Will there actually be punishment if they fail to comply?
Not punishment, but from the article:
If, after any such adjustments, the Fed and the F.D.I.C. are still dissatisfied with the living wills, they can impose restrictions on the banks activities or make them raise their capital levels, which in practice means using less borrowed money to finance their business. If after two years the regulators think the plans are still deficient, they have the power to require the banks to sell off assets and businesses, with the aim of making them less complex and simpler to unwind in a bankruptcy.