Strategic Theme 1: Supervision, Regulation, and Financial Stability

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

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

Board staff will continue to contribute to regulatory reform activities that enhance the resilience of the financial sector and coordinate with other federal supervisory agencies regarding their similar regulatory efforts. Staff will also develop additional policies and tools to strengthen financial stability, including incorporating capital and liquidity analyses and reviews into the supervisory program and develop work programs that support these initiatives. Finally, under the direction of the Board and Federal Open Market Committee (FOMC), staff will develop and deploy crisis management tools as appropriate. As part of ongoing activities, staff will monitor and analyze the effect of such regulations, policies, and tools on financial institutions, financial markets, and more generally on the macro economy.

Projects and Initiatives

• Finalize Basel III capital rule and propose Basel III liquidity standards.
• Finalize enhanced prudential standards for large, domestic bank holding companies (BHCs) as required by sections 165 and 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).
• Incorporate new international risk management standards for financial market utilities (FMUs) into Federal Reserve regulation and policy.
• Develop implementing regulations for designated FMU access to Reserve Bank accounts and services under Title VIII of the Dodd-Frank Act.

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

Staff will develop analytical tools and conduct monitoring activities that enhance the Board's understanding of evolving market structures and practices, including changes in global financial intermediation and capital allocation, evolving risks and risk-management practices, and regulatory and other incentives for financial institutions to appropriately manage risk exposures. As part of this effort, staff will continue to use horizontal reviews to better understand industry practice in key areas and incorporate the results into the policy and supervisory process. Ongoing communications will inform the Board and the FOMC about financial market developments that bear on financial stability and U.S. monetary policy.

Projects and Initiatives

• Improve the Board's processes for identifying both institution-specific risks and broad industry risks by performing a zero-based review of surveillance activities and building a risk-monitoring framework.

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Objective 1.3: Monitor and supervise individual institutions and infrastructures.

Staff will continue to monitor, on an ongoing basis, individual institutions and infrastructures, particularly those that have broader consequences for the financial system and the macro economy. The Board also will continue to implement community and regional bank initiatives to: clarify supervisory expectations, mitigate burden, foster prudent lending activity, and improve communications. The Board will seek comment on a number of proposed rules and revisions covering various financial entities and sectors as outlined in the Dodd-Frank Act.

Projects and Initiatives

• Issue for public comment a rule, as part of the Dodd-Frank Act, for collecting fees from certain companies that the Board estimates are necessary and appropriate to carry out its supervisory and regulatory responsibilities with respect to such companies.
• Revise roles and governance documents that address the Board's expectation of effective supervision by clarifying program requirements for each supervised portfolio.
• Consistent with the framework established in theme 2, develop and implement a comprehensive data governance and sharing plan to effectively receive, store, manage, and control access to data.
• Build out Federal Reserve supervisory programs for financial market infrastructures (FMI), including working with other federal agencies and international authorities to strengthen FMI supervision.
• Monitor and assess the risk profiles of foreign banking organization (FBO) activities in the United States.

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

The Board will use a broad research agenda to assess the macroeconomic and financial-market effects of crisis-management tools, and contribute to domestic and international efforts to improve the quality of financial data that can better inform crisis-management decisions.

Projects and Initiatives

• Continue to implement a recovery and resolution plan program for large BHCs.
• Develop crisis-management and liquidity tools, including coordination of international response.
• Analyze and refine options to use the discount window and other liquidity tools.

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

Staff will continue to assess the effectiveness of various macroprudential policies and their interaction with monetary policy. Staff will contribute to supervisory exercises to increase the resilience of financial institutions through financial stability assessments from the quantitative surveillance (QS) process. Staff will monitor risks to financial stability, analyze linkages between the financial and real sectors, and evaluate alternative policies to contain building systemic risks. Staff will continue briefing the Chairman, other Board members, and the FOMC, as appropriate.

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

In addition to pursuing the research areas defined in this strategic objective, staff will continue to work on efforts to develop and enhance analytical tools and data. Developmental rotational opportunities will be available to support the Board's Office of Financial Stability Policy and Research. Staff will consider possible policy responses to changes in financial globalization and interdependence as issues arise. Staff will assess the economic effects of proposed macroprudential policies on financial institutions in the United States and abroad throughout the year.

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