Fed to restructure bank supervision for greater accountability

The Federal Reserve is planning a major overhaul of its bank supervision structure to improve accountability, according to Fed Vice Chair for Supervision Michelle Bowman. The central bank aims to replace the current system, where regional Fed presidents oversee bank examinations, with a new framework that gives Washington officials clearer responsibility.

Under the proposed changes, the Fed will create five geographic supervisory regions, each led by a new ‘regional leader.’ While regional staff will still conduct examinations, these leaders will be responsible for all supervisory activities in their areas. Bowman criticized the existing structure, stating it ‘disincentivised a critical link between responsibility and accountability,’ citing an independent review of Silicon Valley Bank’s collapse that found Fed examiners were slow to act.

Bowman also criticized the Fed’s reliance on committees for bank supervision, arguing that this approach delayed action and blurred accountability. She proposed streamlining the use of such committees to prevent ‘plausible deniability’ and encourage prompt action by examiners. Additionally, the Fed will review asset thresholds that determine when banks face stricter regulations, considering mechanisms to update these thresholds every five years to reflect inflation and economic growth.

Since taking on her role in 2025, Bowman has led a broad overhaul of how the Fed regulates the largest and most complex banks. She has replaced supervisory leaders, reduced staff, and issued guidelines to focus examiners on material financial risks rather than minor procedural issues. The proposed changes could allow banks more room to expand before triggering additional capital, liquidity, and stress-testing rules.