Key points from Quarles’s speech on the future of Fed supervision

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On January 17, 2020, Federal Reserve (Fed) Vice Chair for Supervision Randal Quarles gave a speech in which he outlined a number of upcoming actions and priorities for Fed supervision. The speech builds on consistent themes from Quarles’ tenure - transparency, fairness and modernizing regulation. He foreshadows several initiatives under these thematic umbrellas, including updating the Fed’s bank supervisory portfolios, publishing the examination program manual for the largest banks, opening significant guidance to public comment and potentially Congressional review, and clarifying when certain types of supervisory findings should be used.

The banks have reason to believe that these changes will be adopted, as nearly all can become policy if a majority of the Board is in agreement. On its face, this new approach would appear to benefit banks, which have long sought more transparency and accountability in supervision. However, they may have reason to believe that supervisory findings will get more serious - particularly for the biggest banks - and pressure to rectify outstanding issues in a timely manner will increase. In addition, changing the behavior of examiners will take time, so banks should not necessarily expect drastic and immediate differences to how they are currently supervised.

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Julien Courbe

Financial Services Leader, PwC US

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