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Financial Services Law Insights and Observations

Fed announces written agreement against China-based bank and NY branch

Federal Issues Federal Reserve Enforcement Of Interest to Non-US Persons

Federal Issues

On November 16, the Federal Reserve Board announced an enforcement action against a Chinese state-owned bank’s New York branch for alleged credit risk management deficiencies. The written agreement requires the bank and its branch to jointly submit a written plan to strengthen senior management oversight of risk management and internal controls, including a sustainable governance and risk management framework. Among other things, the plan must ensure that the branch’s risk management, internal audit function, and credit risk functions maintain appropriate stature and independence, and that potential credit risks are timely escalated. Additionally, risk management roles and responsibilities must be “clearly defined” in the plan, and the bank must ensure that “data management procedures are incorporated into an effective data governance framework.” After the Fed approves the plans, the bank and branch will have 30 days following the end of each quarter to submit “written progress reports detailing the form and manner of all actions taken to secure compliance” with the provisions of the written agreement. 

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