Recommendation: The Director of CFPB should issue public information on its plans for reviewing regulations applicable to banks and credit unions, including information describing the scope of regulations the timing and frequency of the reviews, and the extent to which the reviews will be coordinated with the federal depository institution regulators as part of their periodic EGRPRA reviews. (Recommendation 2)

Agency: Consumer Financial Protection Bureau
Status: Open

Comments: CFPB staff noted in a letter in April 2018 that CFPB had issued requests for information (RFI) on the regulations their agency had adopted and inherited from other agencies. These requests seek public comment on the need to amend these regulations. They noted that they included in their spring and fall 2017 Semiannual Regulatory Agenda descriptions of two initiatives intended to review their regulations to identify opportunities to modernize and streamline provisions. In addition, they noted they had created an internal task force to coordinate and bolster continuing efforts to identify and relieve regulatory burdens. They stated that they would continue to publish information on their plans for reviewing regulations as appropriate. We plan to continue following up with CFPB to determine the extent to which they have published information on their plans to review the burden of their agency's regulations.

Recommendation: As the Board of Governors implements plans to develop an ERM framework, it should include a component to identify and assess risks of regulatory capture across the LISCC program. (Recommendation 1)

Agency: Federal Reserve System: Board of Governors
Status: Open

Comments: In September 2020, the Federal Reserve told us the status of their response to this recommendation had remained unchanged since their August 2018 update. In August 2018, the Board of Governors reported to us that it was developing its ERM framework. The Board added that it was establishing a Board Risk Committee (comprised of senior leaders) to oversee its ERM program and serve as the central forum for addressing Board-wide risk issues. The Board also said that it has begun to implement a number of strategic components of the ERM framework. In August 2019, the Board stated that in their view, the ERM framework they are developing would not significantly alter the management processes that the Board and System have in place under the LISCC program that continue to work effectively. The Board reported to us that it has continued to develop the ERM program with guidance of the Board Risk Committee, which meets quarterly, and continues to serve as the central forum for Board-wide risk issues and oversight of the ERM program. In August 2020, the Board added that it would take several years to develop the ERM program. The Board also will continue to implement strategic components of the ERM framework throughout the Board.

Recommendation: The Board of Governors should finalize and implement program-wide guidance for the LISCC Reserve Banks on implementing LISCC policies. (Recommendation 2)

Agency: Federal Reserve System: Board of Governors
Status: Open

Comments: In September 2020, the Federal Reserve told us the status of their response to this recommendation had remained unchanged since their August 2019 update. In August 2019, the Board of Governors told us that the LISCC supervisory program had taken several steps to "finalize and implement program-wide guidance for the LISCC Reserve Banks on implementing LISCC policies." The Board reported that in 2017 it had issued a near-final LISCC program manual, which they said will memorialize all aspects of the LISCC supervisory program. The Board added the updated manual will reflect the results of a self-assessment of the LISCC Program's first full year of operations under the LISCC core program model, and the initial implementation of the new Large Financial Institution Ratings Framework. The Board also said that, since the last update, the LISCC supervisory program's operating policies, procedures, and templates for the conduct of supervisory activities have been completed and implemented.

Recommendation: The Board of Governors should streamline its conflict-of-interest disclosure review process for participants in the LISCC program, such as by storing disclosure information in compatible electronic systems. (Recommendation 4)

Agency: Federal Reserve System: Board of Governors
Status: Open

Comments: In September 2020, the Federal Reserve told us the status of their response to this recommendation had remained unchanged since their August 2018 update. In August 2018, the Board of Governors told us that they were assessing the feasibility of integrating existing electronic systems. They added that they have drafted guidance that develops a LISCC-specific conflicts of interest and examiner credential program that will seek to ensure consistency in the interpretation and application of conflicts of interest rules for all staff, both at the Board and the Reserve Banks, that participate in the LISCC supervisory program. They said that the Board plans to issue this guidance and begin implementation of a more consistent and centralized disclosure review approach in 2018. In addition, they said that they have begun collecting and storing conflicts of interest disclosure information for all LISCC participants, including Board LISCC staff, in one electronic system. They added that they have provided initial training to Board LISCC staff on the disclosure review process and the electronic system to ensure consistent collection of conflicts of interest data for all LISCC participants.

