Focusing regulatory reform and guidance efforts on issues that do not represent core banking risks, such as climate change, will only serve to further distract bank management and supervisors, Federal Reserve Governor Michelle Bowman said today in a speech to the Pennsylvania Bankers Association. In her remarks, Bowman said it is essential that regulators appropriately calibrate and prioritize supervisory and regulatory actions. However, while climate risk is important, it is “not a core risk to the safety and soundness of financial institutions.”
“The lessons learned from supervisory failures during the bank stress last spring clearly illustrate that bank examiners and bank management should focus on core issues, like credit risk, interest rate risk, and liquidity risk,” Bowman said.
Bowman also reiterated her concern about agency proposals to revamp how banking agencies evaluate bank merger applications. She said that a criticism that agencies act as a “rubber stamp” for mergers doesn’t match the evidence, given the time and resources banks must devote to the process. “To be clear, I think we have room to do better when it comes to timely regulatory action, while maintaining a rigorous review of applications,” she said. “But extended review periods are not uncommon, particularly when you include preliminary discussions and pre-filings with regulators in the published processing timelines.”
