Late last month, Michelle W. Bowman, a Governor on the US Federal Reserve Board, spoke at the Salzburg Global Seminar about how bank regulation and supervision can be made more responsive and responsible following the recent failures of Silicon Valley Bank and Credit Suisse.
"Many of the problems we have seen at these banks — interest rate risk, liquidity risk, poor risk management — are not caused by any evolution in banking," Bowman argued. "These bank failures and recent stress in the banking system have highlighted key deficiencies in risk management practices, and key deficiencies in supervisory priorities."
She called for an independent review to analyze the events surrounding the bank failures, expressing concern that the recent review published by the Fed’s Vice Chair for Supervision, Michael Barr, was too limited in scope and external input to be considered definitive.
Bowman also stressed the need for transparency and public debate amid current reform efforts. "We must be circumspect about what went wrong, deliberate about what to fix, and cognizant of unintended consequences," she said.
"It is abundantly clear that regulatory and supervisory reform is on the way," Bowman concluded. "But we should ensure that changes ultimately promote a safe and sound banking system. That system should serve the needs of customers and support the broader economy."
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