Summary
U.S. banking organizations remain strong.
U.S. banking organizations continue to maintain strong capital and liquidity levels, while demonstrating healthy loan growth and improved profitability, allowing them to continue supporting households and businesses throughout the economic cycle.
Banks also continue to fix previously identified supervisory findings and improve their risk management. In particular, the number of outstanding supervisory findings has decreased for banks of all sizes. Current supervisory findings remain concentrated in nonfinancial areas, such as governance and risk management.
Supervisors continue to monitor evolving risks.
Overall, U.S. banking organizations are better prepared now than before the last financial crisis to weather any potential downturn in the economic cycle. Recent stress test results show that capital levels of large firms remain above regulatory minimums even after a hypothetical severe recession. Using stress tests and other supervisory tools, the Federal Reserve continues to promote financial resiliency by monitoring the adequacy of the capital and liquidity positions of supervised institutions, as well as their lending standards, asset quality, profitability, and risk management practices.
The largest, most systemically important banking organizations are subject to the most stringent regulation and supervision.
The Federal Reserve continues to ensure that the regulatory and supervisory environment is efficient, transparent, and simple and that expectations for individual institutions are appropriately tailored to risks for different banks. In particular, the most stringent regulatory and supervisory requirements are applied to the largest systemically important banking organizations. Firms with smaller risk profiles have less stringent requirements. Effectively tailoring supervisory expectations minimizes compliance burden without compromising an institution's safety and soundness.
The Board continues to promote the principles of efficiency, transparency, and simplicity in its approach to supervising and regulating institutions.
Efficiency involves two components. The first relates to methods: efficient methods tailor the requirements and intensity of regulations and supervision programs based on the risk profile of firms. This minimizes compliance burdens while still achieving regulatory objectives. The second is related to goals: the Federal Reserve has a strong public interest in an efficient financial system, just as it does in a safe and sound one, and includes the efficient operation of the financial sector as one of the goals it seeks to promote through its regulation and supervision programs.
Transparency involves the presentation of regulations, guidance, and supervisory findings in a manner that is easy to understand. Transparency promotes accountability to the public and an effective regulatory process by exposing ideas to a variety of perspectives. Similarly, transparent supervisory principles and guidance allow firms and the public to understand the basis for a supervisory decision, thereby enhancing firms' ability to respond constructively to supervisors.
Simplicity involves developing the Federal Reserve's regulations and supervisory framework without unnecessary complexity and presenting expectations clearly and concisely. The objective of simplicity complements and supports the goal of transparency. Confusion and unnecessary compliance burden resulting from overly complex regulations inhibit progress toward a safe, sound, and efficient financial system.