Federal Reserve Proposes Guidance on Effective Management

11 January 2018
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Key takeaways

  • On January 4, 2018, the Federal Reserve Board (the “FRB”) proposed guidance for effective senior management, management of business lines and independent risk management and controls for large financial institutions. Comments on the proposal are due by March 15, 2018.
  • The FRB has said that the proposal is intended to consolidate and clarify its existing supervisory expectations regarding risk management and define the roles and responsibilities of key individuals who are accountable for risk management within a firm. However, firms will need to evaluate carefully the prescriptiveness of the proposal against their current practices as it could limit the ability of an institution to operate efficiently its risk management function.
  • The proposal applies to (1) bank holding companies and savings and loan holding companies with total assets of $50 billion or more; (2) the combined U.S. operations of foreign banking organizations with combined U.S. assets (branch and nonbranch) of $50 billion or more; (3) any state member bank subsidiaries of entities in categories (1) or (2); and (4) nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the FRB.