Bank regulators have been “frustratingly slow” in advancing their efforts to fight fraud, “and seem to have done little to address the underlying root causes of this increase in fraud,” Federal Reserve Governor Michelle Bowman said yesterday.
During a speech to the Kansas Bankers Association, Bowman noted that fraud — particularly check fraud — has grown in frequency in recent years. Still, the issue has failed to garner more attention from regulators and law enforcement, she said. “Different governmental agencies may share an important role in addressing this problem, but the need for a joint and coordinated solution does not excuse collective inaction.”
Bowman said fraud is the most consistent issue raised when she speaks with bankers.
“Often the concerns note frustrations with the tools available to fight fraud and frictions dealing with counterparties in investigating and addressing fraud,” she said. “The costs of prevention, detection and remediation can also be substantial, but so can the costs of navigating these issues dealing with affected bank customers. We are overdue for more assertive action to protect bank customers and the financial system.”
Openness to innovation
Bowman also used the speech to reiterate her concern that regulators have not been open to innovation in the banking sector. She said the goal should be to build a regulatory framework that allows the private sector to innovate while maintaining appropriate safeguards.
“Bank regulatory policy should address the needs of the unbanked and expand the availability of banking services,” Bowman said. “It should not be used to limit or exclude access to banking services for legitimate customers and businesses in a way that is meant to further unrelated policy goals, sometimes referred to as ‘debanking’ or bank ‘de-risking.’ Credit decisions should not be dictated by banking regulations or supervisory messages. Ultimately, bankers are and should be responsible for their own credit allocation decisions.”
