Federal Reserve Governor Michelle Bowman today expressed concern that regulatory complexities and compliance issues could be hindering community banks’ approach to innovation. In remarks at an event at the Federal Reserve Bank of San Francisco, she offered her thoughts on steps the agency could take to foster innovation and collaboration between community banks and fintech firms.
“I think supervisors need to recognize and be thoughtful about how we might affect the way banks consider innovation,” Bowman said. “In particular, I think it’s important that we fulfill our responsibilities to ensure safety and soundness of banks and consumer protection, while also creating a regulatory framework that does not hinder the integration of responsible innovation into the strategic direction that a bank opts to pursue.”
Bowman highlighted the need to ensure that the Fed’s guidance on managing the risk of outsourcing “appropriately reflects the present-day business realities of the banks we supervise.” She added that the Fed is looking at ways to engage more frequently with industry stakeholders on innovation outside of the examination process.