Supporting Outreach and Engagement across the Federal Reserve System’s Supervision Function

This article was originally published in the Community Banking Connections publication in September 2024.

Public outreach is an important tool used by the Federal Reserve System to support its overall mission. In fact, the Federal Reserve requires all functional areas across its entire enterprise to support initiatives that “increase transparency and the public’s understanding of the Federal Reserve through effective communication, outreach, and engagement.”See Board of Governors of the Federal Reserve System, Strategic Plan 2024–27, Objective 5.5, available at www.federalreserve.gov/publications/files/2024-2027-gpra-strategic-plan.pdf.

In addition to this general outreach requirement, the Strategic Plan of the Board of Governors directs the Federal Reserve’s Supervision function to “promote transparency and public outreach to better inform supervisory and regulatory responsibilities.” This includes engaging key stakeholders to provide “education and timely guidance” on regulations impacting banking institutions as well as on compliance matters.See Strategic Plan 2024–27, Objective 2.4.

Although Supervision staff and leadership at the Reserve Banks and the Board of Governors actively engage in outreach, the Federal Reserve Bank of St. Louis plays a unique role in supporting the Federal Reserve’s outreach goals through a variety of national programs and educational resources. Additionally, the St. Louis Fed operates several local outreach programs that support the informational needs of institutions headquartered in the Federal Reserve’s Eighth District.

The Importance of Outreach

So why is it important for bank supervisors and regulators to engage in outreach to the general public, to supervised entities, and to depository institutions that use Federal Reserve services? In a word, outreach is about transparency.

The U.S. banking system is constantly evolving to meet the financial and credit needs of its retail and business customers. A dynamic banking system requires a dynamic regulatory system that supports responsible innovation while promoting an overall safe and sound banking system that protects consumers. In this system, regulations and supervisory approaches need to adapt alongside changes in consumer needs, technology, and business practices.

Frequent and timely outreach by bank supervisors ensures that supervised institutions, bank customers, and the general public are aware of changes to banking laws, regulations, and supervisory approaches. Changes in regulations can impact, among other things, the way banking products and services are offered to customers, how a bank is evaluated by state and federal bank supervisors during an examination, and a bank’s opportunities for growth and expansion.

Effective outreach enables banking supervisors to communicate these changing expectations while creating feedback mechanisms by which entities and individuals affected by these changes can offer insights and perspectives on their impact.

The Federal Reserve believes that being clear and transparent about expectations about new regulations promotes a strong and stable banking system that is better able to adapt to changes with minimal disruptions to U.S. households and businesses.

The St. Louis Fed’s Support of the System’s National Outreach Programs

Ask the Fed

One of the ways the Federal Reserve ensures that depository institutions are aware of previously announced policy changes is through the St. Louis Fed’s Ask the Fed webinar program.The program is available at www.askthefed.org.

Ask the Fed was created by the St. Louis Fed during the 2008 financial crisis as a simple teleconference program enabling the Federal Reserve to communicate with banks, nearly in real time, to ensure supervisory expectations for banks were understood.

Since that time, the program has been upgraded, and it has been used increasingly to spread the word about policy changes. The St. Louis Fed continues to manage the program on behalf of the Federal Reserve System.

Today, Ask the Fed webinars generally feature Federal Reserve subject matter experts who discuss a variety of topics of importance to banking and financial institutions. Presenters share their views on risk topics including third-party risk management, cybersecurity, commercial real estate, accounting, and liquidity.

Ask the Fed is also frequently used by the Federal Reserve to spread the word about specialized programs such as the Paycheck Protection Program Liquidity Facility (PPPLF), a temporary program created in 2020 in the wake of the COVID-19 pandemic, and the Bank Term Funding Program (BTFP), an emergency liquidity program created under section 13(3) of the Federal Reserve Act following the regional banking failures in spring 2023.

