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October 1, 2014–March 31, 2015
The last six months have brought increased congressional scrutiny on both the Board of Governors of the Federal Reserve System (Board) and the Consumer Financial Protection Bureau (CFPB). As the Office of Inspector General for both agencies within the unique framework of the Federal Reserve System, we continue to provide the vigorous oversight that Congress is seeking. Indeed, the audits and evaluations we completed during this reporting period in the areas of financial supervision, information technology, and the workforce highlight how our work cuts across the Board’s and the CFPB’s programs and operations, allowing us to effectively maximize the economies of our oversight resources. Moreover, these areas track the management challenges that we announced for both agencies in the previous reporting period.
For example, in the area of financial supervision, we issued a report on the Board’s and the Federal Reserve Bank of New York’s consolidated and other supervisory activities related to the losses incurred by JPMorgan Chase & Company’s Chief Investment Office, commonly referred to as the London Whale story. By focusing on the associated consolidated supervision, our evaluation addressed an aspect of the London Whale story that had not been a focus of prior reviews released to the public. Our recommendations seek to improve the effectiveness of consolidated supervision and other supervisory activities. Due in part to our work in this area, the Board has requested that we evaluate the Federal Reserve System’s practices for addressing divergent views as part of the process of making supervisory decisions regarding large bank holding companies.
In addition, during this reporting period, we continued our evaluation of the coordination between the CFPB and other regulatory agencies with respect to conducting supervisory activities, as well as the effectiveness of the CFPB’s documentation of its supervisory examinations. We will continue to focus our efforts on the Federal Reserve System’s supervisory activities related to large, complex financial institutions as well as the CFPB’s supervision program.
We believe that information technology issues and cybersecurity are of paramount importance to both the Board and the CFPB. As a result, two years ago we established an Office of Information Technology to focus our resources in this area. Nearly 50 percent of the reports we issued during this reporting period address information technology issues, including annual assessments of each agency’s information security program. We will continue to focus our efforts in this area and are working to integrate information security assessments into our general audits.
We also completed congressionally requested reviews of the Board’s and the CFPB’s activities related to diversity and inclusion, including both agencies’ establishment of an Office of Minority and Women Inclusion, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Office of Minority and Women Inclusion is responsible for all agency matters relating to diversity in management. Our reports made significant recommendations to enhance the agencies’ operations in these areas.
Finally, regarding our investigative program, we have been discussing with both the Board and the CFPB our investigative strategies so that we can enhance our investigations of potential impediments to the Board’s and the CFPB’s ability to carry out their supervisory and regulatory responsibilities over the entities they supervise. We have also increased our regional presence to engage directly with our agencies’ regional personnel and programs, namely, the 12 Federal Reserve Banks that supervise financial institutions under delegated authority from the Board and regional CFPB supervision staff. During this reporting period, I had the pleasure of opening three of our four planned Office of Investigations regional offices, in Miami, San Francisco, and Chicago. We expect that the fourth regional office, in New York City, will open later this year.
My thanks go to the Board and the CFPB, for their continued support of our efforts to improve the efficiency and effectiveness of their programs and operations, and to our staff, for their dedication to our mission and their exemplary work during this reporting period.
April 30, 2015