• Examines integration challenges between RRP, liquidity stress testing, and ALM
• Highlights operational capability expectations for Group B institutions
• Explores duplication and friction across FDIC, OCC, and internal risk frameworks
• Discusses how RRP can inform strategic planning, M&A, and executive incentives
• Outlines the growing supervisory focus on liquidity readiness and data integrity

Ahead of Treasury & ALM USA, we spoke with Faisal Mohed about the evolving role of recovery and resolution planning for mid-sized banks. As regulatory focus shifts toward operational capabilities and demonstrable liquidity readiness, treasury and ALM functions are being asked to integrate resolution thinking into day-to-day balance sheet management, governance, and strategic decision-making.

Generally speaking, navigating today’s dynamic regulatory landscape is a major challenge for organizations with assets between $50bn to $100bn (such as VLY). It becomes a delicate balance of achieving compliance and efficient resource allocation. Responses below are based on the 2024 Final rule and does not take into account subsequent waivers and anticipate/proposed revisions.

Recovery and resolution planning is still often treated as a standalone regulatory exercise. What are the biggest challenges banks face when trying to integrate RRP with liquidity risk management, stress testing, and ALM?

Heightened Operational Expectations Without Full Recovery Planning Obligations

Although Group B CIDIs have to comply with the FDIC’s operational expectations in terms of demonstrating credible capabilities across liquidity, MIS, and operational readiness, they are not required to develop a full resolution strategy or franchise valuation methodology which is required of Group A CIDIs. As such, this inevitably creates integration burdens and misalignment across treasury and risk functions.

Need to Align Liquidity Stress Testing with Resolution Execution Readiness

As mentioned above, Banks are required to demonstrate the capability to rapidly mobilize liquidity and produce supporting data. These capabilities tend to require fairly seamless integration of liquidity stress testing, collateral management, and IT reporting systems.

Increased Data, Governance, and Process Rigor Despite Smaller Scale
Processes at smaller banks are typically not aligned to resolution planning capabilities. However, current rules require Group B CIDIs to demonstrate operational and liquidity capabilities comparable to larger banks, including MIS needed to support a credible resolution. Mapping critical operations and interdependencies causes smaller institutions to have to “re-wire” processes and systems to accommodate crisis‑focused data reporting.

Misalignment between BAU ALM Processes and Resolution Metrics

Smaller firms typically don’t approach ALM in the same way as Resolution Planning which focuses heavily on liquidity outflows, franchise components, and separability analysis. As such, the underlying assumptions of the two processes often differ.

From a regulatory perspective, what elements of current OCC and FDIC frameworks create the most friction for banks when aligning recovery and resolution planning with day-to-day risk management?

Heightened Operational Expectations Without Full Recovery Planning Obligations

As mentioned above, the requirements for Group B banks are pared back compared to those of Group A banks. The reasoning was to reduce the burden for smaller organizations and tailor the requirements to reflect the potential threat to the larger financial system. However, the pared back requirements for Group B banks effectively create a workstream that is somewhat siloed from the rest of the organization’s risk mitigation and balance sheet planning processes.

Duplication Between Stress Testing, Liquidity Frameworks, and Resolution Requirements

FDIC guidance emphasizes liquidity, operational continuity, and MIS—areas already central to internal risk management frameworks. But because FDIC resolution requirements are often more granular (e.g., entity‑level data, operational playbooks), mid-sized banks must maintain parallel documentation sets and reconcile overlapping but non‑identical frameworks. Additionally, the enterprise-wide capital stress testing process at Group B banks typically consider hypothetical stressed economic scenario(s). At some smaller organizations (leading practice) management might embed the same hypothetical stressed economic scenario(s) into their strategic planning, financial forecasting, and/or FP&A/budgeting processes. However, since there isn’t a requirement to develop a full resolution strategy or franchise valuation methodology for RP purposes, the “connective tissue” among the aforementioned processes gets lost.

Positioning RRP as more than a compliance obligation is a common goal. What practical steps can banks take to ensure recovery and resolution planning genuinely informs strategic decision-making?

Integration with Executive Compensation

Aligning executive compensation with resolution readiness would be the most effective way to ensure RP programs and capabilities become embedded in day‑to‑day decision‑making rather than treated as standalone compliance exercises. This point becomes more important for organizations with growth aspirations of transitioning above $100bn. While Group B institutions are not subject to the OCC’s enhanced recovery planning requirements that apply only to banks ≥$100B, they are subject to the FDIC’s strengthened operational‑capabilities expectations - making compensation linkage a powerful governance tool.

Build an Integrated Operational Capabilities Framework

Because FDIC expects robust operational readiness, a systematic linkage between the BIA process inventory and other key databases would provide several distinct benefits which include:

• Greater alignment of department and job functions
• Enhanced role clarity and setting performance expectations would boost productivity
• Determine if department workflows can be augmented by automation, reduce application redundancies (if any), ensure tech/ops support exists
• Greater monitoring of vendor performance
• Speed of data output and process optimization for resolution planning purposes

Leverage RRP for Strategic Optionality

Resolution planning requires detailed mapping of critical operations and potential separability. The identification of separable and marketable business lines or assets expands the breadth of strategic options available to management as it relates to M&A, divestitures, sales, etc.

Looking ahead, how do you expect regulatory expectations around recovery and resolution planning to evolve, and what should banks be doing now to stay ahead of those changes?

For Group B Banks, it’s uncertain whether Resolution Planning will be further curtailed over the next three years of the current presidential administration. Subsequent regimes may swing the pendulum in the opposite direction. Over the next twelve months, there will likely be further clarity on capabilities expectations for Group B CIDIs. Notwithstanding, there seems to be continued emphasis on demonstrable readiness.

Continued Shift Toward Operational Capabilities Over Static Plans

FDIC leadership has repeatedly emphasized streamlining plan content while increasing focus on actionable capabilities—data, liquidity readiness, and operational execution. Mid-sized banks should expect less emphasis on narrative plans and greater emphasis on demonstrable readiness.

As balance sheets, funding structures, and stress scenarios grow more complex, how do you see the role of recovery and resolution planning developing over the next few years?

Resolution Readiness Will Become a Core Supervisory Theme

Mid-sized banks will face scrutiny around:

• Liquidity mobilization
• Payment operations continuity
• MIS and data quality
• Staffing and cross-functional crisis readiness

 Enhanced Role of 2LOD and 3LOD and Cross‑Functional Governance

Internal audit will continue to expand its role in validating capabilities, controls, and data integrity for resolution planning. Internal audit and second‑line reviews are central to resolution planning effectiveness under FDIC expectations. Banks should integrate capabilities testing wherever possible.