Bowman: Regulation pushing banking services to nonbanks

Policymakers should explore ways to increase bank participation in traditional banking activities that have been pushed to “shadow banks” because of regulation, Fed Governor Michelle Bowman said today. During a question-and-answer session at a banking conference, Bowman was asked her views on nonbank actors that are offering banking services without the same regulatory scrutiny that banks face. Bowman said that if such actors are offering the same services that carry the same risks, “we have to have the same regulation.”

“Some of those activities used to be traditional banking activities and they’ve been pushed outside that regulated perimeter from the unintended or intended consequences of regulation,” Bowman said. “So in my mind, it’s important that we work specifically to further the ability for banks to participate in those traditional activities that they have been very successful in providing and not unintentionally or intentionally push those services outside of regulated banking.”

Responding to another question, Bowman acknowledged that the amount of time the Fed takes to review bank merger applications has increased, but she didn’t see that timeframe shrinking anytime soon. “If you are in the process, then you should probably plan to have a little bit more breathing room or buffer time for having an expectation for resolution,” she said.