Federal Reserve Board Steps Up Supervision After Bank Failures
In a semiannual review of its regulatory policy initiatives, the Federal Reserve Board ("FRB") said that it was taking steps "to enhance the speed, force, and agility of its supervision to reflect lessons learned from the recent U.S. bank failures and its supervision of Silicon Valley Bank."
In the November Report, the FRB said that it was "improving its supervision of liquidity and interest rate risks by conducting targeted reviews at banks exhibiting higher interest rate and liquidity risk profiles, as well as conducting focused training and outreach on supervisory expectations for interest rate and liquidity risk management for banks and examiners." The FRB said that it was "monitoring for potential credit deterioration, particularly within the consumer and commercial real estate (CRE) lending segments," and that it implemented a new novel bank supervision program to improve oversight of banks engaged in non-traditional and financial technology-related activities.
The FRB noted that "some banks have experienced sizeable declines in the fair value of some fixed-rate assets reflecting the increase in interest rates over the past two years," but that "the banking sector remains sound overall, and most banks continue to report capital levels above regulatory requirements."
In the Report, the FRB also reviewed significant recent policy developments, including:
- proposing modifications to large bank capital requirements, which would implement the final components of the Basel III agreement (a/k/a "Basel III endgame");
- proposing adjustments to the calculation of risk-based capital surcharge for global systemically important banking organizations ("G-SIB"), to align surcharges with each banking organization's risk profile;
- proposing amendments to enhance the resolvability of non-G-SIB banks with at least $100 billion in total assets by implementing minimum long-term debt amounts; and
- amending existing liquidity risk and contingency planning-related guidance to encourage banks to utilize the FRB discount window to manage risk.
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