governor michelle w. bowman, ” news release, october 24, 2023, https : / / www. federalreserve. gov / newsevents / pressreleases / bowmanstatement - 20231024. htm. - 7supervisory process, and in issuing “ guidance ” that is technically non - binding but often operates as a de facto requirement. the development and implementation of new supervisory approaches and of guidance largely escape rigorous scrutiny due to the lack of formal procedural requirements for its development. this is true even though the expectations created by guidance can be equally or more impactful to banks than rules. for example, the examination process often produces supervisory findings overemphasizing non - core and non - financial risks, highlighting issues like it and operational risk, management, risk management, and internal controls. 7 these issues have filtered down from examinations and findings at the largest banks to the smallest, raising the question of appropriateness of application for smaller firms. in the supervisory process, we should guard against being distracted by less relevant issues. the prevalence of supervisory findings related to nonfinancial metrics is in part driven by the time it may take to remediate certain issues. however, we should also scrutinize whether this trend is indicative of our supervisory focus — beyond financial risk and toward non - financial risks and internal processes — and whether that shift is appropriate. we should also be aware that due to the vast diversity in business models, size, and geographic footprint among banks, we should not expect every firm to follow the same standards and must be careful to prevent forcing uniformity through “ grading on a curve. ” this risk can be exacerbated through any type of horizontal - like reviews. the supervisory findings made during the examination process inform bank ratings, which can have follow - on effects like limiting options for mergers and acquisitions as noted in the board ’ s most recent supervision and regulation report, nearly half of the 1, 340 supervisory findings for community banks were cited in these categories, more frequently than credit risk as of the fourth quarter of 2023. see board of governors of the federal reserve system, supervision and regulation report, ( washington : board of governors, may 2024 ) 22, figure 16, https : / / www. federalreserve. gov / publications / files / 202405supervision - and - regulation - report. pdf. - 8 ( m & a ) activity ; raising the cost

), " the supervisory capital assessment program, " speech delivered at the federal reserve bank of atlanta 2009 financial markets conference, held in jekyll island, ga., may 11. the average tier 1 common ratio as of june 30, 2009, has been adjusted to reflect the completion of citigroup's exchange offer in september 2009. see group of twenty ( 2009 ), " leader's statement : the pittsburgh summit, " press release, september 25. tendency of current capital requirements to promote credit growth in booms and to restrict credit during downturns, the federal reserve has supported international efforts to develop capital standards that would be countercyclical. countercyclical standards would require firms to build larger capital buffers in good times and allow them to be drawn down – but not below prudent levels – during more - stressed periods. we also are working with our domestic and international counterparts to develop capital and prudential requirements that take account of the systemic importance of large, complex firms whose failure would pose a significant threat to overall financial stability. options under consideration include assessing a capital surcharge on these institutions or requiring that a greater share of their capital be in the form of common equity. for additional protection, systemically important institutions could be required to issue contingent capital, such as debt - like securities that convert to common equity in times of macroeconomic stress or when losses erode the institution's capital base. the crisis also highlighted weaknesses in liquidity management by major firms. short - term secured funding of long - term, potentially illiquid assets – through repurchase agreements and asset - backed commercial paper conduits, for example – became unavailable or prohibitively costly during the worst phases of the crisis, both here and abroad. in response, the federal reserve helped lead the basel committee's development of revised principles for sound liquidity risk management, which in the united states are being incorporated into new interagency guidance that reemphasizes the importance of rigorous stress testing to determine adequate liquidity buffers. 6 together with our domestic and international counterparts, we are also considering quantitative standards for liquidity exposures similar to those for capital adequacy, with the goal of ensuring that internationally active firms can fund themselves even during periods of severe market instability. with supervisory encouragement, large banking organizations have, for the most part, already significantly increased their liquidity buffers and are strengthening their management of liquidity risk. in addition to insufficient