Federal Reserve Governor Michelle Bowman today reiterated her call for an independent, third-party review of the Fed’s response to the recent bank failures, saying that such a review was needed to provide relevant data before moving ahead with a regulatory response. Speaking at a joint Tennessee Bankers Association and Mississippi Bankers Association conference, Bowman acknowledged that an independent review was outside the norm for the central bank, but that so far its internal reviews of the Silicon Valley Bank failure and subsequent fallout “have not reached entirely consistent conclusions.”
“Before making conclusions about appropriate responses going forward to address causal issues, we need accurate, impartial and thorough information to inform the debate about what specifically may be needed to fix any problems in our supervision and regulatory framework,” Bowman said. “While the [Fed] board has made some confidential supervisory information about SVB available to the public, an outside party has an inherent disadvantage in probing the events surrounding the failure of a bank—they do not have access to the full supervisory record, and they have no ability to conduct extensive staff interviews.” She added that independent third-party review would allow the agencies to “fully understand what led to the failures” and would be a “logical next step” in holding regulatory bodies accountable.
Bowman noted that the Fed and other banking agencies are moving ahead with reforms based on their internal reviews. The agencies should instead “pause and reflect” on whether those proposals are appropriately calibrated and executed, she said. “The trend seems to be that regulators are engaging in supervision with a more heavy-handed approach, focusing primarily on quarterly call report data in some cases without the benefit of direct engagement with the targeted financial institutions.”