Recommendation: The Board of Governors should systematically collect and maintain information on the institutions supervisory employees work for before they are hired by the Federal Reserve and their employment destination when they leave. (Recommendation 5)

Agency: Federal Reserve System: Board of Governors
Status: Open

Comments: In September 2020, the Federal Reserve told us the status of their response to this recommendation had remained unchanged since their August 2018 update. In August 2018, the Board of Governors told us that they had implemented policies intended to mitigate the risk that an employee may be influenced by prior employment or the prospect of future employment and place their private interests ahead of the organization's supervisory mission. As an example, they said that recently the Federal Reserve broadened the scope of post-employment restrictions applicable to senior examiners. They added that the Board has begun to develop a more systematic approach to collect and monitor pre- and post-employment data through the use of an electronic system. They said that this updated electronic system is scheduled to be released, for both Board and Reserve Banks use, in 2019.

Recommendation: The Board of Governors should conduct a periodic self-assessment of ethics programs, policies, and procedures that apply to LISCC program participants. (Recommendation 6)

Agency: Federal Reserve System: Board of Governors
Status: Open

Comments: In September 2020, the Federal Reserve told us the status of their response to this recommendation had remained unchanged since their August 2018 update. In August 2018, the Board of Governors told us that their Ethics program staff and Supervision & Regulation staff are jointly assessing the current ethics programs, policies, and procedures applicable to LISCC program participants. The Federal Reserve expects to finalize and implement new conflicts of interest policies and procedures applicable to LISCC participants in 2019.

Recommendation: To strengthen the scenario design process, the Federal Reserve should assess--and adjust as necessary--the overall level of severity of its severely adverse scenario by expanding consideration of the trade-offs associated with different degrees of severity.

Agency: Federal Reserve System
Status: Open
Priority recommendation

Comments: In January 2019, the Federal Reserve said it had initiated two projects that would allow a more efficient evaluation of multiple scenarios, including assessing trade-offs associated with different levels of scenario severity. In December 2019, Federal Reserve staff provided updates on these projects, which remain in progress. We will continue to monitor the Federal Reserve's completion and implementation of these projects and any additional actions it takes that may be responsive to our recommendation.

Recommendation: To improve understanding of the range of potential crises against which the banking system would be resilient and the outcomes that might result from different scenarios, the Federal Reserve should assess whether a single severe supervisory scenario is sufficient to inform CCAR decisions and promote the resilience of the banking system. Such an assessment could include conducting sensitivity analysis involving multiple severe supervisory scenarios--potentially using CCAR data for a cycle that is already complete, to avoid concerns about tailoring the scenario to achieve a particular outcome.

Agency: Federal Reserve System
Status: Open
Priority recommendation

Comments: In January 2019, the Federal Reserve said it had initiated two projects that would allow a more efficient evaluation of multiple scenarios. In December 2019, Federal Reserve staff provided updates on these projects, which remain in progress. We will continue to monitor the Federal Reserve's completion and implementation of these projects and any additional actions it takes that may be responsive to our recommendation.

Recommendation: To improve the Federal Reserve's ability to manage model risk and ensure that decisions based on supervisory stress test results are informed by an understanding of model risk, the Federal Reserve should design and implement a process to test and document the sensitivity and uncertainty of the model system's output--the post-stress capital ratios used to make CCAR quantitative assessment determinations--including, at a minimum, the cumulative uncertainty surrounding the capital ratios and their sensitivity to key model parameters, specifications, and assumptions from across the system of models.

