Growth & Resiliency

In 2024, firms should anticipate increasing supervisory attention to:

• Funding Plans: Regulators will assess whether firms’ contingency funding plans:
  • Are actionable over a range of possible stress scenarios.
  • Provide for stability and a range of funding sources that can be accessed in adverse  circumstances.
  • Consider the FRB discount window as a funding source, and if so, whether operational  readiness to borrow has been established and maintained.
• Liquidity Risk Management: Regulators will increase expectations around:
  • Models (e.g., strength, exposures), uninsured deposits, and held-to-maturity  securities.
  • Liquidity management and reporting (e.g., shortened windows for daily and intraday  capabilities, expanded information reporting).
  • Long-term debt requirements (including an interagency proposal to expand required  holdings of long-term debt to certain banks and holding companies (e.g., $100+  billion)).
  • Transactions with affiliates (and compliance with Regulation W) impacting capital and  liquidity positions.
• Interest Rate Risk Management: Ongoing supervisory focus on interest rate risk  management amid a changing interest rate environment, credit tightening, and quality  and concentration risks, including stress testing and scenario analysis.

• Planning: Multiple regulators will expand expectations to require more firms under  their supervisory authority (e.g., $50+ billion banks, Category II and III banking  organizations, SEC-registered clearing agencies) to engage formal, detailed resolution  planning and plan submissions (i.e., inclusive of the planning process, execution  strategy, and consideration of areas of “potential vulnerability” to resolvability).
• Bridging: Banking regulators will focus on operational resiliency bridge planning,  including the strategy for formation and stabilization of the bridge depository institution,  as well as how operations could continue through resolution or separation from parent  and/or affiliates and any associated activities.

Firms should anticipate that regulators will be considering:

• M&A: Continuing scrutiny of anticompetitive M&A activity, as well as a potentially expanded scope  of bank merger reviews (e.g., to include nonbank entities such as fintechs) and more timely reviews  (e.g., shortened timeframes). Deal activity in 2024 will be dictated largely by macroeconomic  conditions, including interest rates and inflation and tight lending standards, in both banking and  capital markets.
• Tech and Operational Resiliency: Evolving and growing focus on elements of tech and operational  resiliency, including deployment of new technologies (e.g., automated systems, predictive analytics,  cloud); data governance (e.g., privacy, use, sharing); identification of critical operations/core business  lines/material entities and business continuity planning; threat detection/risk monitoring including third  party relationships; concentrations and interdependencies; accountability (e.g., roles, responsibilities,  escalation protocols).
• Examination Scrutiny: Deficiencies identified by regulators, coupled with perceived repeat offenses  or failures to remediate them, will drive close examination of the size and complexity of firms and  evaluation of whether management has reached its “limits.”
• Remediation: Consideration and prescription of escalating options for “remediation” of supervisory  concerns and identified deficiencies (e.g., enforcement actions, changing management, implementing  action plans, imposing fines, capping growth, divesting business lines/activities) with the intent of  simplifying and “meaningfully changing business incentives.”