The nation’s largest banks will soon be required to submit ‘living will’ plans detailing how they would minimize harm sustained by stakeholders in the event of a failure.

The new rule, which received approval from federal regulators on Tuesday, will require banks with assets of $50 billion or more to submit periodic contingency plans to the Federal Deposit Insurance Corporation guaranteeing deposit holders received access to their insured funds within one business day of their failure, outlining how banks will maximize any cash made from the sale of their assets and detailing what measures would be taken to minimize losses to stakeholders.

The impetus behind the new rule is to give large banks a manageable game plan in the event of a failure and, in part, to do away with the notion that banks can become “too big too fail” as a number of financial institutions were treated during the most recent financial crisis. The FDIC will require 37 insured depository institutions with roughly $3.6 trillion in combined insured deposits (nearly 60 percent of all insured deposits as of the end of 2010) to conform to the rule, which will kick in on Jan. 1.

Amongst the banks that will be required to participate in the program are the top four: Bank of America, J.P. Morgan Chase, Citigroup and Wells Fargo.

The rule will complement a separate rule covered under the Dodd-Frank Wall Street Reform Act requiring systemically important nonbank financial companies and bank holding companies with assets of $50 billion or more to prepare resolution plans in the event they enter bankruptcy protection. The rule was put in place following the failures of financial institutions like Lehman Brothers, whose 2008 bankruptcy filing—the largest in U.S. history—is still being sorted out through the Chapter 11 process.

Under the Federal Reserve’s rule, banks with more than $250 billion or more in nonbank assets based in the United States will be required to submit plans on or before July 1, 2012, while companies with $100 billion or more in non-bank assets would be required to submit them a year later. Companies that operate predominately through one or more insured depository institutions would be required to submit plans on or before Dec. 31, 2013.

The FDIC insures the deposits at more than 7,513 deposit institutions across the country, and is funded exclusively by the financial institutions it insures rather than federal funds.

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