WASHINGTON—Wall Street banks are privately pressing the Federal Reserve to formalize a softer supervisory framework now being advanced under the Trump Administration, arguing the changes should be locked in so they cannot easily be reversed by future Democratic regulators, Reuters reported.
According to Reuters, the push centers on the Federal Reserve’s reduced reliance on “matters requiring attention,” or MRAs, which examiners have traditionally used to force banks to correct weaknesses in risk management, controls and compliance. Large banks often operate under numerous MRAs at any given time, with unresolved issues potentially escalating into formal enforcement actions or monetary penalties.
Reuters reported banks are urging the Fed to address what lenders see as legal ambiguity surrounding the newer, less aggressive supervisory approach being championed by Fed Vice Chair for Supervision Michelle Bowman. Sources told Reuters the Fed is expected to provide additional clarity as part of the overhaul, which represents one of the most significant shifts in bank oversight since the 2008 financial crisis.
Critics told Reuters the changes risk politicizing the Fed’s supervisory process and shifting the balance of power toward large financial institutions. Todd Baker, a senior fellow at Columbia University’s Richman Center for Business, Law and Public Policy, told Reuters Bowman is attempting to reshape the Fed’s supervisory culture in favor of bank management, while Bowman has argued supervisors have become overly focused on minor compliance “footfaults” instead of material financial risks.