Agency: Federal Reserve System
Status: Open
Priority recommendation

Comments: In January 2019, the Federal Reserve said it had previously initiated multiple projects to fully respond to our recommendation, several of which were now complete. In December 2019, Federal Reserve staff provided updates on the remaining projects, which remain in various stages of completion. We will continue to monitor the Federal Reserve's completion and implementation of these projects and, once we receive documentation demonstrating the completion of responsive actions, we will update the status of this recommendation.

Recommendation: To improve the Federal Reserve's ability to manage model risk and ensure that decisions based on supervisory stress test results are informed by an understanding of model risk, the Federal Reserve should design and implement a process to communicate information about the range and sources of uncertainty surrounding the post-stress capital ratio estimates to the Board during CCAR deliberations.

Agency: Federal Reserve System
Status: Open
Priority recommendation

Comments: In January 2019, the Federal Reserve said it had previously initiated a project to fully respond to our recommendation. In December 2019, Federal Reserve staff provided updates on the project, but as of February 2020, had not provided documentation fully supporting implementation of a process consistent with our recommendation. We will continue to monitor the Federal Reserve's completion and implementation of this project, and we will update the status of this recommendation once we receive documentation demonstrating the completion of responsive actions.

Recommendation: To improve the Federal Reserve's ability to manage model risk and ensure that decisions based on supervisory stress test results are informed by an understanding of model risk, the Federal Reserve should design and implement a process for the Board and senior staff to articulate tolerance levels for key risks identified through sensitivity testing and for the degree of uncertainty in the projected capital ratios.

Agency: Federal Reserve System
Status: Open
Priority recommendation

Comments: In January 2019, the Federal Reserve said it had previously initiated a project to fully respond to our recommendation. In December 2019, Federal Reserve staff provided updates on the project, but as of February 2020, had not provided documentation fully supporting implementation of a process consistent with our recommendation. We will continue to monitor the Federal Reserve's completion and implementation of this project, and we will update the status of this recommendation once we receive documentation demonstrating the completion of responsive actions.

Recommendation: FSOC and OFR should clarify responsibility for implementing requirements to monitor threats to financial stability across FSOC and OFR, including FSOC members and member agencies, to better ensure that the monitoring and analysis of the financial system are comprehensive and not unnecessarily duplicative.

Agency: Department of the Treasury: Financial Stability Oversight Council
Status: Open

Comments: In October 2019, Treasury staff said that steps continue to be taken to clarify roles and responsibilities across FSOC and OFR for monitoring threats to financial stability. Treasury staff said that they are working with OFR to reorganize and restructure the organization to better fulfill its mission and support FSOC. That work is still underway and will include additional clarification of roles and responsibilities. In June 2019, the Senate confirmed a new OFR Director. Treasury published a report in response to the President's executive order (13772) on Core Principles for Regulating the United States Financial System that recommended the structure and mission of the Office of Financial Research should be reformed to improve its effectiveness and to ensure greater accountability. We will continue to monitor progress in implementing these steps.

Recommendation: FSOC and OFR should clarify responsibility for implementing requirements to monitor threats to financial stability across FSOC and OFR, including FSOC members and member agencies, to better ensure that the monitoring and analysis of the financial system are comprehensive and not unnecessarily duplicative.

Agency: Department of the Treasury: Financial Stability Oversight Council: Office of Financial Research
Status: Open

Comments: In October 2019 Treasury staff said that steps are being taken to clarify roles and responsibilities across FSOC and OFR for monitoring threats to financial stability. Treasury staff said that they are working with OFR to reorganize and restructure the organization to better fulfill its mission and support FSOC. That work is still underway as staff from both entities meet on a weekly basis and will include additional clarification of roles and responsibilities. The Senate confirmed a new OFR director in June 2019. In June 2017, Treasury published a report in response to the President's executive order (13772) on Core Principles for Regulating the United States Financial System that recommended the structure and mission of the Office of Financial Research should be reformed to improve its effectiveness and to ensure greater accountability. We continue to monitor FSOC and OFR actions that would be responsive to clarifying responsibilities for monitoring threats to financial stability.