Bowman: Transparency Around Supervisory Expectations Must Improve

Federal Reserve Governor Michelle Bowman said in a speech today that the as the Fed adapts its supervisory principles for the future, it must enhance transparency around supervisory expectations for safety and soundness and consumer compliance matters.

“I believe supervision works best when supervisors clearly communicate their expectations with banks—there shouldn’t be any ‘surprises’ about our expectations during an exam. In my calls with bankers, I’m reminded that one of the biggest sources of regulatory burden is regulatory and supervisory uncertainty,” Bowman said during a community banking conference hosted by the Fed, the Conference of State Bank Supervisors and the FDIC.
Bowman added that uncertainty for banks can be reduced by clearly communicating expectations, by engaging the industry directly to understand the impact of these expectations and “when appropriate” by providing banks with tools and resources to meet those expectations.

Going forward, Bowman said that when there is significant uncertainty around a new regulation, supervisory expectation, or practice, the Fed will look beyond its traditional communications tools to find innovative ways to reduce that uncertainty.

In addition, Bowman said that the Fed must maintain its commitment to preserving the stability, integrity, functionality and diversity of the banking system; maintain consumer protection; and avoid new regulatory burdens on banks, “particularly those that maintain a more traditional business model.”