Fed Finalizes Supervisory Rating Framework for Large Bank Holding Companies

The Federal Reserve on Wednesday finalized revisions to the supervisory rating framework for large bank holding companies. The finalized framework is largely similar to the proposal released in July. The revisions contained in the final framework more accurately reflect the strength of individual banks and better align the final framework with the supervisory rating systems used for other banking organizations.

The framework comprises three components: Capital, Liquidity, and Governance and Controls. Each component has four potential ratings: Broadly Meets Expectations, Conditionally Meets Expectations, Deficiency-1, or Deficiency-2. The final framework will now consider firms with no rating worse than Deficiency-1 as "well managed."

Consistent with the prior framework, firms with a Deficiency-2 rating in any component will continue to be considered not well managed. Firms that are not well managed face restrictions on certain activities and acquisitions.