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Board of Governors of the Federal Reserve System
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Government Performance and Results Act Annual Performance Report

Supervisory and Regulatory Function

Strategic Goals

Safety and soundness: Promote a safe, sound, competitive, and accessible banking system and stable financial markets

Consumer protection: Administer federal consumer financial protection laws that fall within the Board's statutory authority, including those designed to encourage regulated financial institutions to help meet the credit needs of their local communities

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Annual Performance Objectives

  1. Financial stability and risk containment: Promote overall financial stability by identifying emerging financial problems and consumer protection issues so that significant crises can be averted or addressed in a timely and meaningful manner
  2. Accessibility of the banking system: Provide a safe, sound, competitive, and accessible banking system through comprehensive and effective supervision of U.S. banks, bank and financial holding companies, savings and loan holding companies, foreign banking organizations, and related entities
  3. Financial system efficiency: Enhance efficiency and effectiveness by addressing the supervisory function's procedures, technology, and resource allocation
  4. Effective oversight of financial institutions: Promote the compliance of domestic and foreign banking organizations (those under Federal Reserve supervision) with relevant laws, rules, regulations, policies, and guidelines through a comprehensive and effective supervision program
  5. Consumer protection: Participate in, and shape the national dialogue on, consumer protection in the financial services arena
  6. Relationship building: Promote, develop, and strengthen effective communications and collaborations between the Board, the Federal Reserve Banks, and other agencies and organizations

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Performance Metrics

See table 1 for the seven metrics, targets, and results for the one-year period.

Table 1. Performance metrics: Supervisory and regulatory function

Metric Target Results
Identify and resolve supervisory and financial problems in a timely manner, working alone or in cooperation with other authorities. No specific target.
    A central element of the Dodd-Frank Act is the requirement that the Federal Reserve and other financial regulatory agencies adopt a so-called macroprudential approach to supervision and regulation--that is, an approach that supplements traditional supervision and regulation of individual firms or markets with explicit consideration of threats to the stability of the financial system as a whole. The act also created a new Financial Stability Oversight Council, where membership comprises a diverse group of federal and state financial regulators to coordinate the government's efforts to identify and respond to systemic risks. In addition, the Federal Reserve assumed new responsibilities for the supervision of thrift holding companies as well as oversight of nonbank financial firms, and certain payment, clearing, and settlement utilities that the council designates as systemically important.
Minimize net losses to the Deposit Insurance Fund (DIF) associated with state member banks, consistent with trend data on prevailing economic conditions. DIF losses from state member banks not to exceed premiums paid into the DIF by state member banks.
    During the current performance period, estimated losses of $7.2 billion exceeded state member bank premiums of $1.7 billion, resulting in a net loss to the DIF of $5.5 billion.
Complete financial institution examinations as required by statute and consistent with the efficient allocation of resources based on review of supervisory data, experience, and an assessment of current risks to the financial industry. 98 percent of examinations conducted in accordance with 12- or 18-month statutory requirements; subsequent supervisory follow-up performed on those institutions with a less-than-satisfactory rating as required by Federal Reserve guidelines.
    99 percent of examinations were conducted in accordance with the requirements.
Complete reports of examinations within established time frames. Issue at least 90 percent of reports within 60 days of the examination-closeout meeting.
    BSR: 94 percent of examinations were conducted in accordance with the established time frames
    C&CA: 94 percent of consumer protection examination reports (Consumer Compliance and Community Reinvestment Act) were issued within the established time frames.
Conduct consumer compliance and CRA examinations in accordance with Board and statutory requirements. Complete 80 percent of compliance and CRA examinations of state member banks within Board-established time frames.

    100 percent of compliance and CRA examinations were completed within Board-established time frames.

Improve the accessibility of information about community economic development so that community leaders are better able to make informed choices about strategies and resources to promote neighborhood stabilization and revitalization. Establish ability to use new delivery channels to effectively communicate consumer protection information to the public, community advocates, and industry.

    Created a series of videos documenting successful neighborhood stabilization strategies in Cleveland, Detroit, and Phoenix. The videos debuted at the 2011 Community Affairs Research Conference during Governor Duke's keynote remarks.

    Published Putting Data to Work: Data-Driven Approaches to Strengthening Neighborhoods, a user guide comprised of case studies that demonstrate how communities with limited capacity, as well as communities with very sophisticated data platforms, can make strategic investment decisions.

    Launched "Connecting Communities," a communications platform for sharing promising practices related to various community development issues (in partnership with the Federal Reserve Bank of St. Louis). Sessions in 2011 focused on the impact of foreclosure on credit scores and microfinance as a catalyst to increasing economic opportunity in low- to moderate-income communities.

Conduct outreach; sponsor conferences to promote community development in underserved areas; and provide technical assistance -- all to support an ongoing dialogue with financial institutions, government agencies, and communities to address barriers and challenges to credit and capital access. Leverage System community affairs resources and contacts to provide key economic policymakers with a periodic report of current economic conditions, barriers to credit, and community development trends in low- and moderate-income communities as well as underserved communities.

    Executed a national assembly hosted at the Board in partnership with the Federal Reserve Bank of Atlanta and the Ewing Marion Kauffman Foundation entitled, "Small Business and Entrepreneurship during an Economic Recovery." Research papers presented at the assembly noted the importance of new and small firms to the vitality of the economy, the unique challenges experienced by female and minority entrepreneurs, and the need for more timely and relevant small business data.

