Fed Governor Pushes Regulatory Reforms for Community Banks

Federal Reserve Governor Michelle W. Bowman advocated for "tailored" regulatory reforms to maintain the viability of the community banking model. (See also, prior coverage)

At a Community Bankers Symposium in Chicago, Governor Bowman (i) reaffirmed the importance of maintaining diversity in the banking sector, (ii) emphasized that community banks are essential for financial inclusion and local economic growth, and (iii) noted that the Federal Reserve remains committed to ensuring that future regulations will support the health of both community and larger banks.

She described multiple risks faced by community banks, among them competitive pressures from a variety of sources, cybersecurity concerns, and disparate regulatory burdens.  

Governor Bowman proposed several reforms, including:

• revising size thresholds in regulations to account for inflation and economic growth;
• simplifying the mergers and acquisitions process to encourage consolidation where appropriate;
• encouraging viable de novo bank formation options;
• increasing collaboration between state and federal regulators to develop balanced policies; and
• introducing “tailoring” to align regulations with the size and complexity of banks, to avoid unnecessary regulatory burdens.