Release Date: July 23, 2004
For immediate release
The Federal Reserve on Friday requested public comment on proposed revisions that would better align the bank holding company rating system with current supervisory practices.
The proposed rating system incorporates an increased emphasis on risk management, a more flexible and comprehensive evaluation of financial condition, and an explicit determination of the likelihood that the nondepository entities of a holding company will have a significant negative impact on the depository subsidiaries.
Under the revised rating system, each holding company would be assigned
a composite rating (C) based on an evaluation and rating of three essential
components of an institution's financial condition and operations:
risk management (R); financial condition (F); and potential
To provide a consistent framework for assessing risk management, the risk management component is supported by four qualitatively rated subcomponents: competence of board and senior management; policies, procedures, and limits; risk monitoring and management information systems; and internal controls.
The financial condition component is supported by four numerically rated subcomponents: capital adequacy; asset quality; earnings; and liquidity.
The proposal also contains guidance on implementation of the revised rating system based on holding company size and complexity.
Comment on the proposed revisions is requested within sixty days of publication in the Federal Register, expected shortly.
The proposal is attached.
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Last update: July 23, 2004