US Fed's Bowman Outlines Supervisory Agenda

In her first public remarks as the US Federal Reserve Board's Vice Chair for Supervision last week, Michelle Bowman outlined a broad agenda for revisiting key aspects of the supervisory and regulatory framework, emphasizing pragmatism, tailoring, and a sharper focus on material financial risks.

Bowman argued that supervisory attention has drifted too far toward procedural and documentation issues at the expense of material risk. "Checklists should not distract examiners from the central purpose of examinations," she said, emphasizing the need to prioritize credit, liquidity, and interest rate risks. She also raised concerns about supervisory ratings, noting that "two-thirds of the largest financial institutions in the US were rated unsatisfactory in the first half of 2024," despite many meeting capital and liquidity expectations. The Fed, she said, will propose changes to its Large Financial Institution ratings framework to emphasize financial condition over other factors.