Federal Reserve Moves to Reshape Bank Supervision Structure

The Federal Reserve is proposing a major overhaul of its bank supervision structure, shifting away from the current district-based model. The central bank plans to create five new geographic regions, each led by a supervisor who will report directly to Washington. This change aims to improve accountability and decision-making in the wake of the Silicon Valley Bank collapse, which an independent review found was exacerbated by slow examiner responses.

Federal Reserve Vice Chair for Supervision Michelle Bowman has been a driving force behind this restructuring. In prepared remarks for a conference at the St. Louis Fed, Bowman criticized the existing framework for weakening the link between responsibility and accountability. She argued that the current structure, which relies heavily on committees, delays responses and blurs responsibility when problems arise. Bowman has already replaced supervisory leaders and issued guidance to focus examiners on material financial risks rather than minor procedural issues.

The restructuring is part of a broader regulatory revamp Bowman has been pursuing since taking her role in 2025. Later this year, the Fed will review and potentially update bank asset thresholds that determine when tougher requirements kick in. This review includes considering inflation-adjusted mechanisms that could delay stricter capital, liquidity, and stress-testing rules for expanding midsized lenders. Banks have long argued that static asset thresholds become outdated over time, pulling firms into tighter oversight regimes that were not originally designed for them.