Bowman: the Fed will reorganise bank supervision into five regions along state lines
Serguey Asael Shinder2 min readFederal Reserve Vice Chair for Supervision Michelle Bowman said on 6 October that the Fed is beginning to restructure its supervision function, in a speech at the Community Banking Research Conference in St. Louis.
Five regions. Supervision will initially be realigned into five regions, each led by a regional leader accountable for all supervisory activity in the region, supported by the existing Reserve Bank footprints but drawn along state boundaries rather than Reserve Bank districts. Bowman tied the change to the preliminary report on the failure of Silicon Valley Bank released last month by the independent Starling Advisory Group, which she said highlighted a long-standing mismatch between decision-making authority and accountability: supervision is the Vice Chair's responsibility but is carried out by the Reserve Banks, through "a complex web of dozens of committees" that she said had become a source of delay and "plausible deniability".
Thresholds. Later this year the Board will consider raising fixed-dollar asset thresholds in its regulations to account for inflation and growth, with a mechanism to update them every five years. It will also consider broader reforms to bank portfolios defined by asset size and to the large-bank tailoring framework, including the definition of a community bank, which has been set at under $10 billion in assets for 15 years. In July the Board proposed revising Regulation O, the rules on lending to insiders, which have not been comprehensively updated since 1979.
Ratings. The agencies are finalising revisions to the CAMELS rating system through the FFIEC; under the proposal the Management ("M") rating would no longer singularly drive a bank's composite rating.
Also on her list: the Fed's competitive analysis of bank mergers, which she said understates competition from credit unions, nonbank lenders and branchless banks in rural markets; clearer standards and timelines for new bank charters; and streamlining the call report.