Fed issues compliance risk management guidance for BHCs
Enhanced guidance for the supervision of bank holding companies has been released by the Fed
WASHINGTON, DC –The Federal Reserve has issued enhanced guidance that refines and clarifies its programmes for consolidated supervision of bank holding companies (BHCs) and the combined US operations of foreign banking organisations. The US regulator has also released guidance clarifying supervisory expectations with respect to firm-wide compliance risk management.
The Fed believes that, although initiation of these efforts pre-dated the recent market turmoil, the enhanced approaches to consolidated supervision and firm-wide compliance risk management emphasise several elements that should support a more resilient financial system.
In the meantime, the Fed states it is continuing to work, both independently and in conjunction with other supervisors and functional regulators, on a number of initiatives to strengthen supervisory approaches and reinforce expectations for sound practices in response to market events.
“This supervisory guidance on consolidated supervision and compliance risk management will better equip our supervisory staff, working closely with other US and foreign supervisors and regulators, to understand and assess the full range and scope of a banking organisation's operations and risks,” says Federal Reserve board governor Randall Kroszner.
“This guidance should not only provide greater clarity regarding our longstanding responsibilities as a consolidated supervisor, but is also responsive to ongoing developments in the financial sector. The objectives of fostering financial stability and deterring or managing financial crises will be furthered by the Federal Reserve having a more complete view of firm-wide risks and controls,” Kroszner says.
The Fed is emerging as the foremost financial supervisor in the US but in a statement the board acknowledged “the continuing growth in the size and complexity of many banking organisations exposes firms to a wide array of potential risks, while making it more challenging for a single supervisor to have a comprehensive perspective on the firm as a whole. In this regard, the consolidated supervision guidance is designed to foster consistent Federal Reserve supervisory practices and assessments across institutions with similar activities and risks”.
The guidance describes how Federal Reserve staff should develop an understanding and assessment of the consolidated operations of a bank holding company and the US operations of an foreign banking organisation through “continuous monitoring activities, discovery reviews and testing activities, as well as through interaction with, and reliance to the fullest extent possible on, other relevant supervisors and functional regulators”.
The separate compliance risk management guidance endorses the principles set out in the April 2005 paper issued by the Basel Committee on Banking Supervision entitled Compliance and the compliance function in banks. This guidance clarifies certain Federal Reserve supervisory policies regarding compliance risk management programmes and oversight at large banking organisations with complex compliance profiles.
Click on the links below for both papers click here for letter one click here for letter two
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Prop shops recoil from EU’s ‘ill-fitting’ capital regime
Large proprietary trading firms complain they are subject to hand-me-down rules originally designed for banks
Revealed: the three EU banks applying for IMA approval
BNP Paribas, Deutsche Bank and Intesa Sanpaolo ask ECB to use internal models for FRTB
FCA presses UK non-banks to put their affairs in order
Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management