The Next Horizon in US Bank Supervision

In remarks delivered at the 2026 Banking Outlook Conference in Atlanta last month, Michelle Bowman, Vice Chair for Supervision at the US Federal Reserve Board, outlined “what’s next on the horizon” for regulation and supervision.

Bowman described a shift toward “core and material financial risks to safety and soundness,” moving away from siloed compliance exercises in favor of “unified, forward-looking risk assessments.” She was careful to note, however, that the focus on material financial risks does not mean neglecting nonfinancial risk. “Strong risk management remains essential to the safety and soundness of the institutions we supervise,” she said, “and we will continue to issue findings and examine for it where appropriate.”

Bowman also signaled a concrete shift in how the Fed conducts bank examinations. Too many Matters Requiring Attention (MRAs), she argued, currently cite policy documentation gaps, committee attendance issues, or immaterial limit exceedances. While these are issues that may technically violate standards, she acknowledged, they rarely predict institutional failure. As part of this shift, examiners are being asked to move from asking “Is this documented?” to “What scenarios could cause your strategy to fail, and are you prepared for them?”

The Fed has launched a comprehensive review of all outstanding safety and soundness MRAs, with a view to identifying where supervision has "drifted into procedural compliance over material risk assessment." Where MRAs do not meet the revised standard, they will be downgraded to nonbinding supervisory observations. The review is expected to be completed by the end of June.

Bowman also addressed the importance of “regulatory and supervisory tailoring,” arguing that oversight must reflect the risk that banks of different sizes and complexity pose to the financial system — particularly for community banks. She flagged ongoing reviews of merger and acquisition and de novo chartering processes, as well as proposed changes to the community bank leverage ratio to provide greater flexibility while maintaining capital standards.