Two ways to simplify bank supervision: the Fed moves accountability, the ECB moves the burden
Serguey Asael Shinder2 min readOn 6 October the top supervisors at the Federal Reserve and the ECB each described how they want to simplify bank supervision. They chose different levers.
The Fed: change who decides. Michelle Bowman's main announcement is structural. Supervision will be realigned into five regions along state lines, each with a regional leader accountable for all supervisory activity in it. Her diagnosis, drawn from the independent review of the Silicon Valley Bank failure, is that authority and accountability were split between the Vice Chair and the Reserve Banks and blurred by dozens of committees. The rest of her agenda adjusts the rules themselves: thresholds indexed to growth every five years, a rethink of the $10 billion community bank line, and CAMELS ratings in which management no longer drives the composite on its own.
The ECB: change what is asked of banks. Frank Elderson did not announce a reorganisation. His lever is the treatment of findings. Low-severity findings can now be closed by the bank confirming it has acted, with no documentation; high-severity findings left open for years meet an escalation ladder that runs up to business restrictions and periodic penalty payments.
Where they agree. Both say simplification is not deregulation. Bowman argues that supervision had drifted to "process over substance"; Elderson that open findings "do not strengthen resilience". Both want supervisors' attention on material risks.
Where they differ, and why it matters. The Fed's changes mostly reduce friction on banks through who supervises them and which rules apply by size. The ECB's reduce friction on small issues while raising the cost of ignoring large ones. For banks operating in both jurisdictions, the practical difference is that a US bank will feel the change in its structure and thresholds, a euro-area bank in how quickly an unresolved finding becomes an enforcement matter.