Earlier today, the Federal Reserve released an updated version of its Statement of Supervisory Operating Principles (the “Revised Statement”).[1] The Statement of Supervisory Operating Principles sets out Vice Chair for Supervision Michelle Bowman’s policy priorities and expectations for implementation by Federal Reserve supervisory staff. The Revised Statement, dated April 21, 2026, supersedes the previous version dated October 29, 2025 (the “Original Statement”).[2] The adoption of the Revised Statement follows Randall Guynn assuming the role of Director of Supervision and Regulation at the beginning of March.
The Revised Statement makes several key changes to the Original Statement:
- The addition of a statement indicating that the primary objectives of supervision are to: (1) “Identify as early as possible significant threats to the safety and soundness of a Board-supervised banking organization and to U.S. financial stability and any violation of law or regulation,” and (2) “Encourage or direct each Board-supervised banking organization to take appropriate, proportionate action to eliminate or mitigate those threats and violations as promptly as possible.”
- Adjusting the language in the Original Statement that had indicated that Federal Reserve supervisory staff should not conduct their own examination of a depository institution for which the OCC or FDIC is the primary federal supervisor unless it is “impossible” for the Federal Reserve to rely on the examination of the primary supervisor. The Revised Statement removes the “impossibility” standard and provides greater latitude for Federal Reserve staff to conduct examinations “if the depository institution’s primary state or federal supervisor does not provide the Board with timely access to all supervisory information that is in the possession of the primary federal or state supervisor.”
- Clarifying changes to the language describing the circumstances in which Federal Reserve staff should rely on a determination by a banking organization’s internal audit function in assessing remediation of a deficiency underlying a matter requiring attention (“MRA”) or matter requiring immediate attention (“MRIA”).
- The inclusion of new criteria regarding the issuance of MRAs, MRIAs, and enforcement actions.
- Specifically, the Revised Statement states that Federal Reserve supervisory staff may issue an MRA or MRIA “based on a threat to the safety and soundness” of a supervised firm “only if they determine in good faith that a deficiency exists that, if not remediated in a timely manner, would create a significant probability of significant harm to the financial condition of the banking organization or has resulted in significant actual harm to the financial condition of the banking organization.”
- Supervisory staff are directed to utilize “currently available tools to estimate the probability and severity of a particular deficiency to the financial condition of Board-supervised banking organizations in good faith.”
- This “good faith” standard “will be satisfied only if the supervisory staff has sufficient evidence that a particular estimate of probability and severity is plausible.”
- Notably, the statement indicates that, if a firm “self-identifies a deficiency that would otherwise satisfy the standard for an MRA or MRIA based on a threat to safety and soundness and promptly starts remediating that deficiency in a manner determined to be reasonable” by staff, the deficiency “will presumptively be treated as giving rise to a supervisory observation rather than an MRA or MRIA.”
- The Revised Statement also notes that Federal Reserve staff may issue an enforcement action based on an unsafe or unsound practice by a supervised firm “only if they determine that an act or failure to act by the banking organization would, if not remediated in a timely manner, create an abnormal probability of abnormal harm to the financial condition of the banking organization or has resulted in abnormal actual harm to the financial condition of the banking organization.” Abnormal is defined as “substantially higher than normal or significant.”
- The Vice Chair for Supervision or her delegate “may grant exceptions to the probability and severity standards … to the extent permitted by law.”
- The Revised Statement notes that the Federal Reserve is in the “process of developing various quantitative tests to determine whether a realized or unrealized loss would constitute significant harm to the financial condition of a Board-supervised banking organization as a matter of supervisory policy,” and outlines two tests that “would clearly be sufficient as a matter of supervisory policy to establish significant harm to a banking organization’s financial condition.”
- The two tests involve estimated loss that “would cause or has caused the banking organization to: be less than well capitalized as determined on a historical cost or fair-value basis; or suffer an outflow of a significant amount of cash or other liquid assets within a short period of time.”
- The inclusion of a statement that banking organizations supervised by the Federal Reserve are “encouraged to report a failure to comply with any of the supervisory operating principles contained in this statement by contacting the Head of Supervision of the relevant Reserve Bank or the Board’s Deputy Director for Supervision.”
- A statement that Federal Reserve staff should “facilitate the early resolution of troubled insured depository institutions to minimize the long-term cost to the Deposit Insurance Fund.”
- The inclusion of a new directive that there should not be any material differences between the supervisory criticisms conveyed in a final exit meeting for an examination and those contained in the written examination report.
A redline of the Revised Statement against the Original Statement is available at the following link: /SullivanCromwell/_Assets/PDFs/General/Statement-of-Supervisory-Operating-Principles-2026.pdf.
S&C’s memo to clients on the Original Statement is available here: /insights/memo/2025/November/Federal-Reserve-Releases-Internal-Memo-Outlining-Changed-Approach-Bank-Supervision.