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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF BANKING

SUPERVISION AND REGULATION

SR 16-4

March 3, 2016

Revised, February 17, 

2021

Revision History: In February 2021, this guidance was revised to apply to domestic bank 

holding companies and savings and loan holding companies (including insurance and 

commercial savings and loan holding companies) with total consolidated assets of less than $100 

billion and bank holding companies with total consolidated assets of less than $50 billion that are 

owned or controlled by a foreign banking organization. In addition, the guidance was revised to 

clarify that Reserve Banks generally conduct abbreviated off-site reviews of small, noncomplex 

holding companies with total consolidated assets of up to $3 billion, rather than $1 billion.

TO THE OFFICER IN CHARGE OF SUPERVISION 

AT EACH FEDERAL RESERVE BANK

SUBJECT: Relying on the Work of the Regulators of the Subsidiary Insured Depository 

Institution(s) of Bank Holding Companies and Savings and Loan Holding Companies 

with Total Consolidated Assets of Less than $100 Billion

Applicability: This letter applies to the supervision of all domestic bank holding companies and 

savings and loan holding companies with total consolidated assets of less than $100 billion, and 

bank holding companies with total consolidated assets of less than $50 billion that are owned or 

controlled by a foreign banking organization.

The Federal Reserve is issuing this letter to explain its expectations for its examiners’ 

reliance on the work of the regulators of insured depository institution subsidiaries (IDI 

regulators1

) in the supervision of bank holding companies (BHCs) and savings and loan holding 

companies (SLHCs).2

 The letter presents separate tailored supervisory approaches for 

1 For the purpose of this SR Letter, “IDI regulator” is defined as the prudential bank regulator(s) other than the 

Federal Reserve, which includes the Federal Deposit Insurance Corporation, the Office of the Comptroller of the 

Currency, and the state banking supervisory authorities.

2 This letter is limited to safety-and-soundness supervision. For holding company supervision with respect to 

consumer compliance, Reserve Bank safety-and-soundness and consumer compliance staff review information from 

the Consumer Financial Protection Bureau (CFPB) and the safety-and-soundness regulator of the IDI to inform 

Federal Reserve supervisory plans and evaluations. Primarily for IDIs with total consolidated assets over $10 billion 

(and their affiliates), the CFPB shares supervisory responsibility with the IDI regulator with respect to various 

federal consumer protection laws.
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community banking organizations (CBOs), which are defined as companies with total

consolidated assets of $10 billion or less, and for regional banking organizations (RBOs), which 

are defined as companies with total consolidated assets between $10 billion and $100 billion. 

Background

The principle of relying on the work of the IDI regulators is a well-established tenet of 

Federal Reserve supervisory policy and is required by statute.3

 BHC and SLHC supervision 

focuses on the Federal Reserve’s assessment of the consolidated organization based on a review 

of parent and nonbank activities, together with an assessment of the organization’s IDI 

subsidiaries. When assigning Federal Reserve supervisory ratings to BHCs and SLHCs where 

the Federal Reserve is not the IDI regulator, the Federal Reserve will rely to the fullest extent 

possible on the assessment of the IDI as reflected in the examination work performed by the IDI 

regulator(s). This letter outlines how the Federal Reserve implements such reliance consistent 

with its supervisory responsibilities.

The Federal Reserve tailors its supervision of holding companies based on the size of the 

organization, complexity, and the degree of systemic risk that the organization poses to the U.S. 

financial system and the economy, including the deposit insurance fund. Within this framework 

of tailored supervision, the Federal Reserve focuses on the goals of both macroprudential and 

microprudential supervision for systematically important institutions, and microprudential 

supervisory goals for BHCs and SLHCs with total consolidated assets of less than $100 billion.

4

The BHC Act and the HOLA authorize the Federal Reserve to conduct examinations of 

BHCs and SLHCs, and certain subsidiaries of such holding companies, to obtain information 

needed to assess the safety and soundness of supervised financial institutions.5 At the same time, 

the Dodd-Frank Act requires the Federal Reserve, to the fullest extent possible, to rely on the 

reports and supervisory information from other regulatory agencies to avoid duplication of 

examination activities, reporting requirements, and requests for information. Supervisory 

overlap at the level of the IDI can be avoided through reliance on the examination work 

performed by the IDI regulators, as each agency follows similar rules and supervisory guidance 

when assessing the financial and managerial condition of an insured depository institution. 

