The Federal Reserve Board finalized a new supervisory rating system for large financial institutions last week.
The new rating system is aligned with the areas that have been determined to be the most important to supporting a large firm’s safety and soundness and U.S. financial stability.
The Federal Reserve Board’s supervisory program for large financial institutions focuses on capital, liquidity, and the effectiveness of its governance and controls. Supervisors will use the new rating system to assign a confidential rating to the firms in each of those areas.
The new rating system will apply to all domestic bank holding companies and savings and loan holding companies with $100 billion or more in total consolidated assets. This is a change from the $50 billion threshold initially proposed. Further, 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 as proposed.
The existing rating system will continue to be applied by the Federal Reserve Board to bank holding companies with less than $100 billion in total consolidated assets. Additionally, the existing system will be adopted for non-insurance, non-commercial savings and loan holding companies with less than $100 billion in total consolidated assets.