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Financial Services Law Insights and Observations

Federal Reserve Board to implement new supervisory rating system for large financial institutions

Agency Rule-Making & Guidance Federal Reserve Supervision

Agency Rule-Making & Guidance

On November 2, the Federal Reserve Board (Board) finalized a new supervisory rating system for large financial institutions that is aligned to the core areas supporting qualifying institutions’ safety and soundness and is effective February 1, 2019. Supervisors will use the new rating system to assign confidential ratings for “all domestic bank holding companies and non-insurance, non-commercial savings and loan holding companies with $100 billion or more in total consolidated assets”—an increase from the $50 billion threshold proposed originally. The Board stated that the new rating system “will also apply to U.S. intermediate holding companies of foreign banking organizations with $50 billion or more in total consolidated assets.” The new rating system is designed to (i) better align with current Board supervisory programs and practices; (ii) “[e]nhance the clarity and consistency of supervisory assessments and communications of supervisory findings and implications”; and (iii) “provide transparency related to the supervisory consequences of a given rating.” 

According to the Board, supervisors will continue to apply the existing rating system to bank holding companies with less than $100 billion in total consolidated assets, as well as to non-insurance, non-commercial savings and loan holding companies who do not meet the $100 billion total consolidated asset minimum threshold.

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