Michelle W Bowman: Responsive and responsible bank regulation and supervision

Speech by Ms Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, at the Salzburg Global Seminar "Global Turbulence and Financial Resilience: Implications for Financial Services and Society", Salzburg, Austria, 25 June 2023. 

Central bank speech  | 
28 June 2023

It is a pleasure to be with you here in Salzburg. Bank regulators, particularly in the United States, have come to an inflection point where we are again taking stock of the reforms implemented after the 2008 financial crisis and evaluating whether these reforms have proven to be sufficient. One justification for pushing these reviews forward has been the recent stress in the banking system.

The regulatory framework has evolved substantially since the 2008 financial crisis. The regulatory landscape has become more restrictive, with large increases in capital and liquidity requirements, and other post-crisis reforms to improve bank resiliency. Since that time, the banking landscape has also evolved. Today, to stay competitive, banks need to be able to quickly adopt new and innovative technology.

My remarks this afternoon will address the importance of a responsive and responsible regulatory framework, including regulation and supervision. A responsive framework adapts quickly to changing economic conditions, changing business activities and models, and emerging risks. A responsible framework enables regulators to make changes that are informed by open debate and take into account intended and unintended consequences. These two concepts-adapting to changing conditions, and transparency about regulatory adjustments-are intertwined. They inform my view about how bank regulation should evolve and adapt over time. This is particularly relevant now in light of the calls for reform of the regulatory framework, motivated in part by a desire to remediate perceived weaknesses that contributed to recent bank failures.