The Government Accountability Office (GAO) has offered the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) a series of recommendations regarding supervision of bank management activities.
The GAO said the recommendations stem from examining how consistent regulators’ revised policies and procedures are with leading risk-management practices, how they applied examination policies and procedures, and trends in supervisory concern data since 2012 and how regulators tracked such data.
Weaknesses identified after the 2007–2009 financial crisis included management weaknesses at large depository institutions and the need for federal regulators to timely address, but concerns remained positive economic results of recent years could mask underlying risk-management deficiencies.
According to the GAO, the scope of work involved comparing regulators’ policies and procedures for oversight against leading practices as well as documents from selected bank examinations for 2014–2016 against regulator’s risk-management examination procedures. It also included reviewing aggregate supervisory concern data for 2012–2016 and interviewing regulators and industry representatives.
The GAO recommends the FDIC and the Federal Reserve improve information in written communication of supervisory concerns, the FDIC improve recording of supervisory concern data, and the Federal Reserve update guidelines for escalating supervisory concerns.
The FDIC disagreed with the first recommendation, stating that its policies address the issue. However, it did agree with the second recommendation. The Federal Reserve, however, neither agreed nor disagreed with the recommendations.