The Federal Reserve is taking another step toward easing regulation for big financial institutions, this time changing the definition for a “well-managed” bank.
Under a proposal put up for comment Thursday, the Fed would allow banks with one “deficient” rating to still be considered well-managed. The ratings run across three criteria: capital, liquidity and governance and controls.
Rules released in 2018 say any deficiencies prevent banks from meeting the management standard, which in turn prevents from them certain activities such as making acquisitions.
“In this way, the proposal would provide greater recognition of a firm’s overall condition in determining well-managed status,” Fed Vice Chair for Supervision Michelle Bowman said in a statement. “By addressing this mismatch between ratings and overall firm condition, the proposal adopts a pragmatic approach to determining whether a firm is well managed.”
However, the move drew an immediate rebuke from Bowman’s predecessor, Michael Barr, who said the idea would weaken important safeguards.
