Fed details expectations for big banks' boards

WASHINGTON — The Federal Reserve Board released a proposal Thursday that is designed to clarify the agency's expectations for the biggest banks' boards.

The plan consists of three parts. It outlines attributes of "effective board of directors," the agency said, like setting a clear strategic direction and supporting independent risk management. Under the plan, Fed examiners would use these qualities when scrutinizing the boards at the largest financial institutions.

The proposal would also clarify for all institutions that most supervisory findings should be communicated to the firm's senior management for correction, rather than to the board. Finally, the proposal also identifies supervisory expectations for bank boards that could be streamlined.

Federal Reserve building.
The Marriner S. Eccles Federal Reserve building stands in this photograph taken with a tilt-shift lens in Washington, D.C., U.S., on Tuesday, Sept. 1, 2015. Bill Gross said the Federal Reserve has waited so long to raise interest rates that any move now may be labeled "too little too late" as market turmoil restricts the room for policy makers to act. Photographer: Andrew Harrer/Bloomberg
Andrew Harrer/Bloomberg News

The Fed also released a separate plan to better align the central bank's rating system for large banks with the post-crisis regulatory environment,

“The proposed changes to the rating system will incorporate the regulatory and supervisory changes made by the Federal Reserve since 2012, which focus on capital, liquidity, and the effectiveness of governance and controls, including firms’ compliance with laws and regulations. Supervisors would assess and assign confidential ratings in each of these categories,” the Fed said in a press release.

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