##scc line to coincide with category i. the justification for this line - drawing is that category i firms pose the most systemic risk and require the most supervisory attention. in this state of the world, category ii and iii firms would remain subject to heightened supervisory standards that are commensurate with their risk profile. allow me to draw out what this approach could mean for the foreign banks that currently are in the liscc portfolio. since 2010, these four banks have significantly shrunk their u. s. footprint, and their u. s. operations are much less risky than they used to be. since 2008, the size of the liscc fbos ’ combined u. s. assets has shrunk by about 50 percent, and they have reduced the assets at their broker - dealers from a peak of $ 1. 9 trillion in 2008 to $ 340 billion today, a reduction of over 80 %. in addition, the estimated systemic impact of the liscc fbos today is much smaller than the u. s. gsibs. the average method 1 gsib score of the combined u. s. operations of the liscc fbos is less than a quarter of the average gsib score of the six nonprocessing u. s. gsibs. thus, if any foreign banks move out of the liscc portfolio based on this de - risking, they would move into the lfbo portfolio, where they would be supervised alongside other foreign and domestic firms with similar risk profiles. notably, this change in supervisory portfolio would have no effect on the regulatory capital or liquidity requirements that currently apply to the four liscc fbos. similarly, the change would not result in a loss of insight into the activities of these firms. in the same spirit, i think we should consider publishing the internal procedural materials that the fed uses to supervise the liscc firms, sometimes referred to as the program manual. the manual contains a description of the main supervisory processes for identifying risks and our approach for addressing them. publishing the manual would help the public and the banks better understand why we take the actions that we take as supervisors and would demystify some of our processes. if we took these two simple steps — defining liscc firms and publishing the program manual that governs our supervisory approach — it would go a long way in helping to make our supervisory practices more understandable and accessible without undermining supervisory effectiveness. let me now turn to

last category of proposals includes five areas of improvement that all relate to what we call the “ supervisory process " — how we go about conducting our responsibilities. like my other 5 / 7 bis central bankers'speeches suggestions, these are all rooted in common sense with a view toward maintaining firm and fair supervision. the first is to increase the ability of supervised firms to share federal reserve confidential supervisory information ( csi ) with employees, affiliates, service providers, and other government agencies to promote greater compliance with laws and facilitate the response to enforcement actions. we have received feedback that our rules can prevent banks from sharing csi with a wide variety of relevant parties who need to know this information in order to help the bank remediate identified supervisory issues. we issued a proposal last year to address this shortcoming in our csi rules, and i expect the board will be able to issue a final csi rule later this year. the second process improvement is having the board adopt a rule on how we use guidance in the supervisory process. i would expect the rule to state that the board will follow and respect the limits of administrative law in carrying out its supervisory responsibilities. in particular, consistent with the september 2018 interagency statement on guidance, we would affirm the sensible principles that guidance is not binding and “ non - compliance ” with guidance may not form the basis for an enforcement action ( such as a cease - and - desist order ) or supervisory criticism ( such as a matter requiring attention ( mra ) ). this rule would be binding on the board and on all staff of the federal reserve system, including bank examiners. the third and fourth process improvements relate to supervisory communication. the third improvement is to restore the “ supervisory observation ” category for lesser safety and soundness issues. this approach would provide supervisors with a tool — supervisory recommendations — for continuing to raise concerns about less pressing supervisory matters while focusing a bank ’ s attention on the most urgent matters, those that would receive mras. we removed this category of supervisory commentary in 2013 to better focus bank management on deficiencies found during the supervision process. ( by way of comparison, both the fdic and occ retained this tool. ) on reflection, i think there is value in supervisory observations. they allow an examiner to give notice about a supervisory concern even if that concern has not risen to the level of an mra. the fourth process improvement would be limiting future mras to violations of law, violations of regulation, and material safety and soundness issues.