Federal Reserve Board Announces Modernization of Regulatory and Supervisory Framework

The Federal Reserve Board (FRB) Vice Chair for Supervision, Michelle Bowman, recently announced the next steps in the modernization of the FRB’s bank regulatory and supervision framework.

The FRB is restructuring its supervisory function to a regional structure informed by the Conference of State Bank Supervisors.  This will take shape by realigning coverage into five regions and each of these regions will be led by a regional leader accountable for all supervisory activity in the region that is aligned to recognize and reflect state boundaries.  By following state lines rather than the Reserve Bank District boundaries, the FRB believes it can coordinate more effectively and efficiently with its state and federal regulatory partners. 

Vice Chair Bowman stated that the new structure will preserve local supervision by examiners, as they will remain in the existing Reserve bank locations across each region and continue to oversee the banks they currently supervise.  By doing so, the FRB believes that this approach will clarify accountability and decisionmaking and enable consistent application of supervision.

In the announcement, Vice Chair Bowman also detailed that later this year the FRB will consider updates to the fixed-dollar asset thresholds to account for inflation and economic growth, with adjustments every five years.  The FRB also plans to expand the range of institutions treated as community banks and to update its large bank tailoring framework.

Lastly, Vice Chair Bowman said that through the FFIEC, the agencies and states are working to finalize revisions to the CAMELS rating system.  This includes a proposal to revise the bank rating framework to focus on material financial risk and provide clarity and transparency on the weight of elements that impact a composite rating (including the assignment of a “Management” rating).