Senior/Line/Risk-Management Governance Standards
Building on prior proposed guidance establishing board-of-directors management standards1 and a new large-BHC rating system2 the FRB has proposed supervisory principles that would govern senior and line management along with the independent risk management (IRM) function. Taken together and given their broad direct and indirect scope, these new Fed standards redefine key elements of Federal Reserve supervisory policy, diminishing reliance on compliance with specific capital, liquidity, or other rules in favor of robust stress-test results and robust adherence to examiner expectations. This more subjective standard should reduce direct burden on boards of directors, but increase it across the rest of senior-, line-, and risk- management officers.