The Independent Community Bankers of America (ICBA) is urging the Federal Reserve to scrap its proposed revisions to the large financial institution rating system for the supervision of insurance organizations.
In a letter to Fed leaders, ICBA officials said it strongly opposes the proposal to revise its supervisory rating framework for large bank holding companies. The proposal would loosen requirements for the ratings a firm must receive to be considered “well managed.” That determination grants a firm the ability to engage in a broader range of activities and investments and qualify for expedited processing in certain cases.
ICBA officials said the Fed should seek to supervise and manage the risks posed by the largest firms, not permit them to expand while failing to adequately address safety and soundness risks. ICBA said the proposal invites safety and soundness issues by:
- Allowing large firms with a Deficient-1 rating to be considered “well managed” and by removing the presumption that a Deficient-1 rating would result in an enforcement action.
- Lowering the bar for large banks to be considered “well managed,” which will accelerate consolidation and exacerbate the problem of too-big-to-fail institutions.
- Deemphasizing the governance and controls component for growth-obsessed large firms, many of which have previously demonstrated weaknesses in these areas.
In a June comment letter on the stress capital buffer, ICBA encouraged the Fed to consider the safety and soundness implications of proposed changes to capital rules and requirements for the largest banks. In the letter, it noted that these institutions pose the greatest threat to financial stability, the economy, and consumers.