Federal Reserve clarifies new supervisory rating system for large financial institutions

Agency Rule-Making & Guidance Federal Reserve Supervision Of Interest to Non-US Persons

On February 26, the Federal Reserve Board (Fed) issued clarifying guidance on the new rating system for the supervision of large financial institutions (LFIs). According to SR 19-3, the new LFI rating system replaces the current bank holding company (BHC) rating system and will evaluate and communicate the supervisory condition of: BHCs with total consolidated assets of $100 billion or more; all non-insurance, non-commercial savings and loan holding companies (SLHC) with total consolidated assets of $100 billion or greater; and the U.S. operations of foreign banking organizations with combined U.S. assets of $50 billion or more. The new rating system supports the Board’s supervisory program for all LFIs, including firms posing the greatest risk to U.S. financial stability. The Fed will assign initial LFI ratings to firms supervised by the Large Institution Supervision Coordinating Committee starting early 2019, and all other firms subject to the LFI rating system will be assigned initial ratings in early 2020. SR 19-4, issued the same day, provides guidance on which rating systems apply to BHCs and SLHCs with assets of less than $100 billion, following the adoption of the new LFI rating system.