Changes in the banking and financial services industry have highlighted the importance of incorporating an assessment of consumer compliance risk in the evaluation of a banking organization's overall risk profile. To address these changes, the Federal Reserve is enhancing its bank holding company supervision program to ensure that examiners are focusing appropriately on consumer compliance risk-related matters across the broad range of a bank holding company's activities.
The Board's Division of Banking Supervision and Regulation and Division of Consumer and Community Affairs have developed an enhanced framework for the supervision of consumer compliance risk at large complex banking organizations (LCBOs) and at large banking organizations (LBOs) that are subject to the System's continuous supervision program. Under the framework (attached), consumer compliance examiners will assess consumer compliance risk across the broad range of a banking organization's activities to determine the level and trend of consumer compliance risk. In coordination with the central point of contact and the supervisory team, consumer compliance examiners will evaluate how this risk impacts the organization's reputational, legal, and operational risk profiles. Activities appropriate to the level of the organization's consumer compliance risk will be included in the supervisory plan developed by the supervisory team to address the risks identified in an organization's business activities.
The framework is being implemented in stages, with the initial emphasis on LCBOs and certain LBOs. For other bank holding companies with multiple insured depository institution subsidiaries or nonbank subsidiaries, surveillance and other information will be used by the Reserve Banks to assess consumer compliance risk. Consumer compliance risk will not be assessed in shell holding companies. Federal Reserve supervisory staff will consider the benefits of expanding the framework to other bank holding companies and the cost of doing so after the framework is implemented in the LCBOs and applicable LBOs.
If you have any questions, please contact Deborah P. Bailey, Associate Director, Division of Banking Supervision and Regulation, at (202) 452- 2634, or Karen Murtagh, Senior Review Examiner, Division of Consumer and Community Affairs, at (202) 452-3946.