The Federal Reserve Board has announced a proposal to revise its supervisory rating framework for large bank holding companies. This revision aims to address the “well managed” status of these firms, aligning the framework more closely with other banking organizations’ systems. The proposed changes seek to better reflect the strength of both bank holding companies and the broader banking system.
Introduced in 2018, the Board’s large bank supervisory rating framework assesses whether banks possess sufficient financial and operational resilience to ensure safe operations and regulatory compliance under various conditions. The framework evaluates 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 be considered “well managed.” Banks not meeting this standard would face restrictions on certain activities. A “deficient-2” rating for any component would still classify a bank as not well managed.
The Board is also considering similar revisions for insurers it regulates. Additionally, comprehensive changes are being evaluated, including potential composite ratings for both frameworks and modifications to other supervisory systems.
Comments on this proposal are due within 30 days following its publication in the Federal Register.
Federal Register notice: Revisions to the Large Financial Institution Rating System and Framework for the Supervision of Insurance Organizations (PDF)
Board memo (PDF)
Statement from Vice Chair for Supervision Bowman
Statement from Governor Barr
Statement from Governor Cook
