UPDATE 1-Fed approves final rule on big banks' living wills
By Dave ClarkeWASHINGTON, Oct 17 (Reuters) - The Federal Reserve announced on Monday that it had approved a final rule on the blueprints large banks will have to submit to U.S. regulators showing how they can be dismantled in the event of failure.The rule was written jointly with the Federal Deposit Insurance Corp, which approved it on Sept. 13. Both agencies had to approve the regulation for it to become effective. [ID: nS1E78C0PI]Under the rule, the largest U.S. banks will have to submit a plan, known as a "living will," by the middle of next year.The rule is required by the 2010 Dodd-Frank financial oversight law, and it requires the living wills to be written based on a failing institution going through the bankruptcy process.The law, however, gives the government power to seize and break up large, failing firms through a new "resolution" process if regulators decide this would be less harmful to markets and the economy.The intent behind the living wills and the new resolution authority is to avoid the chaos in financial markets that followed Lehman Brothers' collapse in September 2008, at the height of the financial crisis.The rule applies to banks with more than $50 billion in assets as well as any other company that regulators decide is important to the smooth functioning of financial markets. Regulators have yet to name any of these companies.Under the rule, the schedule for submitting living wills is staggered based on the size of the bank.Bank holding companies with more than $250 billion in nonbank assets will have to file initial plans by July 1, 2012.Firms with between $100 billion and $250 billion in nonbank assets will have until July 1, 2013, to file plans. All other companies covered by the rule will have until Dec. 31, 2013.