” from our stress testing process. 1 similarly, we simplified our capital during ccar, supervisors make a “ qualitative assessment ” of a firm ’ s capital planning process. formerly, firms with a deficient capital planning process were subject to an objection by the federal reserve of the firm ’ s capital plan, which resulted in limitations on the firm ’ s capital distributions. the board removed this requirement in 2019 because of the progress firms had made in improving their capital planning practices. see 84 fed. reg. 8953 ( march 13, 2019 ). - 6framework through the introduction of a stress capital buffer ( scb ) requirement. 2 how should supervision evolve in light of the new stronger and more comprehensive regulatory edifice we now have in place? an example : after we emerge from the covid event, we will no longer need to maintain temporary limitations on capital distributions by large banks and can instead rely on the regulatory capital framework that the board established earlier this year — the scb. among its many advantages, under this framework we will no longer need to review periodic requests from banks for additional capital distributions. instead, the scb sets a clear and explicit capital target that firms must stay above at all times. as a result, firms can rely on that scb target to define how much capital they can distribute in any given calendar quarter. this is a better process because it is more predictable and more efficient. that said, we may still want to conduct a limited review of the capital plans of banks to give some insight into risks that the stress test might not fully pick up. for example, if a firm enters a new line of business and does not yet have a good framework for assuring its managers can measure the results of that business in light of its risks, supervision can detect that shortcoming and the firm can help address this vulnerability before the uncaptured risks materialize. similarly, our new long - term stable funding rule — the nsfr rule — provides objective standards to address risks that fall outside the boundaries of our short - term funding requirement — the lcr rule — and thereby takes some pressure off supervisors to monitor these risks on a case - by - case basis. however, the lcr and nsfr do not address all sources of liquidity risk, and poor dynamic liquidity risk management can lead to a firm ’ s failure just as the scb uses the results of the annual stress tests to determine how much capital firms are required to hold. as a

always the question of whether ratings are consistent when administered in different circumstances by different people. i would like to - 13 explore approaches to ratings that would yield similar results when those ratings are assigned by different staff and across different points in time. one way to do this would be to subject ratings to the scrutiny of multiple parties with a range of perspectives and experiences. this is how the public rating agencies, such as moody ’ s, fitch, and s & p, approach ratings, through ratings committees. and this is how we approach rating the largest, most systemically important firms through the liscc, where a committee that includes independent federal reserve experts has an opportunity to provide feedback on the ratings of the firms in the liscc portfolio. designing this process so that it is reliably consistent and predictable for all banks is an area we should study further. another method we could explore is to dedicate some portion of our exam work to reviewing compliance with concrete regulatory standards, such as some of our liquidity riskmanagement standards, where the standards lend themselves to that approach. and we would commit in advance to giving the findings from these reviews a particular weight in our ratings discussions. i think this overall model — where the supervisory assessment is vetted by a federal reserve committee with independent views, or at least reviewed by staff within the federal reserve outside the normal assessment process, and where we explicitly take compliance with regulatory standards into account in assigning ratings — could be a good one for helping to promote greater consistency and predictability, especially in cases where the subject matter lends itself to such standards. another process improvement involves guidance. at times, we find it helpful to elaborate on our regulatory standards through supervisory guidance. some risk areas that don ’ t easily lend themselves to regulation, such as certain kinds of risk management, also can benefit from supervisory guidance. in both cases, we can enhance the predictability of our supervisory process by inviting public feedback on any applicable guidance or other supervisory standards. - 14 for example, in connection with a recent rule on our capital planning requirements, we invited public feedback on our outstanding supervisory guidance on capital distributions for firms of all sizes. in the recent past, we also have sought comment on our approach to risks associated with governance and internal controls. we will continue to look for feedback on our guidance. all of these approaches will improve the predictability of our ratings and also improve their legitimacy. in terms of substantive changes to show the public that ratings are consistent and predictable,