The Federal Reserve’s approach in evaluating overdraft practices has been to prioritize compliance through the review of these practices, ongoing engagement with bank management, and most importantly, transparency in our regulatory expectations. Regulatory expectations should never come as a surprise to regulated institutions, and our examiners find that transparency is an effective tool to promote compliance.
Nevertheless, the restrictions in current law still can present challenges to timely and effective consolidated supervision in light of, among other things, differences in supervisory models – for example, between the safety and soundness approach favored by bank supervisors and the approaches used by regulators of insurance and securities subsidiaries – and differences in supervisory timetables, resources, and priorities.