Last week, The US Federal Reserve Board (FRB) released its semi-annual supervision and regulation report. Therein, the FRB outlines its regulatory and supervisory efforts throughout 2023.
In the report, the Fed explains that it is taking steps to enhance the "speed, force, and agility" of its supervision to "reflect lessons learned from the recent large U.S. bank failures and its supervision of Silicon Valley Bank." While the report gives examples of these efforts regarding the supervision of financial risk management, it is unclear if these efforts also target the supervision of non-financial risks, which have been widely acknowledged as the root cause of this year's bank failures.
The report also shows that outstanding supervisory findings at large financial institutions, representing unresolved issues raised through supervisory activity, have increased over the last year. Notably, approximately two-thirds of these outstanding findings relate to governance and controls deficiencies.
In a recent op-ed in The Banker, Stuart Mackintosh, Executive Director of the Group of Thirty, and Starling Founder & CEO Stephen Scott argued that post-bank failure reforms should focus on developing tools for supervisors to address the unmitigated non-financial risks that caused them. "As we seek to draw lessons from this past spring and to set priorities to avoid future turmoil," they write, "we should consider how supervisory technologies might position us to exercise informed judgement from the front foot by equipping us with supervisory and risk management red flags." ▸ Read More