Last week, the Federal Reserve issued proposed guidance that could dial back some regulatory expectations for directors of financial institutions. The proposed guidance, applicable to Fed-supervised entities like bank holding companies and state member banks, would clarify the role of boards of directors, and place more responsibilities back onto management instead. This breaks with a trend over the past several years in which regulators have urged more and more active and seemingly granular involvement from bank boards.

This development could be especially good news for outside directors.

Outside directors of financial institutions have always had a challenging role. By definition, they are not part of bank management and are not involved in day-to-day bank operations, and they often are not bankers by trade. Yet they are expected to maintain oversight over management and the institution to a degree that can seem difficult to accomplish without such in-the-weeds involvement.

This conundrum has intensified in recent years, as the financial regulatory landscape has grown more complex and regulators’ expectations have grown. In the wake of the financial crisis, including under provisions added by the Dodd-Frank Act, regulators have placed increased focus on corporate governance, including on the role of the board. Regulators have emphasized the need for directors to be informed and active, and not merely a rubber stamp for bank management. This can be easier said than done when banking regulations and supervisory expectations have become more and more intricate, and understanding the nuances of each and how they apply to the specific financial institution can be difficult. This is especially true for highly technical or esoteric subject matter such as the Basel capital regulations, cybersecurity, and other information technology issues.

To assist directors in meeting these evolving expectations, regulators have offered a great deal of outreach and training, such as the FDIC’s Directors’ College Program and the OCC’s periodic updates to its guide to the role of a national bank director. And in 2014, the FDIC attempted to provide some comfort to outside directors of failed banks in stating that the agency has typically taken individual civil enforcement actions against them only in fairly limited circumstances (where, for instance, the director had engaged in insider abuse or “failed to heed warnings from regulators, accountants, attorneys or others that there was a significant problem in the bank which required correction” and the director “fail[ed] to take steps to implement corrective measures, and the problem continued”).

But now, the Fed appears to be taking a more direct, substantive move to alleviate some of the burden on directors by restating the board’s role and emphasizing that many responsibilities are the province of management, not the board. One specific example is of the treatment of two categories of examiner findings, Matters Requiring Immediate Attention (MRIAs) and Matters Requiring Attention (MRAs). Under existing Fed guidance, SR 13-13, all MRIAs and MRAs are to be presented to the board of directors. But under the proposed guidance, “MRIAs or MRAs would only be directed to the board for corrective action when the board needs to address its corporate governance responsibilities or when senior management fails to take appropriate remedial action. Boards of directors would remain responsible for holding senior management accountable for remediating supervisory findings.” (This echoes a comment made in a 2014 speech by Fed Governor Daniel Tarullo that “[t]here are some MRAs that clearly should come to the board’s attention, but the failure to discriminate among them is almost surely distracting from strategic and risk-related analyses and oversight by boards.”)

The Fed states that the proposal was “informed by a multi-year review by the Federal Reserve of practices of boards of directors, particularly at the largest banking organizations,” but it also seems consistent with the Administration’s desire to bring about regulatory reform and reduce regulatory burden on the financial industry.

At the same time, no matter the content of any final guidance, expectations should be managed. The Fed itself states that this is meant to refocus boards’ activities on their core responsibilities, not relieve them of responsibilities altogether. In a world of complex banking activities and risks, even in a world of lessened regulation, those responsibilities likely will remain extensive.

And as supervisory guidance, this issuance cannot change any underlying law or regulation—only the Fed’s supervisory approach to entities and persons under its authority. This means that specific requirements on directors under laws and regulations, and directors’ statutory liability, will be unaffected. Under the Federal Deposit Insurance Act, for example, all bank directors are “institution-affiliated parties” (IAPs) – and are thus always subject to the federal banking agencies’ enforcement authority for violations and practices specified in the statute (in contrast to independent contractors like outside counsel, who become IAPs only if they “knowingly or recklessly participat[e]” in a specified offense).

Also, the guidance would apply only to Fed-supervised entities, and thus would not cover banks supervised by the FDIC or OCC. This creates potential for a difference in supervisory expectations for different bank boards based on which agency supervises the bank. This could be resolved by the other agencies taking comparable actions, or by the agencies taking joint action through the Federal Financial Institutions Examination Council (FFIEC).

The Fed will accept public comments until October 10, 2017 (60 days after publication in the Federal Register). As the guidance is still in proposed form, it is unclear what the final version will look like—or even if it will be finalized. Financial institutions and affected directors should consider commenting to impact its ultimate content.

Again, outside directors should not see this proposal as a license to be less informed or to immediately reduce their participation. But this is a significant development that may signal further action by the Fed or other regulators to clarify that management-like involvement is not expected of non-management directors.