What is meant by 'living wills' in post-crisis financial regulation?

• A. Plans for rapid and orderly resolution of a failing financial firm.
• B. Long-term corporate strategy documents.
• C. Guidelines for personal retirement planning.
• D. A set of environmental compliance obligations.

Answer: (A)

In post-crisis financial regulation, living wills are resolution plans that outline how a large financial institution could be wound down quickly and in an orderly fashion if it gets into trouble, while keeping essential functions running and reducing systemic risk. The idea is to pre-identify which parts of the firm are critical, how to transfer or police its operations, manage liquidity, and coordinate with regulators to ensure a controlled exit from the market rather than a chaotic collapse. These plans are updated regularly to reflect changes in the firm and the regulatory environment, hence the term "living." They are not about long-term strategy, personal retirement planning, or environmental obligations, but about orderly resolution of a failing institution.