(Adds details on stress tests and living wills)
NEW YORK, July 5 (Reuters) - U.S. bank regulators disclosed on Wednesday how eight of the nation’s largest banks would wind themselves down in the face of collapse and gave American International Group Inc (AIG) and Prudential Financial Inc an extra year to submit their doomsday plans.
The Federal Reserve and Federal Deposit Insurance Corporation (FDIC) posted the public portions of “living wills” submitted by banks including Bank of America Corp, JPMorgan Chase & Co and Goldman Sachs Group Inc. Introduced in the wake of the global financial crisis of 2007-2009, the plans outline how banks would go bankrupt without needing a taxpayer bailout. (bit.ly/2urLrdc)
Regulators will scour the documents to make sure they are credible. Under the 2010 Dodd-Frank Act, the federal government has the power to carve up a bank if regulators do not believe its plan is workable and in recent years they have faulted more than a dozen banks for drafting overly optimistic or not credible plans.
The Fed and the FDIC gave insurers AIG and Prudential Financial until the end of next year to submit their living wills from an original deadline of the end of 2017. The extension was given to enable the companies to incorporate any guidance regulators may provide on their plans.
Regulators also posted plans from Bank of New York Mellon Corp, Citigroup Inc, Morgan Stanley, State Street Corp and Wells Fargo & Co.
President Donald Trump wants to relax the "living will" process, reducing the frequency of having to submit a plan to once every two years and also give the banks more guidance on what to submit. He also wants to eliminate the role of the FDIC in reviewing the living wills.
The living wills are separate from the Fed's stress tests, where banks demonstrate stability by showing how they would withstand economic shocks in hypothetical scenarios but failing either process is a black eye for bank bosses.
In June, the Fed cleared all 34 banks that underwent stress testing in 2017.
Reporting by Pete Schroeder; Editing by Carmel Crimmins, Dan Grebler and Lisa Shumaker