- The FRB has finalized its supervisory guidance for board effectiveness.
- The final guidance is substantially similar to the proposed guidance released in 2017.
- The guidance is applicable to large financial institution holding companies (total assets of $100 billion or more), except U.S. IHCs, and supervisory assessments will be included in a firm’s supervisory rating.
- Sets clear, aligned, and consistent direction regarding the firm’s strategy and risk tolerance.
- Actively manages information flow and board discussions by directing senior management to provide directors with information that is sufficient in scope, detail, and analysis to enable sound, well-informed decisions and consider potential risks.
- Oversees and holds senior management accountable for effectively implementing the firm’s strategy, consistent with its risk appetite, while maintaining an effective risk management framework and system of internal controls.
- Assesses and supports, through its risk and audit committees, the independence and stature of independent risk management and internal audit functions.
- Maintains a capable Board composition, governance structure, and practices that support the firm’s safety and soundness and the ability to promote compliance with laws and regulations consistent with the firm’s size, complexity, scope of operations, and risk profile.
Revisions to or rescission of existing supervisory expectations
Concurrent with finalizing the guidance for board effectiveness, the FRB completed its review of existing supervisory expectations for BHC/SLHC boards in firms of all sizes as set forth in twenty-seven separate Federal Reserve Supervision and Regulation Letters (SR Letter). The review resulted in determinations to revise twelve letters, inactivate nine letters, and retain six letters without change. The changes are included in a table attached to SR 21-4, which is available here.