Earlier this year, the Securities and Exchange Commission (SEC) issued guidance regarding “robo-advisers,” automated investment advice tools accessed via web-based or mobile platforms with minimal human interaction.1 The guidance is an important reminder to the industry that robo-advisers are subject to the same regulatory framework as traditional advisers and highlights several unique regulatory considerations stemming from their distinct business model. The SEC also, for the first time, included these considerations as a part of this year’s examination priorities.
The SEC’s sharpened focus on robo-advisers is a response to their dramatic increase in use over the past several years, largely … Read more
On August 3, the Federal Reserve (Fed) proposed for comment a new supervisory rating system to assess the safety and soundness of Large Financial Institutions (LFIs).1 This is the first change to the Fed’s supervisory rating system since the financial crisis, and aims to simplify and clarify the existing five-component supervisory assessment process2 by assigning ratings across three pillars: (1) capital, (2) liquidity, and (3) the effectiveness of governance and controls.
1. Doubling down on capital and liquidity. The proposal is designed to focus future ratings on two areas where the Fed has made the most changes … Read more
On August 3, the Federal Reserve (Fed) proposed for comment supervisory guidance for boards
of directors of Fed-supervised institutions1 (i.e., Board Effectiveness (BE) guidance). The proposed BE guidance is the result of a multi-year review by the Fed of existing guidance and practices of boards of directors across supervised firms. It is intended to consolidate and replace existing board supervisory expectations from 27 SR Letters, which include 170 supervisory expectations for boards, with 33 expectations of effective boards. The 33 proposed expectations are categorized into five attributes which the Fed intends to assess a firm’s board of directors, including: … Read more
Fraud incidents have increased by over 130 percent in the past year, resulting in significant monetary and reputational losses for financial institutions. Many of these incidents — including high-profile crimes such as the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) attacks from last year — involved the exploitation of governance deficiencies and ineffective operating models.1
Maintaining proper governance for risk management has been a major point of focus for industry groups and regulators, including the Office of the Comptroller of the Currency, the Basel Committee on Banking Supervision, the Committee of Sponsoring Organizations of the Treadway Commission, and the … Read more
The recently released public sections of the 2017 resolution plans submitted by the eight US global systemically important banks (G-SIBs)1 provide a unique window into the banks’ resolution planning efforts that have developed over the last five years. Notably, the 2017 plans not only describe how the banks have enhanced their resolution plans but also highlight improvement in their intrinsic resolvability, which is indicative of the mindset change that has evolved over the past seven years: resolution planning has developed from a one-time compliance “project” to an important strategic consideration for business-as-usual (BAU) financial and operational choices.
These fifth… Read more
In the 100 days since his election, President Trump and members of his cabinet have continued public calls for a rollback of Dodd-Frank and related regulations enacted since the financial crisis, while offering few concrete actions or proposals. Initially, Wall Street (and specifically bank stocks) rallied heavily in anticipation of business-friendly deregulation and tax reform, but bank executives have since tempered their expectations and, at least among the big banks, quieted calls for broad reform.
As we anticipated last November, the Trump Administration largely departed from the anti-bank populism espoused during the campaign and quickly moved on to more traditional … Read more