US regulators are raising concerns about the contingency plans of JPMorgan Chase, Bank of America, Citibank, and Goldman Sachs regarding their trillions of dollars in derivatives. The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) have deemed the banks’ “living wills” inadequate, as they do not sufficiently outline how the banks can safely unwind their derivatives portfolios without relying on government aid, according to Reuters.

In the case of Citigroup, regulators have identified deficiencies in the bank’s data management and control systems, which have led to inaccurate calculations of the liquidity and capital required to close derivatives positions in the event of bankruptcy.

Derivatives played a significant role in the 2008 financial crisis, exacerbating systemic risks and causing widespread losses and instability when the underlying mortgage assets failed. Reuters notes that big banks hold derivatives with trillions of dollars in notional value, and any changes to how they manage the risk, liquidity, or contingent liabilities associated with these portfolios could be extremely costly.

The regulators are urging the banks to address contingency planning, including ensuring they can obtain the necessary approvals or actions from foreign governments to effectively carry out their resolution plans. The filing of living wills by large banks is a requirement under the Dodd-Frank Act, which was passed in response to the 2008 crisis.

The big banks have until September to rectify the identified shortcomings, as per the US regulators’ deadline.