The Emergency Communications System (ECS)

While the Ask the Fed program connects banking institutions with important supervisory and regulatory information and perspectives, the St. Louis Fed’s Emergency Communications System, or ECS, enables the Federal Reserve and other state and federal banking regulatory agencies to communicate directly with supervised institutions during a natural disaster or an operational outage emergency.

The ECS was created in 2008 as a repository for business contact information that could be used by state and federal regulators to communicate with banking institutions during an emergency. The ECS pushes approved messages through multiple communications platforms to ensure that authorized users at banking institutions receive timely messages during times of crisis.

The ECS is managed by the St. Louis Fed on behalf of the Federal Reserve System and can be activated 24 hours a day, 365 days a year. In 2015, the Board of Governors expanded the program to include cyber emergency contacts in the ECS database of emergency contact information. Specifically, the Federal Reserve Board now requires all institutions supervised by the Federal Reserve to submit regularly updated contact information for individuals who “are capable of receiving and acting upon cyber emergencies.”See Supervision and Regulation letter 15-10/Consumer Affairs letter 15-8, “Expansion of the Federal Reserve’s Emergency Communications System,” available at www.federalreserve.gov/supervisionreg/srletters/sr1510.htm.

The ECS conducts periodic tests with all its registered institutions to ensure the validity of its contact information and the effectiveness of its operations.

The Competitive Analysis and Structure Source Instrument for Depository Institutions (CASSIDI)

Another way that the St. Louis Fed promotes transparency to banks and to the broader public is by offering tools and resources that improve understanding of how some regulatory decisions are made.

One such decision concerns the permissibility of a potential bank merger. Although the federal banking regulatory agencies and the Department of Justice weigh several factors when determining merger permissibility under antitrust laws, the impact of a merger on bank competition in local banking markets is an important input into that decision.

In 2006, the St. Louis Fed began offering the Competitive Analysis and Structure Source Instrument for Depository Institutions, or CASSIDI, toolThe CASSIDI tool is available at https://cassidi.stlouisfed.org/index. on its public website, allowing anyone interested in banking competition to understand the competitive effects of a potential bank merger. CASSIDI maintains a database of up-to-date information about Federal Reserve banking markets for all 12 Reserve Bank Districts along with information about the banking institutions and branches in those markets.

The tool enables quick calculation of preliminary, or pro forma, market shares for banks in each market and allows users to see areas of the country that might experience a competitive issue if a merger transaction between two banking entities were to be consummated. Although an analysis performed in CASSIDI does not represent the final decision on the permissibility of a merger, it does provide an important initial screen that can help potential merger partners understand where they might have competitive issues in obtaining regulatory approval for a merger.

The tool is updated throughout the year by a dedicated team at the St. Louis Fed to ensure that CASSIDI has the latest information on changes in the U.S. banking structure.

The Community Banking Research Conference and the Community Depository Institutions Advisory Councils

One final way that the Federal Reserve’s Supervision function promotes transparency is by engaging directly with key stakeholders to help them understand the impact of Federal Reserve policies on banks and consumers and to promote academic research that helps inform future policy.

Since 2013, the St. Louis Fed has served as the host site for the annual Community Banking Research Conference.For more information, see www.communitybanking.org. The conference, now in its 12th year, is sponsored by the Federal Reserve System, the Conference of State Banking Supervisors (CSBS), and the Federal Deposit Insurance Corporation (FDIC). The conference coalesces input from domestic and international researchers on community banking, as well as community bankers and regulators.

For example, leadership from the Federal Reserve, the FDIC, and the CSBS regularly deliver keynote speeches during the annual proceedings. The conference also features a community bank keynote speaker each year. Community bankers are represented on each research panel to provide practical perspectives on the research being presented alongside a more traditional academic moderator who provides feedback on each research paper. Community bankers are also part of a capstone panel at the conclusion of the conference. The panelists speak with an FDIC moderator synthesizing the key elements from the conference while discussing emerging issues in community banking and banking regulation.

