In February 2021, the attached guidance was revised to apply to the supervision of Federal Reserve regulated institutions with total consolidated assets of less than $100 billion, including state member banks, bank holding companies, and savings and loan holding companies (including insurance and commercial savings and loan holding companies); as well as foreign banking organizations with consolidated U.S. assets of less than $100 billion. The guidance does not apply to intermediate holding companies of foreign banking organizations established pursuant to the Federal Reserve’s Regulation YY with total consolidated assets of $50 billion or more. These applicability modifications align with the Board’s tailoring rules. See 84 Fed. Reg. 59032 (November 1, 2019) for more information.
TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK
Supervisory Guidance for Assessing Risk Management at Supervised Institutions with Total Consolidated Assets Less than $100 Billion
Applicability: This supervisory guidance will be used by Federal Reserve examiners and supervisory staff in assessing risk management at financial institutions supervised by the Federal Reserve with total consolidated assets of less than $100 billion, except intermediate holding companies of foreign banking organizations established pursuant to the Federal Reserve's Regulation Y with total consolidated assets of $50 billion or more.
This letter sets forth an update to the Federal Reserve’s supervisory guidance for assessing risk management at supervised institutions with less than $100 billion in total consolidated assets. 1 The attached guidance re-affirms the Federal Reserve’s long-standing supervisory approach that emphasizes the importance of prudent risk management. The core risk management principles outlined in the attached guidance reflect updates to, and partially supersede, SR letter 95-51, “Rating the Adequacy of Risk Management and Internal Controls at State Member Banks and Bank Holding Companies.” 2 In addition to outlining core risk categories and risk management principles, this updated guidance provides clarification on and distinguishes supervisory expectations for the roles and responsibilities of the board of directors and senior management for an institution’s risk management. The revisions also extend applicability to savings and loan holding companies with less than $100 billion in total consolidated assets and U.S. operations of foreign banking organizations with total consolidated U.S. assets less than $100 billion, which were not previously subject to SR 95-51.
Consistent with current practice, the Federal Reserve will continue to issue guidance that specifically addresses supervisory expectations for the individual components of risk management (such as internal audit or asset-liability management) or risk categories (such as credit risk or liquidity risk). Federal Reserve examiners should exercise appropriate judgment in applying the guidance to a particular institution, considering its unique characteristics and the nature, scope, and complexity of its activities.
With regard to the assignment of supervisory ratings, the updated guidance does not change the risk management rating requirements and ratings definitions from SR letter 95‑51. That ratings guidance has been retained in the Federal Reserve’s Commercial Bank Examination Manual. For additional ratings guidance, refer to the Federal Reserve’s Bank Holding Company Supervision Manual and the Examination Manual for U.S. Branches and Agencies of Foreign Banking Organizations. 3
Reserve Banks are asked to distribute this letter to the Federal Reserve-supervised financial institutions in their districts, as well as to their supervisory and examination staff. Questions regarding the revised guidance should be addressed to Keith Coughlin, Manager, Regional Banking Organizations, at (202) 452-2056; Anthony Cain, Manager, Community Banking Organizations, at (202) 912-4377; Karen Caplan, Manager, Savings and Loan Holding Companies, at (202) 452-2710; or Vaishali Sack, Manager, Supervisory Program Development and Analysis, at (202) 452-5221. In addition, institutions may send questions via the Board’s public website. 4
signed by
Michael S. Gibson
Director
Division of Banking
Supervision and Regulation