Fed plans bank-supervision overhaul to strengthen accountability, says Vice Chair Michelle Bowman

The Federal Reserve plans to overhaul its system of supervising US banks, aiming to enhance accountability and decision-making authority, according to Vice Chair Michelle Bowman. Currently, regional Fed presidents are responsible for bank examinations under a structure that gives Washington officials less direct accountability. Bowman proposes establishing five geographic supervisory regions, each led by a new regional leader, to replace this existing system.

This change, outlined in prepared remarks for a St. Louis Fed conference, seeks to create a clearer link between responsibility and accountability, addressing concerns about sluggish Fed examiners' responses to risks, as highlighted by an independent review following Silicon Valley Bank's collapse. Regional leaders will oversee all supervisory activities within their territories, while the regional Reserve Banks will continue conducting examinations.

Bowman also criticizes the Fed's reliance on committees for supervision, noting that these committees have introduced delays and blurred responsibility when issues arose. The Fed is currently reviewing asset thresholds to ensure that larger banks face stricter regulations only when necessary, potentially allowing them to expand before becoming subject to additional capital, liquidity, and stress-testing rules.

These proposed changes aim to streamline oversight and focus on significant financial risks rather than minor procedural issues.