On July 15, the Fed published a notice and request for comment in the Federal Register on revisions to its Large Financial Institution (LFI) rating system and the Insurance Supervisory Framework. The rating system governs depository institution holding companies significantly engaged in insurance activities. The proposal would revise the criteria for a firm to be considered “well managed” under the frameworks, allowing firms with at least two component ratings under “Broadly Meets Expectations” or “Conditionally Meets Expectations,” and no more than one Deficient-1 component rating to qualify.
The LFI Framework defined “well managed” as having sufficient financial and operational resilience to maintain safe and sound operations through a range of conditions, including stressful conditions. Under the Bank Holding Company Act, financial institutions which meet the “well managed” standard could be considered as financial holding companies, which would permit them to engage in more nonbanking activity than if not. Comments on the proposed changes must be received by August 14.
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