LAGUNA BEACH, Calif. — Federal Reserve Vice Chair for Supervision Michelle Bowman said the central bank is pressing ahead with a broad overhaul of bank supervision and regulation aimed at refocusing examiners on core financial risks, easing unnecessary burden—especially for community banks—and improving transparency after lessons from recent bank failures.
Speaking virtually at the California Bankers Association Bank Presidents Seminar, Bowman said her approach since taking the supervision post seven months ago has emphasized tailoring oversight to an institution’s size and risk profile, early detection of material financial risks, and reducing what she described as drift toward subjective or politicized supervisory priorities that distract from safety and soundness.
Bowman highlighted new supervisory operating principles published in late October 2025 that direct examiners to prioritize interest-rate, liquidity, and other material risks—shortcomings she said were exposed by the collapse of Silicon Valley Bank, when “an ever-expanding scope of unfocused activities” allowed critical vulnerabilities to be missed. She said the Fed is refining examiner guidance, seeking industry feedback, and adjusting ratings frameworks so a bank’s “well-managed” status better reflects its overall risk profile.
She also outlined a series of regulatory changes of particular interest to banks, including eliminating the use of reputational risk in supervision, rescinding climate-related supervisory guidance, and proposing to lower the community bank leverage ratio election from 9% to 8%. Bowman said the Fed has modified the enhanced supplementary leverage ratio to strengthen Treasury market intermediation and is revising stress tests to reduce volatility and improve transparency, with additional supervisory reforms to be announced soon.
Looking ahead, Bowman said the Fed is preparing proposals to more clearly define “unsafe and unsound” practices, reconsider asset-size thresholds that trigger heightened regulation, and reduce duplicative exams. She also signaled efforts to streamline call report data collection, speed up regulatory application timelines—particularly for mergers—and narrow the definition of confidential supervisory information to allow better information sharing on issues like fraud and cybersecurity, calling transparency “a critical element” of effective supervision.