Quarles Makes Case for Fed Supervision Revamp

Taking note of the inherent tension in bank supervision between the need for confidentiality and tailoring on one hand and accountability and predictability on the other, Federal Reserve Vice Chairman for Supervision Randal Quarles today elaborated on his plans to revamp how the Fed supervises banks.

“I don’t believe the Federal Reserve has communicated as clearly as it could with the banks we supervise,” Quarles said in a speech in New Haven, Connecticut. “More transparency and more clarity about what we want to achieve as supervisors and how we approach our work will improve supervision.”

Quarles provided a deeper conceptual framework for a set of reforms outlined in a different speech last month and that he plans to “implement expeditiously.” They include: aligning supervisory portfolios with newly tailored regulations; creating a searchable database of all significant agency rules and interpretations; putting supervisory guidance out for public comment; increasing stress test transparency; and adopting a formal rule on the use of guidance in the supervisory process.