plan reduces that tail risk. It signals that banks have mapped out how they would honor or transfer their obligations in a wind-down scenario, and that regulators are satisfied with the result. For credit and risk managers tracking counterparty exposure to large financial institutions, that is a meaningful assurance. 

The derivatives fix is also worth noting for trade credit underwriters and buyers. Derivatives books often underpin the structured credit facilities and risk-mitigation products that support cross-border trade. When those portfolios have clear wind-down procedures in place, the cascading risk to downstream credit markets is lower. 

What this does not fix 

Regulatory approval of a living will is not the same as a guarantee against bank failure. It means banks have a credible plan, not that they will never need one. Businesses with significant receivables exposure, heavy concentration in a single banking counterparty, or reliance on bank-backed trade finance should not interpret this news as a reason to reduce their credit risk management. 

Trade credit insurance, export credit facilities, and political risk insurance remain the primary tools for protecting receivables and contract performance when buyers or counterparties cannot pay, regardless of what happens at the bank level. The two layers of protection are complementary, not interchangeable. 

FAQ 

What is a bank living will? 

A living will is a resolution plan that details how a large financial institution could be safely wound down in the event of failure without destabilizing the broader financial system or requiring a government bailout. The FDIC and Federal Reserve review these plans periodically under the Dodd-Frank Act. 

Which banks were previously flagged, and have they been cleared? 

Bank of America, Goldman Sachs, JPMorgan Chase, and Citigroup received formal shortcoming notices in 2024, primarily related to their derivatives portfolios. The Fed and FDIC confirmed on May 22, 2026 that all four institutions have fully addressed those deficiencies. 

Does this change anything for businesses using trade finance? 

It reduces a specific tail risk: the risk that a major bank’s failure would be disorderly and cascade into the broader credit markets. It does not eliminate counterparty risk or receivables exposure, which still require dedicated protections like trade credit insurance. 

Should my company reconsider its credit insurance based on this news? 

This news is a positive signal for systemic stability, but it does not replace the protection that trade credit insurance provides against buyer nonpayment. If anything, it is a good prompt to review whether your current coverage reflects your actual counterparty exposure. 

Wondering how bank stability and counterparty risk intersect with your trade credit coverage? Contact us to assess your exposure and make sure your protection is in the right place. 

Disclaimer 

This blog post is meant to be informative and provide helpful tips and insights into credit insurance policies.  It is not meant to supersede any policy requirements.  Please consult your credit insurance policy for all requirements including claim filing deadlines and required documentation. 

Since 2004, Securitas Global Risk Solutions, LLC (“Securitas”) has helped clients develop trade credit and political risk transfer solutions that provide value on numerous levels. As an independent trade credit and political risk insurance brokerage, Securitas is focused on developing comprehensive solutions that meet the needs of clients, ensuring a complete understanding of policy wording and delivering excellent responsive service.