3 Refer to sections 5(c)(1)–(2) of the Bank Holding Company Act of 1956 (BHC Act) and sections 10(b)(2) and 

(b)(4) of the Home Owners’ Loan Act (HOLA), as amended by section 604 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (Dodd-Frank Act). 12 U.S.C. 1844(c)(1)–(2); 12 U.S.C 1467a(b)(2), (b)(4).

4 While recognizing that a large number of smaller BHCs and SLHCs simultaneously experiencing financial distress 

could have a harmful effect on a local economy’s availability of credit or on certain sectors or regions of the U.S. 

economy, institutions that are not systemically important do not have the size or degree of interconnectedness to the 

financial system to individually pose macroprudential risk. 

5 12 U.S.C. 1844(c)(2); 12 U.S.C. 1467a(b)(4)(A). This information pertains to the nature of the operations and 

financial condition of the holding company and its subsidiaries; the financial, operational, and other risks within the 

holding company system that may pose a threat to the safety and soundness of the holding company or of any 

depository institution subsidiary of the holding company, or the stability of the financial system of the United States; 

the systems of the holding company for monitoring and controlling any such risks; and the holding company’s and 

subsidiaries’ compliance with federal law, other than in the case of an insured depository institution or functionally 

regulated subsidiary.
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Consistent with this mandate to rely on the work of the IDI regulators, the IDI regulators 

and the Federal Reserve have the mutual responsibility to foster the timely sharing of

information, including their risk-focused supervisory analysis and conclusions. Moreover, the 

sharing of information is necessary so that Federal Reserve staff have an adequate basis for 

relying on the IDI regulators’ work. While exercising the Federal Reserve’s responsibility to 

assess and assign appropriate supervisory ratings to the consolidated holding company, the 

microprudential supervision framework for smaller BHCs and SLHCs provides the Federal 

Reserve with the flexibility to rely on the assessment of an IDI’s condition by another regulator.

Relying on the Work of IDI Regulators for RBOs 

The Federal Reserve supervises RBOs using a program of continuous oversight which is 

characterized by a series of targeted examinations during the annual supervisory cycle, a roll-up 

examination at the end of the cycle, and continuous monitoring between examination events 

during the cycle.

1. Taking into account a holding company’s complexity, risk profile, and condition, the 

Federal Reserve will rely to the fullest extent possible on the work of the IDI regulators 

to supplement its own supervisory work regarding the consolidated holding company and 

its nonbank subsidiaries.

2. Federal Reserve staff will promote the sharing of information with the IDI regulators 

throughout the supervisory cycle, which will foster collaborative interagency 

relationships. Federal Reserve staff and the IDI regulators generally may participate on 

each other’s inspections and examinations to support and complement each other’s work 

as necessary. Through ongoing dialogue and exchange of supervisory documents and 

information, Federal Reserve staff are expected to:

• Understand the IDI regulators’ risk assessment and supervisory plan for each IDI, 

to inform the Federal Reserve’s evaluation of consolidated holding company risk 

and to support development of the Federal Reserve’s supervisory plan for the 

holding company;

• Understand the IDI regulators’ examination work, including the scope, basis for, 

and support of conclusions reached, and the goal of any supervisory action; 

• Communicate to the IDI regulators the Federal Reserve’s supervision goals and 

approach with respect to the holding company and any subsidiaries not subject to 

the supervision of IDI regulators; and

• Use all information made available from the IDI regulators to reach conclusions 

regarding the consolidated holding company’s overall condition and to assign 

appropriate Federal Reserve supervisory ratings.

3. Federal Reserve staff should verify that the Federal Reserve’s supervisory ratings of the 

consolidated holding company are adequately supported by information that is timely and 

complete, including the information received from the IDI regulators.
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4. Federal Reserve staff will scale their supervisory approach, including the review of and 

reliance on the IDI regulators’ work, according to the complexity,

6 risk, and condition of 

the consolidated organization, and to the timeliness of information available from the IDI 

regulators. For noncomplex holding companies with satisfactory supervisory ratings, 

Federal Reserve supervisory ratings should heavily rely on the IDI regulators’ work for 

IDI subsidiaries exhibiting the following characteristics: 

• CAMELS Composite 1 or 2;

• Low or moderate risk profiles;

• Stable financial condition;

• Satisfactory management practices and an associated satisfactory Management 

component rating; and 

• IDI regulator examination reports issued within the past year. 

In these situations, the Federal Reserve expects to limit its supervisory work to verify that 

the holding company can serve as a source of strength to, and the non-bank subsidiaries 

do not pose a threat to, the safety and soundness of the IDI(s). Thus, Federal Reserve 

staff will likely need to perform only limited analysis outside of the required annual onsite holding company inspection of the parent and nonbank subsidiaries. In addition, this 

analysis will be supplemented by the Federal Reserve’s continuous monitoring process. 