    Coordinated an interagency initiative to identify barriers to, and opportunities for, economic growth in American Indian communities. Information gleaned from this series of regional meetings will serve as a framework for a national summit and as a springboard for integrated research, policy, and economic development strategies in 2012.

    Executed a national conference in partnership with the Federal Reserve Bank of San Francisco that examined the role of social impact investing on community development.

    Executed a Housing Policy Forum at the Board that brought together leading experts to examine key issues pertaining to the future of the housing market and lessons to be learned from the recent crisis.

    Executed the "Strategic Data Use to Stabilize Neighborhoods" conference in partnership with the Federal Reserve Bank of Richmond. Participants at the conference explored creative uses of data and technology to promote public and private investment in transitional communities.

    Coordinated the Community Data Initiative, a community affairs officers' collaborative research project. Eleven Reserve Banks regularly administer web-based surveys to gather systematic and relevant market intelligence on community conditions and emerging issues. The results of the Board's quarterly survey of NeighborWorks America's affiliates and grantees provide the Reserve Banks with a national perspective for their regional polls.

    Executed the Community Development Research Conference in partnership with the Federal Reserve Bank of San Francisco. The biennial conference drew more than 350 participants and included a number of recognized experts across a range of disciplines. The conference was preceded by an internal System researchers' symposium where Federal Reserve staff discussed research efforts, shared results, and exchanged ideas on emerging research and policy issues.

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Operational Processes and Resources Required to Meet Goals

Operational Processes, Skills, and Technology

The supervisory and regulatory function plays a key role in carrying out some of the Board's core responsibilities. Through the supervision and regulation of banking institutions and holding companies, the staff in this function work to ensure the operation of safe and sound financial institutions, financial stability, and the fair and equitable treatment of consumers in their financial transactions.

Although the terms bank supervision and bank regulation are often used interchangeably, they actually refer to distinct, though complementary, activities. Bank supervision involves monitoring, inspecting, and examining banking organizations to assess their condition and their compliance with relevant laws and regulations. Information gained from bank examinations, reviews of loan portfolios, and oversight of lending terms and activity is a vital input to the monetary policy decisionmaking process. Similarly, the micro- and macro-economic research conducted at the Board provides valuable support to the supervisory and regulatory function.

When an institution is found to be in noncompliance with laws and regulations, the Federal Reserve may use its supervisory authority to take formal or informal enforcement action. Bank regulation entails making and issuing specific regulations and guidelines governing the structure and conduct of banking, under authority of legislation. The Federal Reserve shares supervisory and regulatory responsibilities with the CFPB, FDIC, FSOC, NCUA, OCC, SEC, various state banking agencies, and, for the international operations of U.S. banks and the U.S. operations of foreign banking organizations in the United States, various foreign supervisory authorities.

This structure has evolved partly as a result of the complexity of the U.S. financial system, with its many kinds of depository institutions and numerous chartering authorities, and partly as a result of federal and state laws and regulations designed to remedy problems that the U.S. commercial banking system has faced over its history.

Funding and Resources

The majority of the resources used to achieve the strategic goals are reported in the divisions of Banking Supervision and Regulation and Consumer and Community Affairs, whose combined 2011 expenses totaled $97.4 million. The amount includes direct costs for 446 positions. In addition, these divisions draw significantly on resources from the Board's research divisions, its Office of Financial Stability Policy and Research, and Reserve Bank staff for economic and quantitative analyses related to the supervision of large financial firms and financial stability.

The Division of Banking Supervision and Regulation is responsible for (1) keeping the Board informed about current and prospective developments in bank supervision and banking structure; (2) coordinating the System's bank supervision and examination activities, including development of policy, collection of data, preparation of hardware and software standards as well as requirements for software development, and training; (3) processing applications for prior consent to form or expand bank holding companies or to make other changes in banking structure; and (4) administering certain regulations.

The Division of Consumer and Community Affairs focuses on the Board's responsibilities in the area of consumer protection, including (1) preparing and interpreting certain consumer regulations within the Board's statutory authority, and (2) assisting and monitoring the community affairs activities of the System.

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Validation and Verification of Measured Values

Data on the number of applications processed (filed by financial institutions), the associated time frames, and related statistical measures are gathered, provided to the Board, and posted on the Board's website. Surveillance data gathered from routine reports are used to implement risk-based examinations, and the data are made available to the public through Uniform Bank Performance Reports and Bank Holding Company Performance Reports.8 Certain data submitted pursuant to the Home Mortgage Disclosure and Community Reinvestment acts are also made available to the public and to financial institutions.

Data associated with the financial exposure of each financial institution supervised by the Federal Reserve are used to develop risk profiles that, in conjunction with supervisory ratings from earlier examinations, are used to determine the frequency and timing of safety-and-soundness examinations. Similarly, financial data, risk profiles, and consumer compliance and CRA ratings data are used to determine the frequency and timing of consumer compliance and CRA examinations. Automated tools allow examiners to gather data required for the examinations from off-site locations, speeding the process and reducing on-site examination time and the associated burden and costs to the institution and the System, while also compiling data for monetary policy purposes.

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8. These reports are available on the FFIEC website at to text

Last update: July 10, 2012

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