Recommendation: The Chair of the Board of Governors of the Federal Reserve System should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers' use of account aggregation services. (Recommendation 6)

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

Comments: In a May 2018 letter, the Chair of the Federal Reserve Board noted that the Federal Reserve recognizes the importance of working together to determine how best to encourage socially beneficial innovation in the marketplace, while ensuring that consumers' interests are protected. The letter noted that the Federal Reserve staff have been meeting with other regulators and industry participants. The Chair states that the Federal Reserve will continue to facilitate and engage in collaborative discussions with other relevant financial regulators in these and other settings to help market participants address the important issues surrounding reimbursement for consumers who use financial account aggregators and experience unauthorized transactions. In October 2018, Federal Reserve staff advised us that issues related to data aggregation were discussed at a June 28, 2018 meeting of the Fintech Interagency Discussion Group, which includes OCC, the Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Consumer Financial Protection Bureau. They noted that they are monitoring private sector efforts related to resolving data aggregation issues and expect to hold additional discussions among the regulators about these issues in the future. In March 2019, the agency noted that it continues to collaborate on this issue. As of February 2020, the agency had no further updates on this recommendation. We plan to follow up with Federal Reserve staff to obtain updates on these efforts in the future.

Recommendation: The Chair of the Board of Governors of the Federal Reserve System should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. (Recommendation 12)

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

Comments: In a May 2018 letter, the Chair of the Federal Reserve Board noted that the Federal Reserve recognizes the importance of formally increasing its knowledge base related to financial innovation. The letter noted that the Federal Reserve has recently organized two nationwide teams of experts tasked with monitoring fintech and related emerging technology trends as they relate to its supervisory and payment system mandates, respectively. These new teams include representation from all of the Federal Reserve System's Reserve Banks and have leadership from Board staff. These teams' critical objectives include ensuring that fintech-related information is shared across the Federal Reserve System and is used to inform relevant supervisory, policy, and outreach strategies. As of February 2020, the agency had no updates on this recommendation. We plan to follow up with Federal Reserve staff to obtain updates on these efforts in the future.

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: While creating control systems at the same time that the emergency programs were being designed and implemented posed unique challenges, the recent crisis provided invaluable experience that the Federal Reserve System can apply in the future should the use of these authorities again become warranted. Going forward, to further strengthen policies for selecting vendors, ensuring the transparency and consistency of decision making involving the implementation of any future emergency programs, and managing risks related to these programs, the Chairman of the Federal Reserve Board should direct Federal Reserve Board and Reserve Bank staff to strengthen procedures in place to guide Reserve Banks' efforts to manage emergency program access for higher-risk borrowers by providing more specific guidance on how Reserve Bank staff should exercise discretion and document decisions to restrict or deny program access for depository institutions and primary dealers that would otherwise be eligible for emergency assistance.

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

Comments: We most recently sought information from the Board of Governors of the Federal Reserve System in July 2018 regarding the status of the recommendation but did not receive any new information. Therefore, the recommendation remains open.

Recommendation: While creating control systems at the same time that the emergency programs were being designed and implemented posed unique challenges, the recent crisis provided invaluable experience that the Federal Reserve System can apply in the future should the use of these authorities again become warranted. Going forward, to further strengthen policies for selecting vendors, ensuring the transparency and consistency of decision making involving the implementation of any future emergency programs, and managing risks related to these programs, the Chairman of the Federal Reserve Board should direct Federal Reserve Board and Reserve Bank staff to document a plan for estimating and tracking losses that could occur under more adverse economic conditions within and across all emergency lending activities and for using this information to inform policy decisions, such as decisions to limit risk exposures through program design or restrictions applied to eligible borrowing institutions.

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

Comments: We most recently sought information from the Board of Governors of the Federal Reserve System in July 2018 regarding the status of the recommendation but did not receive any new information. Therefore, the recommendation remains open.

Recommendation: While creating control systems at the same time that the emergency programs were being designed and implemented posed unique challenges, the recent crisis provided invaluable experience that the Federal Reserve System can apply in the future should the use of these authorities again become warranted. Going forward, to further strengthen policies for selecting vendors, ensuring the transparency and consistency of decision making involving the implementation of any future emergency programs, and managing risks related to these programs, the Chairman of the Federal Reserve Board should direct Federal Reserve Board and Reserve Bank staff to document the Federal Reserve Board's guidance to Reserve Banks on types of emergency program decisions and risk events that require approval by or consultation with the Board of Governors, the Federal Open Market Committee, or other designated groups or officials at the Federal Reserve Board.

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

Comments: We most recently sought information from the Board of Governors of the Federal Reserve System in July 2018 regarding the status of the recommendation but did not receive any new information. Therefore, the recommendation remains open.