FRB Governor Bowman Recommends that Banking Reforms Remediate "Identified Shortcomings"

Federal Reserve Board ("FRB") Governor Michelle W. Bowman recommended steps to ensure that banking reforms focus on "remediating identified issues" and that supervisory priorities are "aligned with the most pressing needs demonstrated by recent events[.]"

In a speech before the CEO/Executive Management Conference, Ms. Bowman advocated for regulation (i) focused on resolving identified issues and shortcomings, (ii) informed by data and analysis and (iii) that increases transparency to policymakers and the public, including the "context, data, and analysis" underlying the proposed reforms. In identifying issues relevant to banking regulations, Ms. Bowman posited that "much work remains" to address factors contributing to the failure of Silicon Valley Bank. She advocated for an independent third-party review to provide regulators with impartial information to determine how SVB-related causal issues should be addressed.

Ms. Bowman said that it is worth reflecting on whether the FRB’s regulatory and supervisory priorities are aligned with the banking industry’s "most pressing needs". To calibrate a revised approach to banking supervision and ensure that the FRB is reacting in a way that is proportionate to a financial institution’s risk factors, Ms. Bowman put forth several considerations for regulators, including whether banking agencies are (i) acting in a consistent manner, (ii) coordinating efforts with state banking agencies and (iii) making supervisory decisions based on a "horizontal review" of financial institutions and their differing business activities and risk profiles.

Ms. Bowman underscored the importance of stakeholders providing feedback on potential impacts of the proposals. She emphasized that the scope of the reforms "will be extensive and could reshape the contours of the bank regulatory framework in important ways[.]"