Strategic Theme 1: Supervision, Regulation, and Financial Stability

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

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

2015 Initiatives and Accomplishments

• Continue development of the remaining major post-crisis regulatory reform rulemaking and guidance.

  • Issued a final rule on margin requirements for uncleared swaps of bank swap dealers, www.federalreserve.gov/newsevents/press/bcreg/20151030b.htm.
  • Published the final rule on the risk-based capital surcharges for systemically important BHCs, which establishes a methodology to identify global systemically important BHCs in the United States, www.federalreserve.gov/newsevents/press/bcreg/20150720a.htm.
  • Released guidance to examiners and banking institutions that consolidates the capital planning expectations for all large financial institutions and clarifies differences in those expectations based on firm size and complexity, www.federalreserve.gov/newsevents/press/bcreg/20151221a.htm.
  • Issued Supervision and Regulation Letter (SR) 15-16, which describes enhancements to the Federal Reserve System's Surveillance Program, www.federalreserve.gov/bankinforeg/srletters/sr1516.pdf.
• Proposed a new total loss absorbing capacity rule that would strengthen the ability of the largest domestic and foreign banks operating in the United States to be resolved without extraordinary government support or taxpayer assistance, www.federalreserve.gov/newsevents/press/bcreg/20151030a.htm.

• Develop and implement resolution and recovery planning programs.

  • Reviewed LISCC firm responsiveness to title I guidance, as mandated by the Dodd-Frank Act.

• Implement SR 12-17 through the development of supervisory expectations, tailored programs, and finalization of a new ratings framework for these firms.

  • Provided guidance for the Federal Reserve's core capital planning expectations for firms subject to the LISCC framework and other large and complex firms and provided guidance for the Federal Reserve's core capital planning expectations for large and noncomplex firms, www.federalreserve.gov/bankinforeg/srletters/sr1518.htm and www.federalreserve.gov/bankinforeg/srletters/sr1519.htm.

• Capture and incorporate information from a broad array of internal and external sources, including consumer and other external groups, into a risk-assessment framework.

  • Launched the Decisions based on Recommended actions supported by collaborative Information-gathering, Validation, and Evaluation (DRIVE) process and the Tracking, Reference Library, Analytics, and Collaboration (TRAC) process.

• Support the Chair, as a member of the FSOC, in identifying risks and responding to emerging threats to financial stability.

  • Supported the Chair's participation in a wide range of the FSOC activities, including discussions on risks in the economy, regular periodic reviews of financial market developments, and review of the FSOC's annual report.

Back to section top

Objective 1.2: Monitor financial markets and industry practices and structures.

2015 Initiatives and Accomplishments

• Produce forward-looking risk reports using new and existing data sources and metrics.

  • Completed the annual 2014 CCAR report, which is an intensive assessment of the capital adequacy of large, complex U.S. BHCs and of the practices these BHCs use to assess their capital needs; issued the 2015 CCAR summary instructions and guidelines, www.federalreserve.gov/newsevents/press/bcreg/bcreg20150311a1.pdf and www.federalreserve.gov/bankinforeg/stress-tests/CCAR/2015-comprehensive-capital-analysis-review-summary-instructions-guidance-intro.htm.

• Continue to provide analysis to the Board and the Federal Open Market Committee (FOMC) about financial market developments that bear on financial stability and U.S. monetary policy.

  • Briefed Board members on the evolving role of broker-dealers and risks to market liquidity.
  • Briefed Board members on the effects of monetary policy in other countries, including emerging market nations and the implications for financial stability abroad.
  • Published research that focuses on financial market development stability and U.S. monetary policy, www.federalreserve.gov/econresdata/feds/2015/index.htm.

• Continue to enhance quantitative surveillance financial stability assessments.

  • Completed four quarterly Quantitative Surveillance Assessment of Financial Stability reports, highlighting various topics during the year.
  • Briefed Board members on financial stability assessment, including analysis of trends from CCAR and Dodd-Frank Act stress testing exercises and their implications for financial stability.

Back to section top

Objective 1.3: Monitor and supervise individual institutions and infrastructures.

2015 Initiatives and Accomplishments

• Develop and implement frameworks for new supervisory programs, including nonbank systemically important financial institutions (SIFIs) and foreign banking organizations. Provide updated guidance on the consumer compliance risk-focused supervision program.

  • Integrated the nonbank SIFIs into the LISCC portfolio program. Specifically, developed horizontal supervisory exercises to address identified risks in the nonbank SIFI insurance firms and expanded analysis of these firms in the LISCC subcommittees.

• Develop supervisory approaches for community banking organizations, regional banking organizations, and savings and loan holding companies that identify and support taking action against early warning indicators of outlier risk.

  • Published a supervisory letter describing revisions to the safety-and-soundness surveillance program for state member banks and top-tier bank and savings and loan holding companies. The enhanced surveillance program includes new risk-classification algorithms that provide examiners and other supervisory staff with early signals of an institution's risk-taking and implements an early-warning model for holding companies to complement the existing model for state member banks. These enhancements will allow examiners to target supervisory activities at high-risk institutions and streamline supervisory approaches at low-risk institutions, www.federalreserve.gov/bankinforeg/srletters/sr1516.pdf.

• Seek comment on rules and revisions covering various financial entities and sectors as outlined in the Dodd-Frank Act.

  • Analyzed the public comments received on the proposed Dodd-Frank Act 165 order.
  • Solicited public comments on the small BHCs policy statement proposed rule, which expands applicability and reduces certain reporting requirements.

• Execute effectively the Federal Reserve's supervisory programs for systemically important FMUs.

