Bank Holding Company Rating System — 2004-07-23 [04-16865]

The increased complexity of the U.S. banking industry has necessitated over time a shift in the focus of the Federal Reserve's supervisory practices for bank holding companies (BHCs), including financial holding companies (FHCs), away from historical analyses of financial condition toward more forward looking assessments of risk management and financial factors. While the emphasis on risk management has been well established in the Federal Reserve's supervisory processes for BHCs of all sizes, this emphasis is not reflected in the primary components of the current BHC supervisory rating system, BOPEC (Bank subsidiaries, Other subsidiaries, Parent, Earnings, Capital). This document proposes a revised BHC rating system that emphasizes risk management; introduces a more comprehensive and adaptable framework for analyzing and rating financial factors; and provides a framework for assessing and rating the potential impact of the nondepository entities of a holding company on the subsidiary depository institution(s).