The Federal Reserve (FED) Vice Chair Bowman: Plans to reform and ease bank regulation

Bowman, the Fed’s new top regulatory official, has set out an ambitious agenda to revisit and relax a number of banking rules and regulatory policies that she believes have become too onerous and unnecessary. Bowman said the Fed will reconsider the way it sets the rules and how it regulates some of the largest and most complex banks in the United States. She noted that a large number of rules introduced since the 2008 financial crisis deserve to be reconsidered. In particular, Bowman noted that the Fed will consider revising its rating of large banks, noting that two-thirds of large banks are still rated unsatisfactory by Fed regulators even if they meet all capital and liquidity requirements. She said the proposed reforms would address this strange mismatch by taking a more rational approach by reducing some of the subjective rating weights of banks that have demonstrated resilience. She also said that the Fed will reconsider its rating framework for smaller banks to ensure that it focuses primarily on material risks rather than regulatory judgments. Bowman also said that the Fed will scrutinize what it calls “horizontal scrutiny,” in which regulators conduct in-depth scrutiny of multiple banks on a particular issue. She argues that this approach actually leads to competition among banks and ignores their respective uniqueness when identifying deficiencies.