During an address to the Connecticut Bankers Association last week, Federal Reserve Governor Michelle Bowman commented on what she termed the “responsible evolution” of banking’s regulatory framework. She outlined how efficiency should be a part of policy discussions; limits on the Fed’s tools to implement policy decisions; and the importance of public engagement in rulemaking.
“Efficiency should play a central role in policymaking,” she said. “Policymakers should consider how a desired policy goal can be achieved in a targeted manner that minimizes costs and administrative burdens on financial institutions.” Citing this summer’s release of third-party risk management guidance for banks of all sizes, which she supported, Bowman said regulatory agencies “lost an opportunity to maximize efficiency” in the release of the guidance. “We should do better for the smallest in size, yet largest number, of banks.”
She called public engagement “critical” to improving rulemaking and noted that industry can help policymakers understand the unintended consequences of proposed rules. Last October, agencies finalized amendments to Regulation II—new rules pertaining to debit card routing on different networks. “A key element … is that banks engaged in the rulemaking process shared their feedback, especially around potential fraud concerns and the speed with which the rule mandated system changes and implementation without consideration of the practical implementation and processor functionality constraints,” she said, noting that stakeholders need to engage in the comment process and communicate with policymakers to share their “real-world” views on the rulemaking agenda.