SR 21-4 / CA 21-2:
Inactive or Revised SR Letters Related to the Federal Reserve’s Supervisory Expectations for a Firm’s Boards of Directors
OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
DIVISION OF
SUPERVISION AND REGULATION
DIVISION OF CONSUMER
AND COMMUNITY AFFAIRS
February 26, 2021
TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK AND TO FINANCIAL INSTITUTIONS SUPERVISED BY THE FEDERAL RESERVE
Inactive or Revised SR Letters Related to the Federal Reserve’s Supervisory Expectations for a Firm’s Boards of Directors
Applicability: This guidance applies to domestic bank and savings and loan holding companies (including insurance and commercial savings and loan holding companies), regardless of asset size.
The purpose of this letter is to present the results of the Federal Reserve’s review of supervisory expectations for boards of directors1 of bank and savings and loan holding companies (hereafter referred to as “firm”) that are presented in certain existing Supervision and Regulation and Consumer Affairs letters (“SR/CA letters”). The purpose of the initiative was to review and revise, as appropriate, supervisory views on boards of directors for all domestic bank holding companies and savings and loan holding companies contained in certain existing Supervision and Regulation (SR) and Consumer Affairs (CA) letters to better align with the Board’s supervisory framework.
The review identified supervisory expectations for boards of directors that may not align with their core responsibilities.2 The review also identified supervisory expectations that did not clearly distinguish responsibilities of a firm’s board from those of the firm’s senior management. The results of the review and accompanying revisions to or rescissions of Federal Reserve guidance are discussed in more detail below.3
Review Results
In reviewing the supervisory letters, the Federal Reserve identified 27 SR/CA letters for potential elimination or revision. The Federal Reserve considered whether it would be appropriate to either revise those expectations to better align with the attributes of effective boards set forth in the board effectiveness guidance or SR letter 16-11, “Supervisory Guidance for Assessing Risk Management at Supervised Institutions with Total Consolidated Assets Less than $100 Billion.” In some cases, the review indicated that a letter should be made inactive as the letter was no longer used in the supervisory process.
After seeking public comment on the review of these 27 SR/CA letters as part of the proposal on the “Board Effectiveness Guidance,”4 the Board decided to revise twelve letters, make inactive nine letters, and retain six letters without change. The attachment sets forth the disposition of the letters that were revised or made inactive. While the revisions to the 12 SR/CA letters align the board effectiveness guidance and SR letter 16-11, the Federal Reserve did not make any other changes to these letters.
To the extent that the content of a revised or inactive letter appears in the Bank Holding Company Supervision Manual or Commercial Bank Examination Manual, the Federal Reserve intends to revise the manual content at a later date. In the meantime, firms are not expected to rely on the manuals for board expectations, and the Federal Reserve does not intend to refer to the board expectations included in the manuals in conducting a supervisory assessment of a firm’s governance and controls.
Reserve Banks are asked to distribute this letter to the appropriate supervised institutions in their districts, as well as to supervisory and examination staff. In addition, supervised institutions may send questions regarding the guidance via the Board’s public website.5
signed by
Michael S. Gibson
Director
Division of
Supervision and Regulation
signed by
Eric S. Belsky
Director
Division of Consumer
and Community Affairs
- SR letter 21-3 / CA letter 21-1, “Supervisory Guidance on Board of Directors’ Effectiveness”
- SR letter 16-11, “Supervisory Guidance for Assessing Risk Management at Supervised Institutions with Total Consolidated Assets Less than $100 Billion”
Notes:
- The terms “board” or “board of directors” also refer to committees of the board of directors, as appropriate. Return to text.
- Refer to SR letter 21-3 / CA letter 21-1, “Supervisory Guidance on Board of Directors’ Effectiveness,” (board effectiveness guidance). Return to text.
- This review focused on supervisory expectations for boards of directors. The Board periodically reviews existing guidance it issues for accuracy and relevance. See, for example SR letter 16-9, “Inactive Supervisory Guidance.” In subsequent guidance reviews, the Federal Reserve will assess language on supervisory expectations for boards of directors for alignment with SR letter 18-5/CA letter 18-7, “Interagency Statement Clarifying the Role of Supervisory Guidance.” Return to text.
- See https://www.federalreserve.gov/newsevents/pressreleases/bcreg20180104a.htm Return to text.
- See http://www.federalreserve.gov/apps/contactus/feedback.aspx. Return to text.