Latest news with #MichelleBowman
Yahoo
19 hours ago
- Business
- Yahoo
6 takeaways from Michelle Bowman's first speech as Fed vice chair
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. Michelle Bowman is a veteran of the Federal Reserve. But the ink on her newest role – the Fed's vice chair for supervision – is still drying. Following her confirmation, she spoke Friday at Georgetown University in her first appearance as the central bank's top cop. Here are six takeaways from her remarks. 1. The Fed's job is not to take the risk out of banking entirely. Banking is not and cannot be devoid of risk, and to drive out such risk 'is at odds with the fundamental nature of the business of banking,' Bowman said. 'Banks must be able to earn a profit and grow while also managing their risks.' 'Adding requirements that impose more costs must be balanced with whether the new requirements make the correct tradeoffs between safety and soundness and enabling banks to serve their customers and run their businesses,' she said. Rather than eliminating risk from the banking system, regulators must be tasked with ensuring banks manage risk effectively, Bowman said. 2. ...or make sure banks don't fail. 'Our goal should not be to prevent banks from failing or even eliminate the risk that they will,' Bowman said. 'Our goal should be to make banks safe to fail, meaning that they can be allowed to fail without threatening to destabilize the rest of the banking system.' 3. Enhancing supervision doesn't necessarily mean more rules; it means tailored rules. 'Supervision focused on material financial risks that threaten a bank's safety and soundness is inherently more effective and efficient,' Bowman said. 'We should be cautious about the temptation to overemphasize or become distracted by relatively less important procedural and documentation shortcomings.' The uniqueness of each bank, in business model and complexity, means that risks are not uniform. In the past, Bowman said, rules meant to enhance safety at the biggest banks have also been unfairly applied to smaller banks. She suggested creating a framework instead for those smaller community banks, which would insulate them from the standards designed for bigger, more complex institutions. 'While I have no objection to a deliberate, intentional policy to apply similar standards to firms with similar characteristics as conditions warrant, the gradual erosion of distinct regulatory and supervisory standards among firms with very different characteristics — essentially the subtle reversal of tailoring over time — is not a reasonable approach for implementing supervision and regulation,' Bowman said. 4. The Fed needs to reconsider some rules it has imposed on banks since the 2007-08 financial crisis. Since Congress passed the Dodd-Frank Act almost 15 years ago, rules banks must follow have 'increased dramatically,' Bowman said. And while many were important, a number of these reforms were 'backward looking — responding only to that mortgage crisis — not fully considering the potential future unintended consequences or future states of the world.' Some changes had unintended consequences, she noted, like pushing banking activities into 'less regulated corners of the financial system.' Moving forward, the Fed needs to evaluate these rules on the banking system today, rather than that of the financial crisis-era. Meanwhile, other regulations, some of which haven't been updated in more than two decades, need to be. 'Given the dynamic nature of the banking system and how the economy and banking and financial services industries have evolved over that period, we should update and simplify many of the Board's regulations, including thresholds for applicability and benchmarks,' Bowman said. 5. Ratings need a revamp. Supervisory changes have 'eroded the link between ratings and financial condition,' Bowman said, noting that two-thirds of the nation's biggest financial institutions were rated unsatisfactory in the first half of last year. Yet the majority of these institutions met all supervisory expectations for both capital and liquidity, and they're all still operating. 'This odd mismatch between financial condition and supervisory ratings requires careful review and appropriate revisions to our current approach. Under the current large bank ratings framework, a single component rating can result in a firm being considered not 'well-managed,' which has driven the disparity between well-managed status and financial condition,' she said. The Fed plans to address this mismatch by proposing changes to the Large Financial Institution ratings framework, she said. The changes will be geared toward creating 'a more sensible approach' to determining if a bank is well-managed, and won't disproportionately weigh a single framework component 'for a firm that has demonstrated resilience under a range of conditions and stresses,' she said. 6. Processing delays have not been kind to bank applications, including for M&A. Applications for regulatory approval, such as seeking a de novo charter or approval to merge, need transparency and clear timelines for action, she said. Processing delays must spur a rethinking, Bowman said, of 'whether many of the additional requests for information can be addressed through better application forms or relying on information that is available from bank examinations.' Recommended Reading Bowman nod for Fed supervision czar advances to full Senate Sign in to access your portfolio
Yahoo
4 days ago
- Business
- Yahoo
U.S. Federal Reserve's New Supervision Chief Will Wield Crypto Authority
