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Board of Governors of the Federal Reserve System
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Annual Performance Report 2012

Strategic Theme 1: Supervision, Regulation, and Financial Stability

Continue building a robust inter-disciplinary infrastructure for regulation, supervision, and monitoring risks to financial stability.


Objectives

1.1 Strengthen the stability of the financial sector through the development of policies, tools, and standards.

1.2 Monitor financial markets and industry practices and structures.

1.3 Monitor and supervise individual institutions and infrastructures.

1.4 Ensure that sufficient crisis-management tools are in place.

1.5 Analyze for the Board and Federal Open Market Committee (FOMC) the role that financial stability policy should play in the setting of monetary policy.

1.6 Pursue research on stress tests, macroprudential regulation and tools, and other financial stability topics.

Since the onset of the financial crisis and passage of the Dodd-Frank Act, the Board has developed a new policy infrastructure to execute its expanded mandate on regulation, supervision, and financial stability. The intent of this infrastructure is to focus on broader institutional stability and the Board's ability to identify and address systemic risks to the financial system, while ensuring sufficient crisis-management tools are in place.

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Accomplishments

  • Support of Financial Stability Oversight Council (FSOC) initiatives

    • Made substantial contributions supporting the designation of eight Financial Market Utilities (FMUs) as systemically important, including the establishment of rules and procedures and conducting relevant analyses.
    • Supported the work of the FSOC Systemic Risk Committee and Data Committee.
    • Made substantial contributions to the FSOC 2012 Annual Report.

  • Development of Dodd-Frank Act regulatory framework

    • Issued final rules on stress-testing requirements for certain bank holding companies, state member banks, and savings and loan holding companies for which the Federal Reserve is the primary federal financial regulator.
    • Issued final rule (Regulation HH) on risk-management standards for Title VIII designated FMUs for which the Federal Reserve is the supervisory agency.
    • Issued proposed rules for public comment on enhanced prudential standards and early remediation requirements under sections 165 and 166 of the Dodd-Frank Act.

  • Microprudential policies, tools, standards, and supervision

    • Participated in supervisory oversight of systemically important institutions through LISCC.
      • Conducted supervisory oversight of systemically important FMUs, including by establishing the FMU Supervision Committee (FMU-SC) as well as a FMU supervisory program; commenced examinations of FMUs subject to Board supervision.
    • Worked closely with the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) to establish policies and procedures for Federal Reserve participation on SEC and CFTC examinations of designated FMUs and for consultation on FMU changes that may have a material effect on risks.

  • Macroprudential regulation and tools

    • Performed annual capital adequacy stress tests on multiple institutions.

  • Crisis-management tools

    • Enumerated and refined the Federal Reserve's options for responding to strains in financial markets.
    • Conducted regular operations reviews of discount window operations at the Reserve Banks.

  • Systemic risk and financial stability analysis

    • Created a new Short-Term Funding Markets section to conduct research and provide policy-relevant analysis of short-term funding markets.
    • Developed quantitative surveillance methods for identifying and evaluating changes in the use of leverage in the financial system and performed a variety of analysis on banking issues.
    • Participated in internal, domestic, and international working groups on a variety of topics.
    • Prepared memorandums and briefs for the FOMC on issues related to monetary policy strategy, frameworks, and developments abroad, particularly in the euro area.
    • Conducted research in support of theme 1.
    • Filled eight of the approved 26 strategic positions: six internal and two external.

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Planned Activities

  • Develop and implement macroprudential monitoring tools, approaches, and standards that enhance financial stability through internal, domestic, and international working groups.
  • Monitor and analyze conditions in the banking system; contribute to quantitative surveillance efforts through the LISCC.
  • Continue implementation of the Dodd-Frank Act through the development of rules, policies, procedures, and tools; coordinate effectively with other U.S. financial regulators and international authorities.
  • Review and clarify existing policies, procedures, and programs as appropriate.
  • Continue working with the Reserve Banks on ongoing discount window issues and related liquidity policies.
  • Research key issues related to the formulation and implementation of monetary and financial stability policy and develop appropriate tools.
  • Develop and enhance existing analytical tools and data; pursue funding for the initial phase of a research data project on a variety of topics.

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Last update: May 17, 2013

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