Overview

• On July 10 the Federal Reserve Board opened a 30-day comment period on its proposal to revise the supervisory rating framework for large bank holding companies.
• Under the plan, banks with up to one “deficient-1” rating in capital, liquidity or governance would still qualify as “well managed,” while any “deficient-2” grade would block that status.
• Supporters argue the adjustment better aligns large-bank ratings with those used for insurers and other financial institutions and more accurately reflects overall firm strength.
• The proposal advanced in a July 7 vote with five board members in favor, one opposed and one abstention, and would mirror changes to insurer ratings.
• Critics Michael Barr and Adriana Kugler caution that easing the definition could weaken safeguards and increase risks for banks, consumers and the wider financial system.