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GAO-25-108047 1 (May 9, 2025)

handle is hein.gao/ptyon0001 and id is 1 raw text is: c)IAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Comptroller General Washington, DC 20548 of the United States May 9, 2025 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 Chair Powell: The purpose of this letter is to call your personal attention to three areas based on GAO's past work and five priority recommendations, which are enclosed.1 Additionally, there are 11 other GAO open recommendations that we will continue to work with your staff to address. We are highlighting the following areas that warrant your timely and focused attention. Specifically: Bank supervision. The 2023 bank failures raised questions about whether the banking regulators took sufficient action to ensure that financial institutions promptly addressed supervisory concerns, such as weak liquidity and risk management practices. In 2024, we found that the Board of Governors of the Federal Reserve System had not finalized a rule that would promote earlier remediation of issues at certain financial institutions. Implementing this recommendation would help lessen the risk of insolvency among certain financial institutions and protect financial stability. Financial services regulations. Leading practices for rulemaking call for assessing the potential and actual effects of proposed and final rules, such as costs and benefits. However, in July 2024, we found that the Federal Reserve's policies and procedures for conducting regulatory analysis had not been updated since 1994 and did not fully align with leading practices, including for documenting the analysis performed. Policies that align its regulatory analysis with leading practices could help the Federal Reserve ensure its rules justify regulatory action and represent the most cost-beneficial option, as we recommended. In addition, we found the Federal Reserve lacked implemented policies and procedures for systematically performing retrospective reviews of its rules. We recommended that the Federal Reserve adopt such policies and procedures. Doing so could help the Federal Reserve evaluate whether rules are achieving their intended effects and avoiding unintended economic consequences. 1GAO considers a recommendation to be a priority if, when implemented, it may significantly improve government operations-for example, by realizing large dollar savings; eliminating mismanagement, fraud, and abuse; or making progress toward addressing a high-risk or duplication issue. GAO-25-108047 Page 1

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