  • Worked with other federal supervisory agencies and international multilateral organizations to develop approaches to recovery for FMUs and the management of risks from potential cyber vulnerabilities.
  • Requested public comment on a proposed new rating system for certain FMUs, www.federalreserve.gov/boarddocs/press/foiadocs/2015/20151113/foia20151113.pdf.

• Coordinate effectively on regulatory and supervisory matters that cut across the institutional and infrastructure portfolios within the Federal Reserve.

  • Issued a joint staff report with the U.S. Commodity Futures Trading Commission, the U.S. Department of the Treasury, the Federal Reserve Bank of New York, and the SEC on the events of October 15, 2014, in the U.S. Treasury Market, www.federalreserve.gov/newsevents/press/other/20150713a.htm.

• Support the Chair as a member of the FSOC with respect to monitoring systemic risk, coordinating interagency dialogue, and issues related to SIFIs and designated FMUs.

  • Presented strategies, options, and a framework for implementing a countercyclical capital buffer based on analysis of likely economic effects, the international experience, indicators that may guide decisions, and integration with stress tests.
  • Developed analytical tools, conducted monitoring activities, and used horizontal reviews of multiple financial institutions to enhance the Board's understanding of evolving market structures and practices and incorporated the results into the policy and supervisory process.

Back to section top

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

2015 Initiatives and Accomplishments

• Continue to improve the effectiveness of the Federal Reserve's crisis-management tools.

  • Approved the final rule specifying procedures for emergency lending under section 13(3) of the Federal Reserve Act, www.federalreserve.gov/newsevents/press/bcreg/20151130a.htm.

• Contribute to domestic and international efforts to improve the quality of financial data that can better inform crisis-management decisions.

  • Presented at the 18th Annual International Banking Conference, The Future of Large and Internationally Active Banks, www.federalreserve.gov/newsevents/speech/tarullo20151105a.htm.

  • Continued work on developing a global financial stability matrix and quantitative indicators of financial vulnerabilities.

    • Completed qualitative financial stability assessments for 10 countries and quantitative financial stability assessments for 12 countries.

Back to section top

Objective 1.5: Analyze for the Board and the FOMC the role that financial stability policy should play in the setting of monetary policy.

2015 Initiatives and Accomplishments

• Assess the effectiveness of macroprudential policies and their interaction with monetary policy.

  • Engaged in a range of analyses to operationalize the Basel III countercyclical capital buffer in the United States, including reviews of the buffer's likely economic effects, the international experience, indicators that may guide decisions, and integration with stress tests.
  • Provided Board members with a comprehensive analysis and review of the macroprudential tools available to the Board and other regulatory authorities.

• Monitor risks to financial stability, analyze linkages between the financial and real sectors, and evaluate alternative policy options that could address systemic risks.

  • Evaluated potential policy responses to ongoing financial interdependencies and potential emerging systemic risks and assessed the economic effects of proposed macroprudential policies on financial institutions.

  • Disseminated research on financial stability issues through the working paper series and presentations at System and other conferences.

    • Presented at a regional conference on the second phase of the G-20 Data Gaps initiative, U.S. Progress on Implementation: Financial Stability Indicators (FSIs) and Coordinated Portfolio Investment Survey (CPIS) and U.S. Policy Use of the Data.

    • Gave speeches on financial stability issues, including

      • "Financial Institutions, Financial Markets, and Financial Stability,"www.federalreserve.gov/newsevents/speech/powell20150218a.htm.
      • "Nonbank Financial Intermediation, Financial Stability, and the Road Forward,"www.federalreserve.gov/newsevents/speech/fischer20150330a.htm.
      • "Financial Stability and Shadow Banks: What We Don't Know Could Hurt Us,"www.federalreserve.gov/newsevents/speech/fischer20151203a.htm.

Back to section top

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

2015 Initiatives and Accomplishments

• Contribute to basic research on financial stability and macroprudential tools through the publication of working papers, academic journal articles, and other publications and participation in professional conferences.

  • Continued to disseminate research through the working paper series and presentations at conferences on financial stability issues, www.federalreserve.gov/econresdata/workingpapers.htm.

• Promote research on related topics through Federal Reserve System efforts, including long-term research projects integrated with the quantitative surveillance process.

  • Completed four quarterly Quantitative Surveillance Assessment of Financial Stability reports and briefed Board members on the findings.
  • Produced and transmitted to the Congress the Government-Administered General-Use Prepaid Cards report, which provides information on the prevalence of use of general-use prepaid cards in federal, state, and local government-administered payment programs and on the interchange fees and cardholder fees charged for use of these services as required by section 1075 of the Dodd-Frank Act, www.federalreserve.gov/publications/2015-government-prepaid-preface.htm.
  • Published, jointly with the Federal Reserve Banks, Strategies for Improving the U.S. Payment System, which presents a multifaceted plan for collaborating with payment system stakeholders to enhance the speed, safety, and efficiency of the U.S. payment system, www.federalreserve.gov/newsevents/press/other/20150126a.htm.

• Integrate, as appropriate, research results into ongoing policy discussions at the Board through briefings and participation in associated work streams.

  • Conducted studies on the implications of vulnerabilities in emerging market economies to U.S. monetary policy normalization.

• Continue work identifying and analyzing cross-border linkages among financial institutions and financial sectors, particularly with respect to their implications for financial stability.

  • Published working papers on financial stability topics via the Finance and Economics Discussion Series and the International Finance Discussion Papers series, www.federalreserve.gov/econresdata/workingpapers.htm.

Back to section top

• Other Formats

• Full report (PDF)

• Stay Connected

• Twitter
• YouTube
• Flickr
• RSS Feeds
• Subscribe