In parsing past speeches and papers from the newly-installed regulator, a roadmap emerges of a banking landscape that might see the rollback of several regulations — and a guiding principle that seeks to relax some mandates on smaller financial institutions — and address risks in the system, but not necessarily to prevent bank failures.
In remarks at Georgetown University last week, Bowman said that some of the rules that have been in place since the financial crisis of 2008 and the subsequent recession were “backward looking” in that they addressed the mortgage crisis and were “not fully considering the potential future consequences” of those policies. “Our goal should be to make banks safe to fail, meaning that they can be allowed to fail without threatening to destabilize the rest of the banking system,” Bowman said.
As for supervision itself, Bowman contended in the same speech that “supervision focused on material financial risks that threaten a bank’s safety and soundness is inherently more effective and efficient” and added that “we should be cautious about the temptation to overemphasize or become distracted by relatively less important procedural and documentation shortcomings.” That approach, we’d add, would dovetail with her stated goals of streamlining de novo bank processes and also re-examining regulations applied to smaller community banks.
Establishing Clearer Standards
“Establishing clearer standards for approval, may encourage more de novo activity,” Bowman said, as “problems have affected bank mergers and acquisitions, where there have been lengthy processing delays. We need to rethink whether many of the additional requests for information can be addressed through better application forms or relying on information that is available from bank examinations.”
The Fed has “pushed down” requirements developed for the largest firms to smaller banks, often including regional and community banks, said Bowman, who added that “an independent community bank supervisory and regulatory framework” would “clearly separate these banks from larger bank supervision and regulation. This would serve to insulate these smaller banks from standards designed for larger and more complex firms.”
Other speeches indicate that combatting fraud will be on the radar. As detailed here, in remarks at a banking conference earlier this year, Bowman said check fraud “has grown in frequency and impact over the past several years. Fraud continues to harm banks … efforts by regulators have been frustratingly slow to advance, and seem to have done little to address the underlying root causes of this increase in fraud … We are overdue for more assertive action to protect bank customers and the financial system.”
Eyeing Innovation
A 2024 speech on innovation in financial services raised the issue, as Bowman said, “Often, a regulator’s first reaction to proposed innovation in the banking system is not one of openness and acceptance but rather suspicion and concern … The use of emerging technology and innovation may require a change in policy or supervisory approach. It also very often requires regulatory feedback — ideally before the innovation is introduced or after it has been integrated by a bank and is reviewed during the supervisory process … Hostility to innovation within the banking system often results in activity migrating outside of the banking system.” Areas ripe for exploration, she stated, include innovations that address frictions in cross-border payments and distributed ledger technology.
Photo: Chair Jerome H. Powell swears in Michelle W. Bowman on June 9, 2025, as vice chair for supervision of the Board of Governors of the Federal Reserve System.
