Washington, D.C. -- United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to Federal Reserve (Fed) Chairman Jerome Powell regarding potential changes to the Fed's bank supervision process involving Matters Requiring Attention (MRAs), critical tools that bank examiners use to communicate violations of law and other areas of risk to financial institutions. Senator Warren expressed concern that these changes would weaken bank supervision and harm consumers. The senator's letter comes the same day Chairman Powell testifies before the Senate Banking Committee.

As a part of its supervisory functions, the Fed regularly conducts examinations of banks, and MRAs are an important tool for bank examiners to identify safety and soundness issues and ensure compliance with relevant banking laws. In the past, MRAs have been used to address issues such as troubling sales practices across the industry that became apparent in the wake of the Wells Fargo scandal, and cybersecurity risks to financial institutions. However, in January, Fed Vice Chair for Supervision Randal Quarles delivered a speech in which he proposed limiting the use of MRAs "to violations of law, violations of regulation, and material safety and soundness issues."

"Vice Chair Quarles' troublesome comments strongly suggest that the Fed intends to severely undermine the effectiveness of its examination program, which is one of its most potent tools to ensure the safe operation of banks and the protection of the consumers they serve," wrote Senator Warren.

The senator also warns that the Fed's supervision of banks would be substantially weakened and examiners would have less discretion to require a bank to resolve a deficiency if that deficiency does not amount to a violation of law.

"That the Fed now appears to be going even further in weakening the bank supervision process signals an abdication of its responsibility to ensure a safe and sound banking system," Senator Warren wrote. "I urge you to immediately halt any efforts to implement this proposal."

The Fed has provided almost no additional public information about how and when it plans to implement this significant change. Senator Warren has requested more information about the Fed's intentions and plans to implement these proposals by February 25, 2020.

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