US Fed’s Bowman Testifies on Supervisory and Regulatory Priorities

In testimony delivered before the US House of Representatives Committee on Financial Services, Michelle Bowman, Vice Chair for Supervision of the Federal Reserve Board, outlined a broad reform agenda aimed at modernizing the US regulatory and supervisory framework.

On supervision, Bowman described a decisive shift toward material risk-focused oversight. A comprehensive review of outstanding Matters Requiring Attention (MRAs) revealed that many previous supervisory citations addressed “procedural or documentation deficiencies rather than threats to safety and soundness,” diverting examiner attention away from material financial risks and “inherently discouraging innovation,” she said. Proposed revisions to the CAMELS rating framework, largely unchanged since 1979, would replace subjective management assessments with clearer, more objective metrics, ensuring ratings reflect a bank’s overall safety and soundness “rather than isolated or process-driven deficiencies.”

Bowman also addressed the growing threat posed by advances in frontier AI models, which she explained have dramatically accelerated the identification of cyber vulnerabilities across critical infrastructure, including the banking system. While this presents opportunities to strengthen defenses, it also introduces new attack vectors.

Effectively managing these risks, she said, will require ongoing public-private collaboration and supervisory frameworks that keep pace with rapid technological change. In her capacity as Chair of the Financial Stability Board’s Standing Committee on Supervisory and Regulatory Cooperation, Bowman noted that the FSB will publish a report on sound practices for financial institutions’ use of AI next week.

Looking ahead, Bowman identified stablecoin regulation under the GENIUS Act, payments fraud, liquidity reform, and threshold recalibration as key priorities. She framed the overall agenda around a single principle: “appropriately calibrating regulatory and supervisory requirements strengthens both financial stability and economic growth.”