March 25, 2020

Federal Reserve Announces Modifications to Supervisory Activities and Delayed Implementation of Changes to Payment System Risk Policy

2 min

To alleviate the burden on financial institutions in the face of economic disruption, the Federal Reserve Board announced changes to its supervisory approach and a delay in implementation of changes to the Federal Reserve Policy on Payment System Risk.

In its March 24 Statement on Supervisory Activities, the Federal Reserve introduced measures to temporarily reduce the focus on examinations and inspections. The Federal Reserve intends to cease all regular examination activity for supervised institutions with less than $100 billion in total consolidated assets. For institutions with more than $100 billion in total consolidated assets, however, the Federal Reserve will not cease examination activities, but defer a significant portion of them based on an "assessment of the burden on the institution and the importance of the exam activity to the supervisory understanding of the firm, consumer protection, or financial stability." Furthermore, the Federal Reserve will extend the time in which institutions must remediate existing and "non-critical" supervisory findings by 90 days. The Federal Reserve provided the caveat, however, that each of the newly announced modifications is subject to limitation, including for reason of financial soundness, consumer protection, or any other critical need.

The Federal Reserve additionally issued a notice delaying the implementation date for changes to Part II of the Federal Reserve policy on payment System Risk from April 1, 2020 to October 1, 2020. The April 2019 approved amendments relate to procedures for determining the net debit cap and maximum daylight overdraft capacity of a U.S. branch or agency of a foreign banking organization.