GAO urges Fed to address outstanding recommendations

Orrick, Herrington & Sutcliffe LLP
Contact

Orrick, Herrington & Sutcliffe LLP

On June 3, GAO released a letter addressed to Fed Chair, Jerome Powell, to provide an update on the Fed's implementation of past GAO recommendations. As of May, GAO noted 13 open recommendations under the Fed. The Fed recently implemented two of the GAO’s four 2023 priority recommendations: one on stress test capital ratio estimates, and the other pertaining to risk tolerance articulation. GAO did not add any new priority recommendations for the Fed, but instead emphasized the importance of addressing the remaining two items: one related to blockchain technology and the other on financial technology.
 

Regarding the blockchain recommendation, GAO urged the Fed to work with other regulators to create a formal mechanism for identifying risks associated with this technology. GAO observed that the Fed had stated in April that it would participate in the Digital Asset Working Group to work with other agencies to address blockchain risks, but GAO recommended that the working group must include a “planning process for identifying and addressing” blockchain risks. Regarding the fintech partnerships recommendation, and in coordination with other federal financial regulators, GAO recommended clear communication on the appropriate use of alternative data in the underwriting process since fintech lenders “may analyze large amounts of alternative data on borrower characteristics … when determining borrowers’ creditworthiness.”

GAO’s letter also emphasized the importance of Congressional oversight to implement recommendations, suggesting strategies such as legislative incorporation and oversight hearings.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

© Orrick, Herrington & Sutcliffe LLP

Written by:

Orrick, Herrington & Sutcliffe LLP
Contact
more
less

PUBLISH YOUR CONTENT ON JD SUPRA NOW

  • Increased visibility
  • Actionable analytics
  • Ongoing guidance

Orrick, Herrington & Sutcliffe LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide