FORUM URGES ADOPTION OF PROPOSAL TO IMPROVE LARGE BANK SUPERVISORY RATINGS

The following information was released by the Financial Services Forum:

Forum Responds to Proposed Revisions to Ratings Framework and Recommends Additional Supervisory Reforms

Washington, D.C. The Financial Services Forum today urged the Federal Reserve Board (FRB) to swiftly adopt its proposal to improve the Large Financial Institution (LFI) Framework. The Forum commended this important first step toward focusing supervision on material financial risks and encouraged the FRB to pursue additional reforms to the bank supervisory framework to support consumers and the broader economy.

"We fully support the Proposal's goal to more accurately align a firm's 'well managed' designation with an institution's ability to maintain safe-and-sound operations across the business cycle," the Forum said in a letter responding to the Federal Reserve's proposal. "Revisions to other relevant ratings frameworks, such as CAMELS, are also needed, as are broader reforms to supervisory practices. This will require the sustained efforts of, and coordination among, the FRB and other federal agencies, and we urge the FRB to continue to press ahead with additional reform efforts."

Key points highlighted in the comment letter:

The Forum supports the proposed revisions to the LFI Framework that would allow a firm to retain its "well managed" status with a single ratings downgrade.

There should be a strong presumption that a firm with satisfactory ratings for the capital and liquidity components of the LFI Framework will not be further downgraded for the governance and controls component.

The FRB and other banking agencies should undertake a broader range of reforms to the bank supervisory framework, including improving the CAMELS rating system, adopting transparent and objective guidance for evaluating ratings frameworks, focusing supervision on material issues, and reforming the supervisory appeals process.

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The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.