The plans by BNP Paribas (>> BNP PARIBAS), Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) and HSBC (>> HSBC Holdings plc) showed shortcomings, and "significant progress" was needed, the U.S. Federal Reserve and the Federal Deposit Insurance Corp. said in a statement.

Banks are required to draw up these plans that lay out how they can go through ordinary bankruptcy without the help of taxpayer support during a next crisis, but regulators have criticized them as overly optimistic.

In August, the two regulators used similar language for 11 large U.S. banks that submitted their living wills for 2014.

The agencies said they expected to take regulatory action if the three foreign banks did not improve.

The regulators have the power to cut down the banks' business after two years once they officially determine the plans do not meet the legal requirements, and after giving them a formal period to correct problems.

The FDIC already said that the three plans were "not credible," while the Fed did not take quite as harsh a tone, but agreed that the plans needed considerable work.

Among the improvements needed, were fixing derivative contracts so that they can get terminated rapidly in case of bankruptcy. The banks also needed to make sure that critical functions could continue to work in a crisis, and that they were able to produce reliable information quickly.

(Reporting by Douwe Miedema; Editing by Sandra Maler)

By Douwe Miedema