In a speech today, Federal Reserve Governor Michelle Bowman when again required a “targeted” regulative action to the current bank failures, pressing back versus more comprehensive reforms that “appear to advocate a shift away from tailoring and risk-based supervision.” Bowman’s remarks at the Texas Bankers Association Annual Convention in San Antonio mirrored her remarks from more than a week previously, when she warned that broad regulative modifications might do more damage than excellent.
“Radical reform of the bank regulatory framework—as opposed to targeted changes to address identified root causes of banking system stress—is incompatible with the fundamental strength of the banking system,” Bowman stated at the convention. “I am extremely concerned about calls for casting aside tiering expectations for less complex institutions, given the clear statutory direction to provide for appropriately calibrated requirements for these banks.”
Bowman stated a targeted option would rather concentrate on real threats, on the enhancement of guidance and threat management, and on timely removal of supervisory concerns. She likewise stated that in times of tension, regulators require to be forward concentrated on bank readiness so that banks are placed to deal with concerns of issue. “These include being prepared to address contingency funding needs, with a plan in place that has been tested and is ready to be executed. Regulators need to be supportive of this kind of planning,” she stated. “One of the initial lessons gained from the current bank failures is that bank management, and their boards of directors, need to be prepared to check the banks’ capability to handle liquidity requirements throughout times of tension.
“This is one area where I think bankers can make an important, immediate contribution,” Bowman included. “I strongly encourage bankers to consider creating a plan to handle liquidity needs during times of unexpected stress—and then test the ability to execute the plans.”
