The Federal Reserve Board of Governors issued guidance on Monday detailing changes in the framework for the supervision of America’s largest financial institutions.
“The framework strengthens traditional microprudential supervision and regulation to enhance the safety and soundness of individual firms,” the Fed Board said in a letter. “It also incorporates macroprudential considerations to reduce potential threats to the stability of the financial system and to provide insights into financial market trends.”
The new framework is intended to reduce the likelihood of institutions’ failure, as well as limit the overall threat such a firm’s failure would pose to the overall financial system.
While the framework does not apply to community financial institutions, it does apply to the largest and most complex U.S.-based and foreign firms subject to supervision by the Fed, as well as domestic bank and savings and loan holding firms and large foreign banking organizations with assets of more than $50 billion not subject to the strictest Fed supervision.
The framework includes guidance for capital and liquidity planning and positions, corporate governance, recovery planning, management of core business lines, management of critical operations, support for banking offices and resolution planning.
The Fed Board said that the framework will be implemented in stages and that the board would issue additional guidance to assess the ability of financial institutions to meet the new framework requirements.