Bowman sets four principles to modernize global bank supervision
Federal Reserve Vice Chair for Supervision Michelle Bowman outlined four guiding principles for modernizing global financial regulation at the Bank Policy Institute conference on July 13. The FSB framework prioritizes material risks, tailored oversight, transparency, and forward-looking rules.
Targeted risk over supervisory volume
Federal Reserve Vice Chair Michelle Bowman detailed the Financial Stability Board's strategy to overhaul bank oversight, moving away from a "more is better" regulatory mindset.
Citing the failure of Silicon Valley Bank, she noted that dozens of outstanding supervisory findings failed to prevent collapse because supervisors lost focus on core material risks.
The new framework establishes four core principles: focusing on material financial risks, tailoring rules to bank size and complexity, increasing transparency, and supporting responsible innovation.
In the US, implementation includes the March 2026 Basel III capital proposal, which simplifies requirements into a single risk-based stack and indexes G-SIB surcharges to nominal GDP growth.
Outdated limits and artificial intelligence
To address structural inefficiencies, the Federal Reserve is updating static regulatory thresholds, such as the ten billion dollar asset benchmark, by indexing them to economic growth and inflation over time.
Additionally, supervisors published explicit Supervisory Operating Principles for the first time and introduced "supervisory observations" for non-severe concerns.
Regarding emerging technologies, an FSB workstream released a consultation report on sound practices for artificial intelligence adoption, featuring flexible guidance based on real-world industry use cases.
Pragmatism replaces bureaucratic box-checking
Bowman’s blueprint offers a long-overdue shift from box-checking toward risk-tailored oversight.
However, success hinges on whether supervisors can execute subjective judgment without creating dangerous blind spots.
Without firm accountability, flexible guidance risks weakening enforcement under the banner of modernization.