Summary of Michelle Bowman's Speech on Bank Regulation and Supervision (January 7, 2026)

This post is a transcript/interpretation of a speech delivered by Michelle W. Bowman, a member of the Federal Reserve Board, outlining her vision for modernizing bank regulation and supervision. Her central theme is a move towards more pragmatic, less burdensome regulation, particularly for community banks, while ensuring financial stability. Here’s a breakdown of the key points:

Core Philosophy & Overall Approach:

Pragmatism over "More is Better": Bowman emphasizes a need to reassess the regulatory landscape, shifting away from the idea that simply adding more rules is inherently beneficial. She advocates for a “fresh look” at both regulation and supervision.

Focus on Material Risk: Regulation and supervision should concentrate on material financial risks, not minutiae. She emphasizes focusing on what truly impacts the safety and soundness of banks.

Community Bank Focus: A recurring theme is the disproportionate burden regulations place on community banks. She repeatedly calls for tailored approaches that recognize their different risk profiles and contribution to the economy.

Transparency & Accountability: Increasing transparency in supervisory processes is a significant priority.

Specific Areas of Reform & Modernization:

Stress Testing: Bowman highlights the Board’s recent request for comment on enhancing the transparency of the annual stress test process.

Supervisory Operating Principles: She stresses that examination findings and reports must focus on material financial risk. Initiatives include: Revisiting standards for issuing Material Regulatory Actions (MRAs) and Matters Requiring Attention (MRAs). Ensuring CAMELS ratings accurately reflect risk profiles, with “Management” (M) assessed on measurable factors. Reviving the use of non-binding supervisory "observations" for early identification of potential issues.

Reporting & Applications: She identifies the current system as overly burdensome, especially for community banks, and calls for a review of data collection to ensure relevance and necessity. She wants to streamline the application process for regulatory approval, making it less uncertain, cumbersome, and slow.

Confidential Supervisory Information (CSI): Bowman criticizes the overly broad definition of CSI, which hinders valuable information sharing and potentially shields abusive supervisory behaviors. She wants to review approaches to better define CSI and create limited use cases where it can be shared.

Transparency in Supervision: Bowman announced the public release of the LISCC Operating Manual (for large banks) and plans to release remaining manuals, increasing transparency in supervisory processes.

Key Initiatives & Ongoing Efforts:

Review of Data Collections: A rigorous review is underway to determine if existing data collections remain relevant and necessary.

Streamlining Application Processes: Efforts are ongoing to improve the process for banks seeking regulatory approval for various activities.

Increased Transparency: Releasing manuals and guidance to provide public insight into supervisory operations and expectations.

In essence, Bowman’s speech advocates for a more balanced and proportionate regulatory approach that supports a healthy and vibrant banking system, particularly for community banks, without compromising financial stability. She seeks a system that is less about ticking boxes and more about understanding and mitigating actual risks.