On August 3, 2017, the Board of Governors of the Federal Reserve System (“Federal Reserve”) released a proposal regarding its supervisory expectations for the boards of directors of bank holding companies, savings and loan holding companies, state member banks, U.S. branches and agencies of foreign banks, and non-bank systemically important financial institutions supervised by the Federal Reserve (the “Proposal”).
In recent years, industry groups have catalogued the many specific requirements that the federal banking agencies’ regulations and guidance impose on the directors of banking organizations to review and approve day-to-day matters. The industry has called for the federal banking agencies to reevaluate their regulations and guidance so as to focus directors on their core responsibilities – i.e., broader strategic and oversight activities. Federal Reserve Governor Jerome Powell acknowledged these issues in April 2017, stating that “[w]e need to ensure that directors are not distracted from conducting their key functions by an overly detailed checklists of supervisory process requirements.”
The Proposal appears intended to accomplish this goal by: (1) distinguishing the Federal Reserve’s expectations for the board’s responsibilities from its expectations for management’s responsibilities, and (2) reducing the number of instances where guidance requires the board to review and/or approve specific matters.