Fed to revamp bank oversight with regional leaders and accountability focus

The Federal Reserve is planning a major overhaul of its bank supervision system to improve accountability. Fed Vice Chair for Supervision Michelle Bowman announced the changes, which will replace the current structure where regional Fed presidents oversee examinations with a new system led by Washington officials. The central bank will establish five geographic supervisory regions, each managed by a new 'regional leader.' Bowman criticized the existing system, stating it 'disincentivised a critical link between responsibility and accountability.' She cited an independent review of Silicon Valley Bank's collapse, which found that Fed examiners were slow to act.

Under the new structure, regional leaders will be responsible for all supervisory activities in their territories, though staff at regional Reserve Banks will still conduct examinations. Bowman also criticized the Fed’s reliance on committees for bank supervision, arguing that it delayed action and blurred responsibility. She proposed streamlining the use of such committees to enhance decision-making.

Bowman has been leading a broad overhaul of how the Fed regulates large and complex banks since becoming the top regulatory official in 2025. She has replaced supervisory leaders, reduced staff, and issued guidelines narrowing the issues examiners should investigate. Bowman argued that examiners should focus on material financial risks rather than minor procedural deficiencies.

The Fed will also consider revising the asset thresholds that determine when banks face stricter regulations. The proposed changes could allow banks to expand more before triggering additional capital, liquidity, and stress-testing rules. Bowman suggested examining fixed-dollar asset thresholds and updating them every five years to account for inflation and economic growth. Banks have long argued that fixed thresholds become outdated and impose stricter regulations on institutions not originally intended for such oversight.