US regulators are warning major banks like JPMorgan Chase, Bank of America, Citibank, and Goldman Sachs about their contingency plans for trillions of dollars in derivatives. The Federal Reserve and FDIC are flagging the banks’ “living wills” as inadequate, specifically pointing out issues with Citigroup’s data management and control systems. In the event of bankruptcy, these banks need to ensure they have the liquidity and capital to unwind their derivatives portfolios without government assistance. Derivatives were a key factor in the 2008 financial crisis, contributing to systemic risks and widespread losses. The regulators stress the importance of contingency planning, including obtaining necessary approvals from foreign governments. Required by the Dodd-Frank Act, these banks have until September to address these critical shortcomings. Changes in risk management could be costly for banks holding trillions in derivatives. Subscribe to stay updated on this evolving issue.