Supervision in Brief

As we come out of more than two years of weathering the effects of the pandemic, Twelfth District banking and economic conditions continue to show signs of recovery. However, we are monitoring financial conditions as the economy normalizes while noting a changing interest rate environment and potential headwinds from geopolitical tensions and uncertainty around the […]

We are ready to restart examination activity and have issued interagency guidance for safety and soundness (SR 20-15). This guidance recognizes that external events such as COVID-19 can have an adverse impact on a financial institution’s condition that may not be reflective of management’s efforts to mitigate these risks. The interagency guidance instructs examiners to consider the unique, evolving, and potential long-term nature of the issues confronting institutions.

As we address the unique and challenging circumstances of the coronavirus (COVID-19), the Federal Reserve Bank of San Francisco is focused on carrying out our important responsibilities through continuity of operations, while being mindful of the safety and well-being of everyone affected. Our top priority is the health and well-being of our employees, communities, and constituents. We will continue to communicate relevant information as soon as it becomes available, and we stand ready to support our employees, member banks and customers in any way we can.

The overall financial health of the industry has allowed bankers and bank supervisors alike to better assess and understand a number of increasing nonfinancial risks, such as cyber security, cloud usage, and data governance. To expand our knowledge and deepen our thinking in this area, our fintech team recently partnered with FinRegLab to host a Data Symposium, The Role of Consumers in the Data Ecosystem. The Symposium was a valuable step toward establishing a shared vision on the importance of protecting consumer financial data and supporting a strong ecosystem of innovation, competition, and collaboration among traditional financial institutions and fintech firms.

This issue of Supervision in Brief discusses three topics that arose during a recent Western Bankers Association roundtable at our Los Angeles branch. While banking conditions remain very positive overall, our conversations at the roundtable revealed that banking and financial services still face a number of challenging and complex policy issues. These include CECL adoption, Community Reinvestment Act reform, and the California Consumer Privacy Act of 2018. Taken individually, each of these issues is a key factor in the life of a modern financial institution. Taken together, they serve as a reminder that positive banking conditions, no matter how good, do not resolve hard policy challenges.

This issue of Supervision in Brief commends John Williams, outgoing San Francisco Fed president and chief executive officer, for his leadership and legacy as he prepares to assume the presidency of the New York Fed. We also provide details on the San Francisco Fed’s presidential search process and offer an online resource to follow the progress. There is a lot of talk about the recent financial regulatory reform law, so we summarize the key points for bankers. Randal Quarles joined the Federal Reserve Board late last year as its vice chairman for supervision. We highlight his recent remarks on important monetary policy and regulatory topics. Finally, we share the latest issue of First Glance 12L, our quarterly report of 12th District banking conditions.

This issue of Supervision in Brief summarizes the latest economic and banking conditions within the 12th District. We note strong but moderating growth in jobs, housing prices, loans, and improvements in earnings. We also feature recent discussions in Community Banking Connections on CRE concentrations and risk management, and highlight commentary on bank efficiency efforts and their effects on long-term viability. Finally, we remind bankers about several Fed outreach activities, and recap the joint Federal Reserve-Conference of State Bank Supervisors Community Banking in the 21st Century research and policy conference.

Tracy Basinger was appointed executive vice president and director of the Financial Institution Supervision and Credit Division at the Federal Reserve Bank of San Francisco on July 1, 2017. In this special first issue of Supervision in Brief, her quarterly newsletter to bankers in the 12th District, she provides highlights on her background and offers views of some of the important issues facing financial institutions.