WASHINGTON (11/24/14)--Two separate reviews of how it examines large banks have been launched by the Federal Reserve, the board of governors announced last week prior to Federal Reserve Bank of New York President William Dudley's appearance at a U.S. Senate subcommittee hearing.
The Fed's inspector general will examine two aspects of how the system examines large banks, while the board will conduct its own review of how it supervises the largest, most systematically important financial institutions.
Dudley came under fire from members of the Senate financial institutions and consumer protection subcommittee Friday. Sen. Elizabeth Warren (D-Mass.) said during the hearing that until action is taken, the entire financial system remains at risk.
"The Federal Reserve will continue to improve its supervision and regulation of financial Institutions," Dudley said in his testimony before the subcommittee. "We understand the risks of doing our job poorly and of becoming too close to the firms we supervise."
Federal Reserve General Counsel Scott Alvarez and Division of Banking Regulation and Supervision Director Michael Gibson requested a look into:
Alvarez and Gibson wrote a letter to Mark Bialek, inspector general for the Fed's Board of Governors, to make the request.
"Decision makers must have access to complete information and to the informed views of members of the examination team in order to reach appropriate decisions and supervisory conclusions regarding the examination of large banking organizations," the letter reads.
The board's own review will examine:
Dudley told the Senate subcommittee the review is expected to take several months.