Supervision and Regulation Report: Key Insights and Priorities

Blog article

The Federal Reserve Board has published its semiannual Supervision and Regulation Report, offering critical insights into current banking conditions and transparency about its supervisory and regulatory actions. This report outlines the primary supervisory priorities and focus areas for 2023, providing valuable information for financial institutions and stakeholders.

In the Report, the Federal Reserve describes that in 2023, supervisory efforts were intensified to assess banks’ preparedness for managing liquidity and credit risks with focus on the following:

• Banks are expected to have prudent liquidity risk-management practices and to regularly test their ability to access multiple sources of contingent funding.
• Given increased delinquencies in certain loan sectors, credit risk continues to be a supervisory priority. Supervisors are closely monitoring underwriting standards and loan quality.
• For Commercial Real Estate-concentrated state member banks, supervisors are conducting in-depth examinations to ensure concentrated banks are exercising strong risk-management practices.
• Cybersecurity risk remains a priority. Supervisors are conducting examinations to ensure banks have adequate controls and resilience to protect their data and operations against cybersecurity threats.

For U.S. firms with $100 billion or more in total assets, the Federal Reserve’s supervisory priorities for the coming months include:

Capital

• Interest rate risk
• Market and counterparty risk
• Consumer and commercial credit, including commercial real estate
• Firm remediation efforts on previous supervisory findings

Liquidity

• Internal liquidity stress tests, including
  • changes to deposit stress testing segmentation and runoff rate assumptions
  • highly liquid asset composition frameworks and monetization assumptions
• Firm remediation efforts on previous supervisory findings
• Intraday liquidity monitoring and risk-management practices

Governance and Controls

• Operational resilience including cybersecurity
• Novel banking and information technology risks
• Third-party vendor management
• Firm remediation efforts on previous supervisory findings

The Supervision and Regulation Report provides critical insights into the Federal Reserve’s current and future supervisory priorities. By focusing on key areas such as liquidity, credit risk, and cybersecurity, financial institutions can better prepare for regulatory scrutiny and enhance their risk management practices.

The full version of the report is available here:  Supervision and Regulation Report