, soundness, and financial stability. tiered regulatory and supervisory experience the federal reserve also takes a tiered approach to supervision. we organize the firms we supervise into portfolios based predominately, although not exclusively, on asset size. we have four such groups : ( 1 ) community banking organizations, which are generally those with $ 10 billion or less in total assets ; ( 2 ) regional banking organizations, which have total assets between $ 10 billion and $ 50 billion ; ( 3 ) large banking organizations, which have total assets over $ 50 billion but are not among the largest and most complex banking organizations ; and ( 4 ) firms overseen by the large institution supervision coordinating committee ( liscc ), which are the largest and most complex banking organizations. 1 as with tiered regulation, our tiered supervision is intended to take into account differences in business models, risks, relative regulatory burdens, and other salient considerations. where specific regulatory goals for the different portfolios vary, the supervisory programs reflect those differences. and even where the goals are similar across portfolios, supervisory programs should nevertheless take account of the differences among the firms in the four portfolios. in general, we shape our supervisory expectations for each portfolio by considering the increase in safety and soundness that we are likely to achieve through a specific practice or requirement, in light of the regulatory costs for the banking organizations in the portfolio and the impact that the stress or failure of those institutions would likely have on credit intermediation, the deposit insurance fund, and financial stability. so, for example, there are heightened expectations with regard to corporate governance for large banking organizations that are not applied to regional or community banking organizations. among other areas, the federal reserve expects the boards of directors of these larger firms to set direction and oversight for revenue and profit generation, risk management, and control functions ; to ensure that senior management has the expertise and level of involvement required to manage core business lines, critical operations, banking offices, and other material entities ; and to maintain a corporate culture that emphasizes the importance of compliance with laws, regulation, and consumer protection. while strong corporate governance is important at all banking organizations, it is vital at large banking organizations, given that their systems and operations are typically much broader and more for more information supervision. htm. on the liscc, see http : / / federalreserve. gov / bankinforeg / large - institution - bis central bankers ’ speeches complex than those of the smaller

daniel k tarullo : application of enhanced prudential standards to bank holding companies testimony by mr daniel k tarullo, member of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 19 march 2015. * * * chairman shelby, ranking member brown, and other members of the committee, i appreciate the opportunity to testify on the threshold in section 165 of the dodd - frank wall street reform and consumer protection act ( dodd - frank act ) for application of enhanced prudential standards to bank holding companies. in my testimony this morning i will try to provide, from a regulator ’ s perspective, some context for the committee ’ s consideration of this subject by explaining how the federal reserve has differentially implemented prudential regulations based on the size, scope, and range of activities of banking organizations, as well as how we have organized our supervisory portfolios. in both our supervisory and regulatory practices, we are pursuing a tiered approach to prudential oversight. regulatory differentiation in the dodd - frank act traditionally, statutes creating prudential regulatory requirements or authorities generally took what might be termed a unitary approach. that is, the statutes simply made a particular requirement or authority applicable to banks or banking organizations generally, with few clear distinctions based on the characteristics of the regulated entities. the federal banking agencies did adopt some regulations with requirements that applied only to larger institutions. and, as i will describe a bit later, through supervisory practice they administered some statutory requirements differently based on the size of banks and the scope of their activities. but the starting point was a more or less similar set of statutory requirements. the dodd - frank act explicitly broke with this traditional approach by creating prudential requirements that vary with the size or systemic importance of banking organizations. of particular importance is the dodd - frank act emphasis on financial stability, both in markets generally and with respect to the largest financial firms, which had been associated with market perceptions that they were too big to fail. the law created some new authorities for financial regulators and instructed regulators to use authorities they already had to put in place regulations to contain systemic risk. as to regulations applicable to individual firms, the dodd - frank act creates thresholds for various prudential regulations at asset sizes of $ 1 billion, $ 10 billion, and $ 50 billion. of special note is that section 165 of the dodd - frank act requires the federal reserve to establish enhanced prudential standards for