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Board Report: May 23, 2012
In July 2010, the Dodd-Frank Act established new supervisory responsibilities by designating the Board, acting on its own or pursuant to recommendations by the Financial Stability Oversight Council (FSOC), to establish more stringent prudential standards for large bank holding companies (BHCs), including certain nonbank financial companies that present financial stability risks. We conducted this audit to assess Division of Banking Supervision and Regulation's (BS&R) approach and activities to comply with Dodd-Frank Act requirements related to developing enhanced prudential standards for large BHCs, including prudential standards that would apply to any nonbank financial company determined by FSOC to be systemically important.
Overall, we found that BS&R had taken a proactive approach to enhancing its supervision of large BHCs, including initiating actions prior to the passage of the Dodd-Frank Act. BS&R has reorganized sections of its division that supervise large BHCs to establish strategic and policy direction for supervisory activities that affect the most significant BHCs and has taken actions to enhance the supervision of large BHCs to meet the related requirements of the Dodd-Frank Act.
As BS&R continues to enhance its approach for supervising large BHCs, we provided two suggestions for management's consideration. We suggested that the Large Institution Supervision Coordinating Committee define and document roles and responsibilities for its subgroups and for coordination with other Board offices, to ensure a clear understanding of each office's purposes and functions. We also suggested that the Director of BS&R finalize the process for distributing and maintaining a complete list of large BHCs that are subject to enhanced prudential standards, including BHCs that may fluctuate above or below the $50 billion threshold in asset size, to effectively and timely supervise BHCs under Dodd-Frank Act requirements. In comments on a draft of our report, BS&R senior management indicated that actions are being taken to fully implement our suggestions.