Bowman stresses tailored supervision and innovation for banking stability

The U.S. banking system remains sound and resilient, characterized by strong capital ratios, significant liquidity buffers, and continued growth in lending.

Non-performing loans have declined across most categories, and profitability remains robust.

However, Vice Chair Bowman highlighted increasing competition from non-bank financial institutions in payments and lending, which do not face the same capital, liquidity, and prudential standards as regulated banks.

The Federal Reserve is actively encouraging banks to innovate responsibly, having rescinded policies that hindered innovation.

Efforts are underway with other regulators to develop capital and liquidity regulations for stablecoin issuers, as mandated by the GENIUS Act, and to provide clarity on digital asset activities to ensure the banking system can support them effectively.

Bowman emphasized tailoring the regulatory framework to reflect diverse bank risks, advocating for less stringent standards for community banks.

She supported reducing their burden by updating outdated statutory thresholds and improving anti-money laundering frameworks.

For large banks, the Federal Reserve is modernizing regulations across its capital framework, including stress testing, the supplementary leverage ratio, and Basel III. Recent actions enhance public accountability for stress testing and clarify capital requirements, particularly for mortgage loans.

This aims to balance safety and soundness with fostering economic growth.