Reading Between the Lines: Recent Regulatory News

Reading Between the Lines

March 30, 2020 – Federal Reserve Statement on Supervisory Activities

Where did it come from, and where can I find it?

Who needs to know about it?

  • All financial institutions supervised by the Federal Reserve

Why was it Issued?

  • To address adjustments in their supervisory approach in light of COVID-19

What does it say?

  • Financial institutions are encouraged to work with customers impacted by COVID-19
  • The Fed will not criticize you for prudent actions taken to accommodate impacted customers
  • The Fed will shift its focus from regular exams, to monitoring your efforts to address the internal and external impact of this issue
  • The Fed is also providing an additional 90 days to remediate any existing supervisory findings

What did it NOT say (but the Guru wants you to know)?

  • The exception to this de-emphasis on regular examination activity is any matter they feel is either urgent or negatively impacts safety and soundness. If you have any outstanding supervisory matters that might fall into those categories (MRA’s, formal or informal enforcement actions), the Guru believes you should stay on your committed timetable for completion of those matters. The timetable for completion was agreed to by your institution and the Federal Reserve based on an assessment of the severity of the findings. Taking additional time to resolve them could conceivably be perceived as having a negative impact on your safety and soundness.
  • Any actions taken to accommodate customers who may be unable to meet their contractual obligations will necessarily result in a higher risk exposure for your institution. Essentially the Federal Reserve is asking you to temporarily increase your credit risk appetite. Document that with the Board, and don’t forget to roll it back to pre-pandemic levels when this is over.
  • Although there may temporarily be less scrutiny on routine regulatory matters, try not to allow yourself to get too far behind in the day-to-day management of IT and vendor management.
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