§4513b Prudential management and operations standards

Summary

The Director must create rules or guidelines that set management and operations standards for each regulated entity. These standards cover 11 areas, including internal controls and information systems, independent internal audits, interest-rate and market risk management (with ways to measure, monitor, and limit market risks), liquidity and reserves, control of asset and investment growth, investments and purchases that match the law’s purpose, overall risk management and board/senior management oversight (including tested business resumption plans for major systems with remote-site facilities), credit and counterparty risk and concentration limits, and keeping proper records under consistent accounting practices. The Director can also add other operational standards as needed. If an entity fails to meet a standard, the Director must (for rules) or may (for guidelines) require an acceptable plan to fix the problem. The plan must say what actions the entity will take and, if the entity is undercapitalized, can be part of a capital-restoration plan. The Director generally gives entities up to 30 days to submit a plan and usually must act on plans within 30 days of getting them. If an entity does not submit or follow an acceptable plan, the Director will order fixes and may limit asset growth, require higher capital ratios, or take other actions until the problem is fixed. The Director must use such powers if the entity still fails to meet a standard, has not fixed it, and had extraordinary growth in the 18 months before it first failed. These powers add to any other authority the Director already has.