Bowman outlines tailored regulation and supervisory shift

Federal Reserve Vice Chair for Supervision Michelle W Bowman emphasized the principle of regulatory and supervisory tailoring, adapting approaches to the risk profiles of banks of varying size and complexity.

She highlighted ongoing work to review merger and acquisition processes for community banks, including streamlining applications and updating competitive analysis frameworks.

Bowman also noted the review of proposed changes to the community bank leverage ratio, aiming to provide greater flexibility while maintaining strict capital standards.

These efforts are designed to enable community banks to better support local communities and meet the financial needs of the U.S. economy, particularly in remote and rural areas, by reducing unnecessary burdens and focusing on their core strengths.

Bowman outlined the Federal Reserve's efforts to modernize regulations for large banks, focusing on four key capital framework pillars.

These include enhancing transparency in stress testing by disclosing models and scenarios, and finalizing changes to the supplementary leverage ratio (SLR) for U.S. G-SIBs to ensure it acts as a backstop without impeding low-risk activities.

The Fed is also advancing U.S. Basel III implementation to reduce uncertainty and provide clarity for bank capital standards, with specific adjustments to mortgage capital treatment to support lending.

Finally, the G-SIB surcharge framework is being refined to balance safety and soundness with economic growth.