In a recent call to action, Michelle Bowman, who serves on the Board of Governors of the U.S. Federal Reserve System, emphasizes the importance of adapting to changing economic conditions and emerging risks, while also ensuring transparency and open debate in the regulatory process.
Addressing the Salzburg Global Seminar on bank regulation and supervision, she urged global regulators to focus on supervising innovative banking activities, such as banking as a service and digital assets.
Bowman noted that a “supervisory void” has emerged, leaving financial institutions uncertain about how to handle emerging technologies.
She suggests that an independent third-party review should be conducted to analyze the factors that contributed to recent bank failures and the resulting stress in the banking system.
They argue that the current internal reviews conducted by regulatory agencies may have limitations and that an independent review would provide a more comprehensive and impartial assessment.
Bowman calls for improvements in communication among regulators, greater transparency in supervisory expectations, and a focus on relevant banking risks.
She also emphasize the importance of addressing the supervision of novel banking activities and providing clear regulatory guidance in order to avoid uncertainty and potential harm to banks and their customers.
Regarding regulatory reform, Bowman advocates for responsible changes that consider the consequences and impact on the broader financial system. She suggest that increases in capital requirements may have unintended consequences.
Bowman also discusses the implementation of international capital standards, noting the challenge of promoting consistency and parity across jurisdictions.
Overall, the speech calls for a careful and well-informed approach to regulatory reform, considering the lessons learned from recent bank failures and the evolving banking landscape.