A recent Wall Street Journal article looked into how U.S. regulators, in recent weeks, have been focusing in on Wall Street boardrooms as the U.S. government has continued to intensify oversight of financial markets. The Federal Reserve Bank and other bank regulators are holding more frequent meetings with individual directors at some of the largest banks in the country. In these meetings, regulators have demanded detailed minutes as well as other official documents from board meetings in order to better oversee and regulate commercial bank operations. In some instances, it has been reported that some bank directors have met more with regulators in 2015 than with their own full boards. However, different banks have different processes. At Goldman Sachs Group Inc., the bank’s lead independent director meets monthly with its primary Fed supervisor. Morgan Stanley allows Fed supervisors to sit in on a portion of each board meeting, where they can listen and ask questions.
In addition, Washington has honed in more on regulators and review information that directors get from bank management. They have been asking about succession planning and inquiring about directors, as well the potential downsides of certain transactions. The Fed and OCC were quoted recently as saying that board oversight helps make the financial system safer, but directors have complained that they are being asked to take too much responsibility.
What do we make of this growing emphasis on bank regulation following the financial crisis? Is it making a difference?