The Federal Reserve — a key regulator of U.S. banking — is about to have a new vice chairman for supervision, Michelle Bowman, who will ultimately guide how the Fed oversees the financial system, possibly including how stablecoin issuers are regulated. After a tight party-line confirmation vote in the Senate approved the Kansas Republican's nomination 48-46, Bowman, who has already been serving as one of the Fed board's governors, will now be elevated to one of its leadership roles. The supervision job was created after the 2008 global financial meltdown and is meant to help focus the central bank's regulatory role as distinct from its better-known job marshaling U.S. monetary policy. Banking has been a sore spot for the crypto industry, and the Fed — alongside the two other bank agencies, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. — had taken a highly cautious crypto stance. The sector and its lawmaker allies have blamed the agencies for pressuring the banking system to cut off digital assets businesses and insiders from banking services, jeopardizing the industry's health, though this changed after Donald Trump became U.S. president again this year. In April, the Fed joined the other regulators in withdrawing earlier constraints on banks' interactions with the industry. The Fed's potential role over stablecoin issuers remains murky as the regulatory legislation is still being debated. Republicans lawmakers have worked hard to sideline the central bank from stablecoin duties, but the latest legislation being considered still foresees the Fed regulating stablecoin issuance in the banks it oversees, plus serving a role in assessing whether foreign regulators are up to snuff to handle issuers outside the U.S. While Democrats had favored a Fed duty as a watchdog over nonbank issuers, the current legislation being debated on the floor of the Senate puts the OCC in that position. In her new job, Bowman will serve under Fed Chair Jerome Powell, who has stated in the past that he'd defer to the vice chairman to lead the supervisory agenda. She replaces Democrat predecessor Michael Barr in the position, though he stayed on the board. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
4 days ago
- Business
- Reuters
Fed's Bowman lays out ambitious agenda to overhaul and ease bank oversight
WASHINGTON, June 6 (Reuters) - The Federal Reserve's new top regulatory official laid out an ambitious agenda for revisiting and easing numerous bank rules and oversight policies which she argued have become onerous and unnecessary. Michelle Bowman, who was confirmed to be the Fed's Vice Chair for Supervision on Wednesday, said the Fed will be reconsidering how it writes rules and polices some of the nation's largest and most complex banks. In prepared remarks, she argued that the influx of rules since the 2008 financial crisis merits reconsideration. "Our goal should not be to prevent banks from failing or even eliminate the risk that they will. Our goal should be to make banks safe to fail, meaning that they can be allowed to fail without threatening to destabilize the rest of the banking system," she said. Bowman, who has served as a Fed governor since 2018, has long been critical of efforts to impose stricter rules on the banking sector. In her first remarks since being confirmed to the Fed's top regulatory post, she said the Fed will soon launch numerous projects aimed at easing requirements and streamlining oversight, including in many areas that have been longtime targets for complaints by banks. Among those initiatives will be changes to how the Fed supervises large banks, plans to make some bank rules less restrictive, and a consideration of changes that could ease the bank merger process.
Bloomberg
4 days ago
- Business
- Bloomberg
Fed's Bowman Says Big Banks' Secret Ratings Will Be Addressed
Michelle Bowman, the Federal Reserve 's incoming vice chair for supervision, says the central bank will soon address the 'odd mismatch' between the confidential ratings of big banks and the lenders' financial conditions. Fed data show that two-thirds of the largest US banks were rated unsatisfactory in the first half of 2024, though most of them met all supervisory expectations for capital and liquidity, Bowman said Friday in prepared remarks for a Psaros Center for Financial Markets and Policy event at Georgetown University's McDonough School of Business.
The Star
5 days ago
- Business
- The Star
Senate confirms Bowman as Fed's bank watchdog
New Federal Reserve vice-chair for supervision Michelle Bowman. — Bloomberg WASHINGTON: US Federal Reserve (Fed) governor Michelle Bowman has been confirmed by the US Senate to serve as the central bank's vice-chair for supervision, further signalling a shift to lighter regulation under President Donald Trump. Bowman, a fifth-generation banker and Republican, has long touted the need for more 'tailored' oversight in her speeches. She has signalled significant changes in regulatory priorities and has a friendlier relationship with the bank industry than her predecessor, Michael Barr. Barr resigned from the role earlier this year. She frequently countered him on issues including bank oversight, stress-test reforms and capital rules. Bowman has said that watchdogs should be better aligned in their goals for the financial system. That effort has already started to take shape, with Treasury secretary Scott Bessent hosting Bowman and other regulators for private meetings in a bid to streamline oversight, according to sources. Bowman has also hired advisers from lending giant Goldman Sachs Group Inc, Wall Street legal heavyweight Davis Polk & Wardwell and big-bank lobbying powerhouse the Bank Policy Institute. Bowman has said that she will work with officials at the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency to re-propose a landmark US bank-capital proposal known as Basel III endgame. She was a sharp critic of the plan as originally drafted, which would have hiked the biggest banks' capital requirements by 19% to buffer against losses and a financial crisis. She is also working with other regulators on potential changes to the supplementary leverage ratio (SLR). Critics have argued the SLR ratio has limited banks' purchases of traditionally safer instruments like US Treasuries. Bessent said in May that officials may move this summer on easing that capital rule. Dennis Kelleher, president of Washington-based consumer advocacy group Better Markets, said Bowman's role is to protect the jobs and savings of everyday Americans from the risks of Wall Street. 'Unfortunately, Bowman has the opposite views: while claiming to care about Main Street, she enthusiastically and unequivocally supports those banks' priority of deep, broad and mindless deregulation,' Kelleher said. But industry groups like the Independent Community Bankers of America said in a statement that Bowman's real-world experience gives her a keen understanding of how certain regulations applied universally – regardless of a bank's complexity or risk profile – impedes access to credit for those who need it most. Bowman told lawmakers in April that regulation has become overly complicated and redundant. — Bloomberg
