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Financial Institution Supervision
|Sarah J. Dahlgren (bio)
Executive Vice President
Acting on delegated authority from the Board, the Financial Institution Supervision Group (FISG) of the Federal Reserve Bank of New York supervises the financial institutions that are subject to the Boardís supervision and are located in the Second Federal Reserve District, which includes New York state, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands.
The objectives of supervision are to evaluate, and to promote, the overall safety and soundness of the supervised institutions (micro-prudential supervision), the stability of the financial system of the United States (macro-prudential supervision), and compliance with relevant laws and regulations. The supervision mandate is carried out through a combination of methods, including the conduct of both on-site and off-site examinations and inspections; continuous supervision performed by supervisory teams dedicated to a specific supervised institution; review of reports and data; and coordination with other supervisory agencies.
Our Supervisory Approach
Under this risk-focused approach, activities identified as those likely to pose the highest risk to the firm receive the most scrutiny and FISG examiners employ the assistance of specialists with skills tailored to these specific activities.
In addition, FISG evaluates the adequacy of a firmís capital and liquidity. The presence of strong capital and liquidity buffers promotes the objective of enhancing a firmís ability to absorb losses and withstand financial stress. Especially in the case of a large bank holding company, it can contribute to the stability of the financial system as a whole.
FISG coordinates its supervisory activities with those of other federal and state authorities, including the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Commodities Futures Exchange Commission, the FDIC and state banking and insurance regulators, who have primary supervisory responsibility over certain types of entities.
The Examination Process
Examiners also continuously monitor, review and analyze financial, managerial, and organizational data as well as periodic reports filed by firms. Continuous monitoring is designed to develop and maintain an understanding of strategic business developments, changes in the firmís risk profile, and associated policies and practices. The scope of continuous monitoring is adjusted, as appropriate, based on specific events, such as (i) significant changes in inherent risk, control processes or key personnel; (ii) concerns regarding the adequacy of controls; (iii) the absence of sufficiently recent exams; or (iv) market events.
Findings from examinations or continuous monitoring can lead to further engagement with the firm in an effort to improve the firmís processes, financial condition or the safety of the financial market. In some cases, findings may also lead to an enforcement action against the firm.
The Supervisory Teams
For large complex institutions, the team is led by a senior supervisory officer, who, in addition to leading the development and execution of the supervisory program for the firm, is responsible for interactions with the board of directors and executive management.
The team's specialists interact directly with members of the firmís management across various business lines and control functions, including the control functions responsible for managing credit risk, market risk, liquidity risk, operational risk, and legal and compliance risk.