On August 3, the Board of Governors of the Federal Reserve System (the FRB) proposed supervisory expectations for banking organization boards of directors that are intended, among other things, to better distinguish the roles and responsibilities of the board from those of management. The proposal would:

•  Establish five attributes of an effective board (applicable to large bank and savings and loan holding companies and systemically important nonbank financial companies, but not intermediate holding companies of foreign banking organizations):
   
  • setting clear, aligned and consistent direction regarding the firm’s strategy and risk tolerance;
  • actively managing information flow and board discussions;
  • holding senior management accountable;
  • supporting the independence and stature of independent risk management and internal audit; and
  • maintaining a capable board composition and governance structure.
     
• Include a review of existing supervisory guidance for all holding company boards to identify and revise or eliminate board expectations that go beyond the core board responsibilities.
• Provide that supervisory findings (MRAs and MRIAs) should generally be directed to senior management for corrective action, and should be directed to the board only if they relate to the board’s governance responsibilities or where senior management has failed to take remedial action.