Bowman: Fed reforms target AI, stablecoins, banking resilience

The U.S. banking system remains sound and resilient, with strong capital ratios and significant liquidity buffers.

While delinquencies have slightly increased, they remain within historical averages.

However, non-bank financial institutions (NBFIs) are capturing a growing share of the lending market without comparable regulatory standards.

This shift, exemplified by mortgage loan origination moving to non-banks, has led banks to tighten lending standards for NBFIs due to concerns about underwriting and collateral quality.

The Federal Reserve also finalized reforms to the community bank leverage ratio (CBLR) framework, allowing a broader range of qualifying banks to use a simplified 8 percent leverage ratio for capital adequacy.

This extends the grace period for compliance from two to four quarters, ensuring the framework is accessible and aligns with congressional intent.

The Fed is modernizing its regulatory capital framework, clarifying requirements and aligning them with actual risks to support credit extension while preserving strong capital.

Proposals also encourage responsible mortgage lending by reducing disincentives, addressing a significant decline in bank-originated mortgages since 2008.

Supervision efforts include advancing risk-based tailoring, matching oversight to each bank's size and complexity.

A review of outstanding matters requiring attention (MRAs) found many cited procedural deficiencies, prompting recalibrated priorities.

Revisions to the CAMELS rating framework introduce clearer, more objective metrics for overall safety and soundness.

Innovation is also a focus, with updated capital treatment for tokenized securities and revised model risk management guidance to support responsible adoption of new technologies like AI.