The economy has changed significantly since the 2008 financial crisis, but regulation is holding back banks from fully engaging with those changes, Federal Reserve Vice Chair for Supervision Michelle Bowman said today.
During a Q&A at a Santander Bank conference in Madrid, Spain, Bowman spoke about her approach to regulation and supervision. She said that some of the regulatory changes put in place after the financial crisis were important, but the economy has “changed tremendously” since then and regulators have not provided the flexibility banks need to adjust to that change.
“We’ve seen a number of different innovations and different engagements that I think our banks in particular would like to be a part of, but they’re inhibited from doing so because of the regulatory environment, and things that we created or calibrated during the post-financial crisis years may or may not still be fit for purpose,” she said.
Bowman pointed to artificial intelligence as one technology that could transform banking. She also pointed to digital assets, particularly with the recent passage of the Genius Act, which directs the Fed and other agencies to establish a regulatory framework for payment stablecoins.
“In parallel with that, I think it is important that banks are able to engage fully with digital assets if they want to, because we want to make sure that they’re not left behind,” Bowman said. “We also want to make sure they’re engaging in a way that separates those digital assets on their balance sheets from their regular business activity, so we can ensure that safety and soundness remains but they can also offer the kind of services their customers want.”
