The public versions of large banks' so-called "living will" plans, released by U.S. regulators offer few, if any, new details on the process by which banks and regulators would smoothly dispose of assets in a default scenario.

Fitch Ratings believes that living will plans still depend heavily on implicit assumptions related to regulatory cooperation and market liquidity in any future crisis that might involve the failure of one or more major institutions.

Much of the content in the public living will documents was identical or very similar to previous public disclosure, and offered only a general framework for the hypothetical treatment of bank assets and liabilities upon insolvency. The nine global banks submitting both public and confidential plans to the FDIC and the Fed are the first to do so under the Dodd-Frank Act.

One implicit assumption included in plans submitted by multinational banks was that regulators would work collaboratively across borders to ensure that an orderly wind-down of an institution could take place. Given the territorial nature of bank regulation and the difficulties faced by various regulatory agencies in their home markets, we see this as a problematic assumption that may not be applicable in any future global financial crisis involving large bank failures until and unless there is broad harmonization of bank resolution regimes.

Another key issue raised by the living will documents is the potential for any future crisis to necessarily involve a high degree of systemic risk aversion that would make the timely disposal of assets and the liquidation of any single bank's operations difficult. While it is conceivable that a single global institution could fail in isolation, this is by no means the most likely distress scenario in light of the potential for multiple banks to confront simultaneously similar macro and liquidity pressures at the time of default, forcing banks and regulators to dispose of assets in illiquid markets.

Smaller institutions, with less than $250 billion of assets, will follow the largest banks in submitting living wills, but we would expect few additional insights on approaches to orderly liquidation procedures in those filings.