New York (AFP) – US regulators rejected Wednesday the bankruptcy contingency plans of five giant US banks, saying their weaknesses proved “too big to fail” remained a threat to the financial system.

Both the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) said the “living will” plans were “not credible” for Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street and Wells Fargo.

The plans, required in the wake of the 2008 financial crisis, are supposed to demonstrate how the failure of a “systemically important” bank would not devastate the broader financial system.

“The goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal,” said Thomas Hoenig, vice chairman of the FDIC, in a statement.

The five “too big to fail” banks were given until October 1 to improve the plans, which were required in the Dodd-Frank regulations governing systemically important banks after the failure of Lehman Brothers in 2008 threatened to bring down the financial system.

Democratic presidential hopeful Bernie Sanders backs the break-up of big banks, while Neel Kashkari, president of the Minneapolis Federal Reserve, has said the financial behemoths “continue to pose a serious, ongoing risk to our nation’s economy.”

But Richard Bove, an analyst at Rafferty Capital Markets and a defender of big banks, said the tendency of regulators to stiffen requirements was an overreach that weakens the ability of US banks to compete with other global banks.

– Systemic threat –

The FDIC’s Hoenig said the deficiencies in the five banks’ living wills varied and included weaknesses on determining when to enter bankruptcy, assessing adequate liquidity and the transfer of capital to operating units in anticipation of bankruptcy.

Also worrying, the banks have gotten bigger and more complex since 2008 and have “excessively high leverage,” Hoenig said.

If one of the banking giants were to fail, the others “would become suspect in their ability to withstand the shock,” Hoenig said. “Too easily one failure could become a systemic crisis.”

Failure to submit acceptable living wills by the five banks’ October 1 deadline could result in higher capital requirements and other toughened standards, such as restrictions on bank operations.

JPMorgan executives told an earnings conference call they would address the problems.

“The most important thing is that we work with the regulators to understand their feedback in more detail and we’re fully committed to meeting their expectations,” said JPMorgan chief financial officer Marianne Lake.

“We believe it is in everyone’s best interest to end the debate on ‘too big to fail.’”

Bank of New York Mellon, Wells Fargo and State Street released statements saying they were committed to addressing shortcomings. Bank of America is expected to address the issue when it reports earnings on Thursday.

The regulators found that the living wills of two other large banks, Goldman Sachs and Morgan Stanley, also had weaknesses. They were ordered to address the deficiencies, but did not technically fail the test.

The FDIC found that Goldman’s plan “was not credible or would not facilitate an orderly resolution under bankruptcy,” the FDIC said. The Federal Reserve came to that same conclusion about Morgan Stanley.

Regulators also found problems in Citigroup’s plan but “they did not believe the shortcomings rose to the level of the statutory standard required for a joint determination of non-credibility,” the FDIC said.

Citigroup said it would work to further improve its plan.

“Citi has become a simpler, smaller, safer and stronger institution since the financial crisis and it is critical that Citi can be resolved without the use of taxpayer funds and without adverse systemic impact,” said Citigroup chief executive Michael Corbat.

Regulators are also evaluating the plans for four foreign banks: Barclays, Credit Suisse, Deutsche Bank and UBS.