Fed Vice Chair Highlights Recent Regulatory Reforms and Monetary Policy Concerns
Federal Reserve Vice Chair for Supervision Michelle W. Bowman reviewed recent supervisory and regulatory reforms and shared her views on current monetary policy.
In remarks at the New England Economic Forum, Ms. Bowman highlighted numerous concrete actions taken to modernize bank supervision, including finalizing changes to the large financial institution ratings framework to better reflect material financial risks, revising the enhanced supplementary leverage ratio, and proposing recalibration of the community bank leverage ratio. She noted that the Fed removed reputational risk from the examination toolkit to allow "examiners to focus on material financial risks" and issued the first-ever "set of supervisory operating principles to enhance transparency [and] consistency in examinations."
She also highlighted significant regulatory actions, including (i) withdrawing climate-related supervisory guidance that "diverted supervisory resources away from risks that are material to the safety and soundness of banks," (ii) issuing a new policy statement to facilitate responsible innovation, and (iii) initiating a review of regulatory reporting requirements. She said the Fed was working to implement the Fed's responsibilities under the newly passed GENIUS Act on stablecoins. She said that future priorities include "improving the mergers and acquisitions review process, assessing ... capital requirements, addressing payments ... fraud, and strengthening examiner training."
Ms. Bowman also described the FOMC's decision to cut interest rates by 75 basis points since September 2025. She discussed how her economic views evolved over the past year, initially taking an optimistic stance on policy changes, but later shifting focus to growing labor market concerns as signs of weakness become clearer. She expressed particular concern about labor market fragility despite continued economic growth. She noted that GDP has remained solid and inflation is moving closer to the 2% target (especially when excluding tariff effects) but said that unemployment rose to 4.4%. She said that job gains have slowed dramatically, and various indicators suggested the labor market could deteriorate quickly. She noted that private payroll growth averaged only 30,000 jobs per month in the fourth quarter, concentrated in just a few service industries.