Fed Proposes Principles on Large Bank Risk Management

The Federal Reserve today proposed new guidance setting forth its core principles of effective risk management by banks with over $50 billion in assets, including expectations for senior management, business line management and independent risk management and controls. The proposal follows the Fed’s proposal last summer to create a new supervisory risk rating scale for large bank holding companies with over $50 billion in assets.

The newly proposed guidance would build on the proposed rating system. The Fed said it would use a risk-based approach to determine which business lines of a firm to examine during a given year, and that it would consider factors such as size, complexity, recent supervisory experience, growth and recent changes.

“In order to minimize unnecessary duplication for firms subject to this guidance, the Federal Reserve would, to the extent possible, evaluate a firm’s governance and controls in coordination with other relevant federal and state agencies, particularly the primary regulators of the firm’s insured depository institution subsidiaries,” the Fed said.

Comments on the proposed core principles guidance are due by March 15. The Fed is still accepting comments on the large bank ratings system with an extended deadline of Feb. 15. For more information, contact ABA’s Cecelia Calaby.