Fed proposes changes to large bank supervisory rating framework
Investing.com -- The Federal Reserve Board asked for public input on Thursday regarding changes to its supervisory rating system for large bank holding companies, specifically addressing their "well managed" status.
The proposed revisions aim to better align the supervisory framework with the actual strength of bank holding companies and the overall banking system. The changes would also create more consistency with rating systems used for other banking organizations.
The Fed’s current large bank supervisory framework, established in 2018, evaluates banks on three components: capital, liquidity, and governance and controls. Each component can receive one of four ratings: broadly meets expectations, conditionally meets expectations, deficient-1, or deficient-2.
Under the new proposal, a bank with no more than one "deficient-1" rating would still be considered "well managed." Banks failing to meet this standard would be deemed not well managed and face restrictions on certain activities. Banks with any component rated as deficient-2 would continue to be classified as not well managed.
The Fed plans to implement similar changes to its supervisory rating framework for insurers under its regulation.
Additionally, the Federal Reserve will consider more comprehensive changes in the future, including potentially adding composite ratings to both frameworks and modifying other supervisory rating systems.
The public has 30 days after the proposal’s publication in the Federal Register to submit comments.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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