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Federal Reserve Fiduciary Risk FIRMA March 2010

Federal Reserve Fiduciary Risk FIRMA March 2010. J. Douglas Pollitt Trust Risk Specialist Team Leader Federal Reserve Bank of Chicago John.D.Pollitt@frb.chi.org. Federal Reserve Fiduciary Risk FIRMA March 2010. Disclaimer

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Federal Reserve Fiduciary Risk FIRMA March 2010

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  1. Federal Reserve Fiduciary Risk FIRMA March 2010 J. Douglas Pollitt Trust Risk Specialist Team Leader Federal Reserve Bank of Chicago John.D.Pollitt@frb.chi.org

  2. Federal Reserve Fiduciary Risk FIRMA March 2010 • Disclaimer • Views expressed are those of presenter and they are not necessarily those of the Federal Reserve and do not otherwise constitute policy and/or position statements of the Federal Reserve.

  3. Federal Reserve Fiduciary Risk FIRMA March 2010 • Federal Reserve System Structure • Process For Determining Trust Risk Supervisory Themes • Annual Spring System Determination/Vetting • How Trust Risk Themes Are Incorporated Into Supervisory Process • State Member banks Trust related examinations & targets • Annual CPC/Dedicated teams Risk Assessment/Sup Planning

  4. Federal Reserve Fiduciary Risk FIRMA March 2010 • Enterprise Wide Fiduciary Risk Assessment • Role of the Federal Reserve/Consolidated Regulation, post GLBA & functional regulated entities • CPC/Dedicated team responsibilities • Base & Updated Risk Profiles of Fiduciary Activities (RIAs, Brokerage, Service Providers, Family Offices, etc) reflected in legal/reputational and operational risk categories • Enterprise Wide Risk and Compliance Management assessing whether & how all fiduciary risk captured at holding company level, determining threat to BHC earnings, liquidity, & capital • Factor into BHC ratings of RFI with I component =Impact on BHC of stress within and risks posed by non-bank RIA affiliates and sponsored funds

  5. Federal Reserve Fiduciary Risk FIRMA March 2010 • Fiduciary Themes, Priorities • Firms support for stressed funds (not just 2a7 funds) • Meeting Client Objectives and Adhering to Fiduciary Standards • Strategic & Earnings Pressure E.g. rising interest rate impact on RIAs and 2a7 funds • Increased Litigation Risk • Regulation R & GLB Push Out Rules • Operational Risks – Staffing Turnover, Fraud & Outsourcing

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