Request for Comment on Bank Holding Company Rating System - District Notice 04-53 - Dallas Fed

Federal Reserve Bank of Dallas2200 N. PEARL ST.DALLAS, TX 75201-2272August 17, 2004Notice 04-53TO: The Chief Executive Officer of eachfinancial institution and others concernedin the Eleventh Federal Reserve DistrictSUBJECTRequest for Comment onBank Holding Company Rating SystemDETAILSThe increased complexity of the U.S. banking industry has necessitated over time ashift in the focus of the Federal Reserve’s supervisory practices for bank holding companies(BHCs), including financial holding companies (FHCs), away from historical analyses offinancial condition toward more forward-looking assessments of risk management and financialfactors. While the emphasis on risk management has been well established in the FederalReserve’s supervisory processes for BHCs of all sizes, this emphasis is not reflected in theprimary components of the current BHC supervisory rating system, BOPEC (Bank subsidiaries,Other subsidiaries, Parent, Earnings, Capital).This document• Proposes a revised BHC rating system that emphasizes risk management;• Introduces a more comprehensive and adaptable framework for analyzing andrating financial factors; and• Provides a framework for assessing and rating the potential impact of thenondepository entities of a holding company on the subsidiary depositoryinstitution(s).For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the FederalReserve Bank of Dallas: Dallas ...