Doran Jones reported on June 6 that, as a result of the Silicon Valley Bank failure, the Fed had been subject to criticism for its failure to act on the problems it uncovered and that that they would ensure that supervisors would be policing banks more aggressively.  A recent report from Bloomberg confirmed that the Fed is following up on its promise by issuing private warnings to banks with assets in the range of $100 billion to $250 billion, including Citizens Financial Group, Fifth Third Bancorp, and M&T Bank Corp. These confidential notices cover critical safety and soundness areas, including capital, liquidity, technology, and regulatory compliance.

These confidential notices, known as “matters requiring attention (MRA)” and “matters requiring immediate attention (MRIA)” reflects a significant increase in regulatory scrutiny.  Doran Jones anticipates that this scrutiny will eventually trickle down to smaller regional and community banks.

MRIAs and MRAs typically require a bank’s board to reply to the Fed and provide a timeline to correct any shortcomings. Bank regulatory experts noted the importance of the timeline requirement. Gary Bronstein, head of the financial services team at Kilpatrick Townsend & Stockton, told Bloomberg “We’re going to start seeing the supervisory staff impose tight deadlines on resolution,”. “If banks are not resolving these issues pretty quickly, then we’ll see enforcement actions.”

Regulators have often allowed banks time to address MRAs, and even MRIAs, recognizing that they often have limited resources to address what are often complex issues, but that is clearly no longer the case.  Regulators expect banks to apply the resources by whatever means necessary to maintain safety and soundness and regulatory compliance.

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Banks should be prepared to address existing regulatory findings and known issues that are likely to result in an MRA or MRIA.  It is often more efficient and cost-effective to bring in outside risk and compliance expertise that can quickly analyze and address known gaps and uncover other potential issues before the regulators do.

Contact us to learn how a strategic partnership with Doran Jones can provide you with cost-effective solutions by leveraging our expertise with these and other critical risk and compliance functions.