Comment periods extended for board of directors, rating systems proposals

Extensions to Nov. 30 of comment periods on proposals to enhance effectiveness of boards of directors at banks and new rating system for large firms were announced by the Federal Reserve last week.

The comment periods were originally to expire Tuesday (Oct. 10) for the proposal on boards of directors and Monday (Oct. 16) for the rating system proposal.

“The Board extended the comment periods to allow interested persons more time to analyze the issues and prepare their comments,” the central bank board stated in a release.

The proposal on boards of directors, according to the Fed, is intended to refocus the central bank’s supervisory expectations on the core responsibilities for the boards of directors of the largest firms, “which will promote the safety and soundness of the firms. ”Core responsibilities, the Fed noted, include oversight of the types and levels of risk a firm may take and aligning the firm’s business strategy with those risk decisions. The proposal, the Fed also stated, would “reduce unnecessary burden for the boards of smaller institutions.”

Under the second proposal, the Fed has proposed changes to the rating system to incorporate the regulatory and supervisory changes made by the Federal Reserve since 2012 (when the most recent supervisory program for the largest firms were introduced), which focus on capital, liquidity, and the effectiveness of governance and controls, including firms’ compliance with laws and regulations. The system would only apply to large financial institutions, such as domestic bank holding companies and savings and loan holding companies with $50 billion or more in total consolidated assets, as well as intermediate holding companies of foreign banking organizations operating in the United States.

Firms with less than $50 billion in total consolidated assets, including community banks, would continue to use the current rating system, which reflects long-standing supervisory practices for those firms, the Fed said.

Federal Reserve Board announces public comment period has been extended through November 30, 2017, on two related proposals; enhance effectiveness of boards of directors at banks and new rating system for large firms