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GAO-22-105605 1 (2022-06-03)

handle is hein.gao/gaoner0001 and id is 1 raw text is: U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Comptroller General Washington, DC 20548 of the United States June 3, 2022 The Honorable Jerome H. Powell Chair Board of Governors of the Federal Reserve System 20th St. & Constitution Ave., NW Washington, D.C. 20551 Priority Open Recommendations: Board of Governors of the Federal Reserve System Dear Mr. Chairman: The purpose of this letter is to provide an update on the overall status of the Board of Governors of the Federal Reserve System's (Federal Reserve) implementation of GAO's recommendations and to call your personal attention to open recommendations that should be given high priority.1 In November 2021, we reported that on a government-wide basis, 76 percent of our recommendations made 4 years ago were implemented.2 The Federal Reserve's implementation rate was 81 percent. As of March 2022, the Federal Reserve had 15 open recommendations. Fully implementing the open recommendations could significantly improve the Federal Reserve's efforts to more effectively oversee risks to consumers and the safety and soundness of the U.S. banking system. Since our May 2021 letter, the Federal Reserve has not implemented our three priority recommendations, and we have not added any priority recommendations for this year. We ask your continued attention to the remaining three priority recommendations, which are related to financial technology (fintech) and stress testing. (See enclosure for the list of recommendations and actions needed to implement them.) Financial technology. In December 2018, we reported that the Federal Reserve, other federal banking regulators, and the Consumer Financial Protection Bureau (CFPB) needed to communicate the appropriate use of alternative data in the underwriting process with banks that engage in third-party relationships with fintech lenders. By implementing the recommendation, federally regulated banks may be better able to manage the risks associated with partnering with fintech lenders that use these data. Stress testing of banking institutions. In November 2016, we reported that the Federal Reserve needed to improve its ability to manage model risk and stress testing of banking institutions. These improvements included designing and implementing a process to 1Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies. They are highlighted because, upon implementation, they may significantly improve government operation, for example, by realizing large dollar savings; eliminating mismanagement, fraud, and abuse; or making progress toward addressing a high-risk or duplication issue. 2GAO, Performance and Accountability Report: Fiscal Year 2021, GAO-22-4SP (Washington, D.C.: Nov. 15, 2021). GAO-22-105605 Federal Reserve Priority Recommendations Page 1

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