FED Adjusts Supervisory Approach to Alleviate the Impact of COVID-19
FED issued a statement to provide additional information to financial institutions regarding adjustments to its supervisory approach in light of the COVID-19. The key topics on which additional information has been provided include increased focus on monitoring, changed focus on examinations, extended time periods for remediation of supervisory findings, and continuous communication with institutions. Additionally, FED announced that it will establish a Primary Dealer Credit Facility (PDCF) and Commercial Paper Funding Facility (CPFF) to support credit needs of households and businesses.
In its statement on adjustments to its supervisory approach, FED provides the following key information:
- FED will focus on monitoring and outreach to help financial institutions of all sizes understand the challenges and risks of the current environment
- To minimize disruption and to focus on outreach and monitoring, FED will temporarily reduce its examination activities, with the greatest reduction in activities occurring at the smallest banks. FED intends to reassess its approach to examinations in the last week of April to determine whether conditions have changed.
- Large banks should still submit their capital plans that they have developed as part of the Comprehensive Capital Analysis and Review (CCAR) by April 06, 2020. The plans will be used to monitor how firms are managing their capital in the current environment
- To allow firms to focus on heightened risks in this current environment and assist consumers, additional time will be granted for resolving non-critical existing supervisory findings. FED is extending the time periods for remediating existing supervisory findings by 90 days, unless FED notifies the firm that a more timely remediation would aid the firm in addressing a heightened risk or help consumers.
Additionally, CFTC announced that in response to the COVID-19 pandemic, the Division of Swap Dealer and Intermediary Oversight (DSIO) issued two additional no-action letters providing temporary, targeted relief to a large U.S. bank that helps finance America’s oil and gas sector and to those who operate commodity-focused investment funds the CFTC regulates. DSIO has granted temporary, targeted no-action relief to Commodity Pool Operators from certain reporting requirements.
- Press Release on Supervisory Approach
- Statement on Supervisory Approach (PDF)
- Press Release on PDCF
- Press Release on CPFF
Keywords: Americas, US, Banking, Securities, COVID-19, Supervisory Approach, CCAR, PDCF, CPFF, Deadline Extension, Swaps, Swap Dealer, Investment Funds, Reporting, CFTC, FED
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.
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