In other situations, the Federal Reserve will scale its supervisory approach, including 

performing more detailed monitoring of a consolidated holding company’s internal 

management information systems, internal audit, and loan review reports, depending on 

the company’s complexity, risk, condition of the consolidated organization, and 

timeliness of information available from the IDI regulator. For example, a holding 

company with the following characteristics is a candidate for closer Federal Reserve

supervision to ensure the conclusions reached by the IDI regulators remain a valid basis 

for assigning the supervisory ratings to the consolidated holding company:

• The IDIs examination reports are not current;

7

• The Composite rating for the holding company or any of its IDI subsidiaries is 

less than satisfactory; or

• The holding company has deteriorating financial or risk trends that are not 

reflected in the most current IDI regulators’ examination reports. 

6 The Federal Reserve distinguishes between complex and noncomplex holding companies by evaluating a number 

of factors, including: the size and structure of the company; the extent of intercompany transactions between IDI 

subsidiaries and the holding company or its non-depository subsidiaries; the risk, scale, and complexity of activities 

of any non-depository subsidiaries; and the degree of leverage at the holding company, including the extent of debt 

outstanding to the public. Companies are also designated “complex” if material risk management processes for the 

holding company and its affiliates are consolidated at the parent company.

7 For the purpose of this guidance, RBO IDI examination reports that are not current are defined as reports older 

than one year, measured from the mailing date of a IDI regulator’s report to the start date of the Federal Reserve 

supervisory evaluation.
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5. If Federal Reserve staff do not have an adequate basis for relying on the IDI regulators’ 

supervisory findings, the Federal Reserve will work to resolve information gaps with the 

IDI regulators.

8

 

Relying on the Work of IDI Regulators for CBOs 

The Federal Reserve’s approach to the supervision of holding companies with total 

consolidated assets of $10 billion or less is primarily described in SR letter 13-21, “Inspection 

Frequency and Scope Requirements for Bank Holding Companies and Savings and Loan 

Holding Companies with Total Consolidated Assets of $10 Billion or Less.” Reserve Banks, in 

the vast majority of cases, conduct abbreviated off-site reviews of small, noncomplex holding 

companies with total consolidated assets of up to $3 billion upon receipt of examination reports 

from the IDI regulator of the lead subsidiary IDI. These Reserve Bank reviews assess activities 

conducted outside of the subsidiary IDI and rely substantially on the findings of the IDI regulator

to evaluate the overall condition of the holding company. 

For larger CBO holding companies, Reserve Banks conduct point-in-time on- or off-site 

reviews that are coordinated with, or closely follow, on-site examinations of the lead subsidiary 

IDI by its IDI regulator. The Reserve Bank reviews of larger CBO holding companies are 

targeted toward assessing parent company and nonbank activities and their potential effect on the 

safety and soundness of the subsidiary IDI. The Reserve Bank evaluates the condition, 

performance, and prospects of the subsidiary IDI based on the conclusions of the IDI regulator

and does not duplicate the work of the other regulator. 

Contact for Questions

Questions regarding this letter may be directed to: 

• BHCs: Keith Coughlin, Manager, (202) 452-2056, or Nigel Ogilvie, Senior 

Supervisory Financial Analyst, (202) 973-5090, for Regional Banking Organizations; 

and Anthony Cain, Manager, (202) 912-4377, for Community Banking 

Organizations; or

• SLHCs: Karen Caplan, Manager, (202) 452-2710, or Andrea Nore, Supervisory 

Financial Analyst, (202) 475-6368.

In addition, institutions may send questions via the Board’s public website.9

Michael S. Gibson

Director

8 In rare and limited circumstances, where unresolved information gaps exist or reliance upon information obtained 

from the IDI regulators does not sufficiently support the Federal Reserve’s supervision of a consolidated holding 

company, the Federal Reserve would consider invoking its expanded examination authority under section 5(c)(2) of 

the BHC Act and section 10(b)(4) of the HOLA, as amended by section 604 of the Dodd-Frank Act, to examine IDIs 

for which the Federal Reserve is not the primary regulator. 12 U.S.C. 1844(c)(2); 12 U.S.C. 1467a(b)(4).

9 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.
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Cross Reference to:

• SR letter 13-21, “Inspection Frequency and Scope Requirements for Bank Holding 

Companies and Savings and Loan Holding Companies with Total Consolidated Assets of 

$10 Billion or Less”