Since the conference’s inception in 2013, the St. Louis Fed’s Supervision Division has chaired the conference’s planning committee and has actively worked with all stakeholders to ensure that the conference attracts high-quality research and incorporates a diverse range of perspectives into each conference. Although the annual conference is an in-person event, it is streamed live on www.communitybanking.org to ensure that those interested in the proceedings can tune in from anywhere in the world.

The St. Louis Fed’s Supervision Division oversees the operations of the Eighth District’s Community Depository Institutions Advisory Council, or CDIAC. Each Reserve Bank maintains a 12-member CDIAC that meets at least biannually to share insights and perspectives with Reserve Bank and Supervision leadership. The CDIACs were created in 2011 by the Board of Governors to provide a regular mechanism for gathering information on the banking, regulatory, and economic conditions facing smaller depository institutions (community banks and credit unions) across the United States. The chairs of the CDIACs in each of the 12 Reserve Bank Districts travel to Washington, D.C., two times per year to meet with Federal Reserve Board members and staff to share the perspectives gleaned from their local meetings. These perspectives are shared more broadly with the public through meeting records that are posted to the Federal Reserve Board’s website.The meeting records are available at www.federalreserve.gov/aboutthefed/cdiac.htm.

Conclusion

The Federal Reserve has made significant investments in time and talent to enhance public understanding of its mission through public outreach, engagement, and education. The Federal Reserve’s Supervision function both supports the Federal Reserve’s broader outreach mission and directs outreach that enhances an understanding of the banking system and banking supervision. The St. Louis Fed oversees several of the major national outreach programs that allow for critical outreach and engagement with banking institutions across the United States.

There are other Federal Reserve national supervision outreach programs and initiatives as well, such as the Community Banking Connections Community Banking Connections is available at www.cbcfrs.org. and the Consumer Compliance Outlook publications,Consumer Compliance Outlook is available at https://consumercomplianceoutlook.org. the webinar series on consumer compliance topics,Outlook Live is available at https://consumercomplianceoutlook.org/outlook-live/. and the training program.Basics for Bank Directors is available at www.kansascityfed.org/banking/basics-bank-directors/.

Individual supervision divisions at the Reserve Banks also create their own custom outreach programs to engage directly with their supervised institutions.

This network of national and local programs not only ensures that the Federal Reserve’s Supervision function meets its outreach obligations under the Federal Reserve’s strategic plan but also enables the Federal Reserve System to leverage the subject matter expertise from across its districts to ensure that all supervision-related outreach, conducted nationally or locally, benefits from the latest thinking on supervisory and regulatory matters.

The partnership between each Reserve Bank and Board supervision staff is vital to the success of all our outreach programs and ensures that we can continue to quickly understand the opportunities and challenges facing the banking industry and tailor our outreach and engagement strategies accordingly.

I encourage all banking institutions to register for the Federal Reserve’s national supervision outreach programs and to connect with their local Reserve Bank’s supervision divisions to make sure they’re aware of local opportunities for ongoing engagement and education.

Notes

1. See Board of Governors of the Federal Reserve System, Strategic Plan 2024–27, Objective 5.5, available at www.federalreserve.gov/publications/files/2024-2027-gpra-strategic-plan.pdf.
2. See Strategic Plan 2024–27, Objective 2.4.
3. The program is available at www.askthefed.org.
4. See Supervision and Regulation letter 15-10/Consumer Affairs letter 15-8, “Expansion of the Federal Reserve’s Emergency Communications System,” available at www.federalreserve.gov/supervisionreg/srletters/sr1510.htm.
5. The CASSIDI tool is available at https://cassidi.stlouisfed.org/index.
6. For more information, see www.communitybanking.org.
7. The meeting records are available at www.federalreserve.gov/aboutthefed/cdiac.htm.
8. Community Banking Connections is available at www.cbcfrs.org.
9. Consumer Compliance Outlook is available at https://consumercomplianceoutlook.org.
10. Outlook Live is available at https://consumercomplianceoutlook.org/outlook-live/.
11. Basics for Bank Directors is available at www.kansascityfed.org/banking/basics-bank-directors/.