FRB Governor Bowman Summarizes Regulatory and Supervisory Priorities
Federal Reserve Board ("FRB") Governor Michelle W. Bowman summarized her views on monetary policy, cryptocurrencies, payment systems, climate-related risk and updating the Community Reinvestment Act ("CRA").
In remarks before the Florida Bankers Association, Ms. Bowman said that she expects the Federal Open Market Committee to continue raising interest rates to tighten monetary policy. She cited three positive developments in the fight against inflation, including (i) the ongoing strength of the labor market, which "remain[s] resilient despite higher interest rates and slower growth;" (ii) that household balance sheets remain strong, with low debt levels; and (iii) that the U.S. banking system remains strong as evidenced by high levels of capital and liquidity, which she attributed to the reforms adopted after the last financial crisis.
On cryptocurrency and payment systems, Ms. Bowman stated that the FRB should support innovation to help the banking industry evolve to meet consumer demand. She cautioned that prohibiting banks from engaging in crypto activities may push industry growth into the non-banking sector "leading to much less transparency and potential financial stability risk." She said that the FRB will continue to closely monitor banks' exposure to crypto while evaluating different regulatory approaches. Ms. Bowman also said that the FRB will continue to consider the benefits of a central bank digital currency, and how the FRB's FedNow service or other existing instant payment services may accomplish the same outcomes.
On the proposal to update the CRA, Ms. Bowman said that the proposal is intended to support the transition toward internet and mobile banking. She said that she supports updating the CRA, but expressed concern that some proposed changes will be costly for smaller and community banks.
On climate change, Ms. Bowman said that the FRB "views its role on climate as a narrow focus on supervisory responsibilities and limited to our role in promoting a safe, sound and stable financial system." She expects the FRB to build additional supervisory requirements to develop a sound framework for managing climate-related risk.