Governor Michelle W. Bowman of the Federal Reserve System spoke about the importance of a responsive and responsible regulatory framework in the banking sector. She addressed the need to adapt to changing economic conditions and emerging risks while ensuring transparency and open debate in regulatory adjustments. Governor Bowman highlighted recent stress in the banking system and failures in risk management practices and supervisory priorities. She suggested an independent third-party review to thoroughly analyze the factors contributing to recent bank failures and stress.
Governor Bowman emphasized effective supervision and regulation, particularly in core banking risks like liquidity and interest rate risk. While supporting certain reforms, she expressed concerns about higher capital requirements hindering bank lending and competition without addressing supervision effectiveness. She debunked the idea that recent bank stress resulted from a less assertive supervisory approach.
Governor Bowman called for improvements in supervision, transparency in supervisory expectations, and a clear regulatory approach to novel banking activities. She stressed evaluating the consequences of regulatory revisions and considering the impact on the broader financial system. While supportive of Basel III endgame reforms, she emphasized public comment and transparency in the rulemaking process.
Governor Bowman also warned about the impact of capital requirements on international competition and the shadow banking system. Higher capital requirements could disadvantage regulated banks, potentially shifting financial activity away from them.
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