Fed Directs Examiners to Act Faster, Cut Duplicative Supervision

The Federal Reserve's Division of Supervision and Regulation issued an updated Statement of Supervisory Operating Principles directing examiners of all Board-supervised banking organizations to act more promptly on material safety-and-soundness risks and rely less on duplicative supervisory work, following an independent review that faulted supervisors' handling of Silicon Valley Bank.

The review found that Board and Reserve Bank supervisors knew or should have known by March 2022 that SVB was highly vulnerable to bond-portfolio losses and a deposit run, but did not act promptly or decisively to require it to reduce interest-rate or liquidity risk. The review blamed a "long-standing culture of excessive risk aversion and indecision" and decision-making by committee consensus.

The statement adopts a probability-and-severity framework for issuing matters requiring attention ("MRAs") and matters requiring immediate attention ("MRIAs"), and for taking enforcement actions, and commits not to criticize staff for reasonable, good-faith mistakes. It also (i) restores nonbinding "supervisory observations" by amending SR 13-13; (ii) reiterates that examiners of holding companies and of the U.S. operations of foreign banks must rely to the fullest extent possible on the work of the primary supervisors of those firms' depository subsidiaries, other than state member banks; (iii) halts horizontal reviews in the GSIB and large-bank portfolios unless the Deputy Director for Supervision finds the benefits outweigh the costs; (iv) requires reliance on satisfactory internal audit validations rather than duplicate testing of remediation; (v) bars examiners from discouraging the use of Federal Home Loan Bank liquidity; and (vi) requires MRAs and MRIAs to be written in plain, specific language.

Examiners may not delay terminating findings once deficiencies are fully remediated, or require "capstone" reviews of unrelated or non-material issues before ending an enforcement action. Self-identified deficiencies that a bank promptly begins remediating will presumptively draw only a supervisory observation. The Vice Chair for Supervision or a delegate may grant exceptions to the probability-and-severity standards "to the extent permitted by law." Separately, staff are directed to facilitate the early resolution of troubled banks to minimize long-term costs to the Deposit Insurance Fund, as contemplated under 12 U.S.C. 1823 note.

Banks may report noncompliance with the principles to their Reserve Bank's Head of Supervision or the Board's Deputy Director for Supervision. The statement supersedes an April 21, 2026 version.