FRB Governor Bowman Calls for Prudent Supervision and International Collaboration to Address Financial Stability Risks
Federal Reserve Board Governor Michelle W. Bowman advocated for a balanced approach to address financial stability risks. She emphasized the role of efficient and effective supervision and the importance of international collaboration to promote a stable global financial system.
At an international economic festival in Morocco, Governor Bowman highlighted the following:
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Challenges for Central Banks: Governor Bowman noted the challenges faced by central banks in addressing inflation and maintaining financial stability, particularly in the context of supply chain disruptions, strong demand and accommodative monetary and fiscal policies.
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Financial System Vulnerabilities and Risks: Ms. Bowman described various vulnerabilities and stability risks, including those related to commercial real estate, nonbank financial institutions and U.S. Treasury markets.
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Policy Approaches: Ms. Bowman emphasized the importance of proactive supervision and regulation to mitigate financial stability risks. She pointed to the need for a balanced approach when considering the impact of regulatory changes on the long-term viability of banks and the potential consequences of overreacting to recent stresses.
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International Collaboration: Ms. Bowman called for international collaboration among central banks and regulatory authorities to address financial stability issues that transcend national borders.
Ms. Bowman said that recent "geopolitical tensions" created additional financial stability risks. She argued that it is essential that central banks facing high inflation bring it back down to a sustainable target, noting the Federal Reserve's recent increases in the federal funds rate. She said that the Federal Reserve, and other financial regulators and central banks, can "address and mitigate financial system vulnerabilities and risks so that monetary policymakers are able to continue to pursue their monetary policy mandates" as "they strive to restore price stability and promote financial stability."