While the Federal Reserve recently announced a proposal to streamline its supervisory expectations for large bank boards of directors, Governor Jerome Powell today said that regulators will continue to “expect much more of board directors than ever before.”
The Fed’s proposal — which was released earlier this month – clarifies the distinction between bank boards and senior management teams, and includes five criteria by which regulators will assess bank boards. The Fed’s intention “is to enable directors to spend less board time on routine matters and more on core board responsibilities: overseeing management as they devise a clear and coherent direction for the firm, holding management accountable for the execution of that strategy, and ensuring the independence and stature of the risk management and internal audit functions,” Powell said. “[I]t is essential that boards get these fundamentals right.”
Powell noted that while the proposal directs most matters requiring attention to be directed to senior management teams instead of the board, directors will continue to receive MRAs in cases where board practices are at issue or where senior management teams have failed to sufficiently address issues in a timely manner. He added that the Fed “[does] not intend that these reforms will lower the bar for boards or lighten the loads of directors.”
