The Federal Reserve today released a set of new supervisory operating principles that instructs its bank supervisors to focus on material financial risks rather than “processes, procedures and documentation” that do not pose a threat to a bank’s safety and soundness.
According to a Fed statement, the new principles align bank examination and ratings to material financial risks, reduce duplication between exams from different supervisors, and streamline the remediation of issues cited by supervisors. The goal is to sharpen, rather than narrow, the Fed’s supervisory approach, Vice Chair for Supervision Michelle Bowman said.
“By anchoring our work in material financial risks, we strengthen the banking system’s foundation while upholding transparency, accountability and fairness,” Bowman said. “This is not about what we are leaving behind — it is about building a more effective supervisory framework that truly promotes safety and soundness across our financial system, which is the Federal Reserve’s core supervisory responsibility.”
American Bankers Association President and CEO Rob Nichols welcomed the announcement. “As Vice Chairman Bowman has made clear, by prioritizing the most significant risks facing banks the Fed will be strengthening supervision while allowing banks to better serve their customers, clients and communities,” he said. “The Fed’s action follows similar efforts from the OCC and FDIC focused on making sure bank supervision is properly tailored, and we look forward to working with the prudential regulators to maintain the strength and resiliency of the banking system.”
