The Fed’s supervision staff earlier this month had told banks around the nation that examiners would begin reviews of the outstanding warnings, according to a Bloomberg report.
- Warnings will be removed if they do not comply with the Fed’s recent instruction for examiners to focus more on urgent threats to a bank’s financial stability and less on procedural matters, the report said.
- Federal Deposit Insurance Corp in October had unveiled a plan to narrow the way examiners can issue warnings to lenders.
The Federal Reserve has reportedly signaled to banks that it plans to abandon some of the confidential warnings it previously sent them to improve operations.
The Fed’s supervision staff earlier this month had told banks around the nation that examiners would begin reviews of the outstanding warnings, which are private orders to fix deficiencies, according to a Bloomberg report that cited people familiar with the matter.
Warnings To Be Eliminated
Warnings will be removed if they do not comply with the Fed’s recent instruction for examiners to focus more on urgent threats to a bank’s financial stability and less on procedural matters, the report said.
Executives at each firm will get the opportunity to engage on a plan to resolve the remaining warnings, the report said.
The effort to scale back unresolved warnings would occur in stages through examiner reviews, the report said. Consumer deficiencies or material risks are not included in the review, it added.
Trump’s Promise Of Easing Rules
President Donald Trump’s financial regulators have promised to relax several banking rules, which lenders think have become complex over the years.
The new review is aimed to help examiners “enhance the effectiveness of supervision by focusing on material financial risks to a bank’s safety and soundness,” the report said, citing a Fed memo.
Shift In Supervision Focus
Federal Deposit Insurance Corp in October had unveiled a plan to narrow the way examiners can issue warnings to lenders. As per the new measure, FDIC’s staff will only be issuing warnings or imposing penalties related to practices that cause or can cause financial harm to the bank.
FDIC’s acting Chair Travis Hill had said at the time that examiners would be expected to focus on issues that materially impact the risk of failure rather than “a litany of process-related items that are unrelated to a bank’s current or future financial condition.”
Bank Stocks’ Reaction
Shares of major U.S. lenders JPMorgan, Morgan Stanley, Citi, and Bank of America were down between 0.7% to 4%.
