Federal Reserve to Limit Supervisory Activities during Pandemic

March 25, 2020

Late in the afternoon of March 24, 2020, the Board of Governors of the Federal Reserve System issued a statement on supervisory activities during the COVID-19 pandemic.

Of most immediate interest to community banks and their holding companies, the Federal Reserve announced that it generally intends to cease all regular examination activity for all but the very largest financial organizations ($100 billion or more in assets). Examinations would still be conducted where critical to safety and soundness, consumer protection or otherwise required to address an urgent, immediate need.

Although bank examinations and holding company inspections are essential to the Federal Reserve’s role in ensuring the safety and soundness of the U.S. banking system, examinations and inspections require significant attention from bank and holding company management. The Federal Reserve’s decision to cease examinations and inspections during the COVID-19 pandemic will avoid distracting management from their key roles in working with their customers to mitigate the economic effects of the crisis.

The Federal Reserve will reassess its examinations approach in late April. Reports for recently completed (or nearly completed) examinations may still be issued, but will be reassessed to ensure that they remain relevant and appropriately prioritized under current circumstances. Further, the time periods for remediating existing supervisory findings will be extended by 90 days, unless the Federal Reserve notifies the organization of a different time period. Any examination activities will be conducted off-site until normal operations are resumed at the institution or holding company and the Federal Reserve Banks.

Finally, the Federal Reserve:

  • reiterated the position taken in the March 22, 2020 interagency statement encouraging financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19,
  • indicated it will focus on monitoring efforts to understand the challenges and risks that the current environment presents for financial institutions and their customers,
  • stated that its supervisory personnel will focus their monitoring efforts on operations, liquidity, capital, asset quality and impact on consumers, as well as, for large financial institutions, operational resiliency and potential impacts on broader financial stability.

In response to the coronavirus (COVID-19) pandemic, Lewis Rice has formed a COVID-19 Task Force which brings together subject matter authorities from various practice areas within the Firm who stand ready to assist our clients as they navigate these challenging and evolving issues. We will continue to monitor the myriad legal and other developments that may impact our banking clients and all of our business clients who have outstanding loans.

If you have legal questions related to COVID-19, please reach out to one of the authors above or another member of the Task Force.