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Regulatory Expectations

Regulatory Expectations. April 19, 2013. Pam Martin Board of Governors of the Federal Reserve System Division of Banking Supervision and Regulation | Risk Section 202-452-3442 | pamela.a.martin@frb.gov. Overview. What Community Banks are NOT Required or Expected to do

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Regulatory Expectations

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  1. Regulatory Expectations April 19, 2013 Pam MartinBoard of Governors of the Federal Reserve SystemDivision of Banking Supervision and Regulation | Risk Section202-452-3442 | pamela.a.martin@frb.gov

  2. Overview • What Community Banks are NOT Required or Expected to do • Federal Reserve Tailors Supervisory Guidance to both Size and Complexity of the Firm • Risk Management Expectations 2

  3. May 14, 2012 Statement to Clarify Supervisory Expectations for Stress Testing by Community Banks • Community Banks not required or expected to conduct the stress testing specified by Dodd-Frank Act. • Community Banks not required or expected to conduct enterprise-wide stress tests required of larger organizations under the capital plan rule. • Community Banks are not required or expected to comply with the May 12, 2012 Supervisory Guidance on Stress Testing for Banking Organizations with more than $10 billion in Total Consolidated Assets.

  4. Federal Reserve Tailors Supervisory Guidance to both Size and Complexity of the Firm • Proposed Enhanced Supervisory Standards for Dodd-Frank Act (Sec. 165) prescribes less strenuous standards for firms in the $10 to $50 billion asset range • Company-run stress tests for these firms have been moved (fall 2013) with disclosure pushed back to 2015 • Board plans to issue additional supervisory guidance describing supervisory expectations for company-run stress tests that will be specifically tailored to banking organizations in the $10 to $50 asset range

  5. Federal Reserve Tailors Supervisory Guidance to both Size and Complexity of the Firm • Risk Committee/CRO Requirements specifically tailored to banking organizations in the $10 to $50 billion asset range • For these firms, Risk Committee is not required to be a free-standing committee of the Board (may be housed within another committee) • Banking organizations in the $10 to $50 asset range are not required to appoint a CRO

  6. Risk Management Expectations for Community Banks • All banking organizations should have the capacity to understand their risks and the potential impact of stressful events and circumstances on their financial condition. • Existing guidance: Interest Risk Management (SR 10-1), Funding and Liquidity Risk Management (SR 10-6), Payment of Dividends, Stock Redemptions, and Stock Repurchases (SR 09-4), and Concentrations in Commercial Real Estate (SR 07-1) highlight the use of stress testing as a means to better understand the range of a banking organizations potential risk exposures

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