The Federal Reserve issued guidance aimed at ensuring the use of consistent standards by supervisors and smaller banks to assess the banks’ regulatory ratings.
Bank examiners, as part of routine examinations, score banks on criteria including capital adequacy, asset quality and liquidity.
“Examiners should consider an upgrade of a banking organization’s supervisory rating when there is a demonstrated improvement in the organization’s financial condition and risk management practices, and where improvement is likely to continue,” the Fed said in a letter to officers in charge of supervision at regional Fed banks.
“The Federal Reserve will evaluate the strength of core financial components, overall risk management, and board of directors’ oversight in assessing whether an upgrade is warranted.”
The U.S. central bank said the guidance applies to all institutions supervised by the Fed with total assets of $10 billion or less.
The Fed said the guidance was being issued to assure that regulatory scores are upgraded “in a timely manner” when the banks have made “requisite progress.”
To contact the reporters on this story: Craig Torres in Washington at firstname.lastname@example.org;
To contact the editor responsible for this story: Christopher Wellisz at email@example.com