Federal Reserve Board ("FRB") Vice Chair Randal K. Quarles offered recommendations to strengthen bank supervision and communication.
In a speech at Yale Law School, Mr. Quarles emphasized the importance of FRB bank supervision that (i) makes clear the supervisory expectations on banks, (ii) deters banks' bad behavior, and (iii) promotes clear two-way communication. He advocated that the FRB:
- align supervisory portfolios by using a "clear and transparent standard" that hold banks posing greater risks to higher standards;
- make stress tests more transparent;
- modify the FRB capital rule to allow banks to review their supervisory tests before submitting their capital plans;
- create a word-searchable database on the FRB website that includes historical interpretations;
- request public comment on significant supervisory guidance to encourage more informed supervision and increased engagement with banks; and
- adopt a rule concerning the FRB's use of guidance during the supervisory process that includes (i) requiring the FRB to comply with the Administrative Procedure Act (or APA) with respect to its supervisory duties and (ii) clarifying that "non-compliance" with the guidance will not serve as the basis for enforcement action against a bank.
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