On November 5, the Fed released its draft final notice and memo after it finalized revisions to the large financial institution rating system and the framework for the supervision of insurance organizations (Frameworks). The current Frameworks evaluate firms based on three components: (i) capital planning and positions; (ii) liquidity risk management and positions; and (iii) governance and controls. Each component receives a rating on a four-point non-numeric scale: broadly meets expectations; conditionally meets expectations; deficient-1; or deficient-2. A bank holding company or supervised insurance organization with more than one deficient-1 rating or with a deficient-2 rating for any component, will not be considered “well managed.”

As previously covered by InfoBytes, the Fed last solicited public comment on revisions to the Frameworks in July 2025. The Fed received 10 comments from industry groups, public interest groups, academics, congressional members, and other interested parties. Supporters argued that the changes would better reflect a firm’s ability to maintain safe and sound operations, reduce compliance costs, and encourage innovation. Opponents raised concerns about increased risks to safety and soundness and competitive disadvantages for community banks. The final notice also removed a reference to reputational risk in the Framework.