Fed Vice Chair Calls Bank Regulation "Overly Complicated," Calls for Pragmatic Approach

Federal Reserve Vice Chair for Supervision Michelle W. Bowman urged a pragmatic approach to updating the bank regulatory framework to lessen complexity and burden.

In remarks at the Economic Growth and Regulatory Paperwork Reduction Act ("EGRPRA") Outreach Meeting, Federal Reserve Vice Chair for Supervision Michelle W. Bowman said the EGRPRA review provides an opportunity for regulators to streamline outdated or overlapping rules while maintaining safety and soundness. Bowman emphasized that regulation should begin with identifying the specific issue it seeks to address and include ongoing evaluation to ensure it remains "fit for purpose." She warned that growing regulatory complexity has increased costs for banks, particularly community banks, and has sometimes driven financial activities outside the regulated system.

Ms. Bowman noted that this third EGRPRA review must deliver "lasting impact," criticizing prior efforts as "underwhelming" for failing to reduce regulatory burden. She said the Federal Reserve is pursuing initiatives to modernize its framework and cut unnecessary costs. She emphasized that many Board regulations have not been comprehensively reviewed in decades and should be updated to reflect economic growth through revised thresholds, inflation indexing, and greater consistency across frameworks. She highlighted ongoing work on regulatory capital requirements, including adjustments to the Community Bank Leverage Ratio and stress testing, and efforts to modernize supervisory ratings and streamline merger and application reviews.

Bowman also described broader supervisory reforms designed to focus attention on material financial risks rather than procedural or documentation issues. She highlighted initiatives to reduce redundant data collections, eliminate "reputational risk” from supervision, and promote fair access and innovation across the banking system. She called for continued collaboration between regulators and banks of all sizes, trade groups, and community organizations to ensure a regulatory structure that remains efficient, transparent, and supportive of economic growth.