Fed Unveils Bank Supervision Principles That Prioritize Material Risks

Overview

• The Federal Reserve released supervisory operating principles directing examiners to focus on material financial risks and to take timely, proportionate action.
• An internal Oct. 29 memo, made public Tuesday, instructs supervisors to step away from process and documentation checks that do not present material risk.
• Examiners are told to rely where feasible on state and other federal regulators’ examination work and to coordinate ratings with state agencies to reduce duplication.
• Supervisory findings must avoid vague MRAs and MRIAs, prioritize deficiencies with potential financial impact, and be closed once underlying issues are corrected.
• The Fed is training examiners and expects to formalize the approach in public guidance, has committed to publishing stress‑test models for transparency, and plans to trim Supervision and Regulation staffing by about 30% through 2026, drawing industry praise and criticism from former vice chair Michael Barr.