The Federal Reserve Board finalized revisions to its supervisory rating framework for large bank holding companies, changing how component results feed into the overall supervisory assessment and the determination of whether a firm is “well managed.” The final approach is substantially similar to the proposal issued in July and is intended to make ratings better reflect overall firm condition and align more closely with other supervisory rating systems. The Board’s Large Financial Institution rating framework, introduced in 2018, assesses whether firms have sufficient financial and operational strength to operate safely and soundly and comply with laws and regulations across a range of conditions. It comprises three components, capital, liquidity, and governance and controls, each graded on four levels: broadly meets expectations, conditionally meets expectations, deficient-1, and deficient-2. Under the revised framework, a firm with no more than one deficient-1 component rating will be considered well managed, while any deficient-2 component rating will continue to result in a not well managed determination, which carries limitations on certain activities and acquisitions. Similar changes were also finalized for the Board’s supervisory rating framework for insurers it regulates. The revisions take effect 60 days after publication in the Federal Register.
Federal Reserve Board 2025-11-05
Federal Reserve Board finalizes changes to large bank holding company supervisory ratings and updates the well managed standard
The Federal Reserve Board finalized revisions to its supervisory rating framework for large bank holding companies, aligning it more closely with other systems and refining the criteria for a "well managed" designation. The revised framework, similar to the July proposal, assesses capital, liquidity, and governance, with specific conditions for deficient ratings. Similar changes apply to the Board's supervisory framework for insurers.