The Board of Governors of the Federal Reserve System ("FRB") requested comments on proposed guidance related to supervisory expectations for large financial institutions' risk management practices.
The proposal is intended to consolidate and clarify the FRB's existing supervisory expectations regarding risk management. The proposal addresses the roles and responsibilities for distinct management sectors related to risk management. The proposal covers core principles for financial institutions' (i) senior management, (ii) business line management and (iii) independent risk management.
One of the core principles for effective senior management is ensuring that risk management is "prudent and consistent" with a firm's business strategy and capabilities. For business line management, the guidance includes a discussion of strategy implementation, risk identification and infrastructure, business controls, and accountability. The guidance also provides information on governance, risk tolerance, identification and reporting, internal controls, and internal audits with regard to independent risk management and controls.
The proposed guidance was issued as part of a larger initiative to institute a new rating system for large financial institutions (see previous coverage). Comments on the proposed guidance must be submitted by March 15, 2018.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
