Federal Reserve reshuffles bank supervision model for better accountability

The Federal Reserve has unveiled plans to overhaul its bank supervision model, shifting accountability closer to Washington. The current system, where regional bank presidents oversee examinations, will be replaced with a new structure featuring five geographic regions, each led by a designated regional leader.

Fed Vice Chair for Supervision Michelle Bowman emphasized that the existing setup lacked accountability, citing an independent review of Silicon Valley Bank's collapse. The review found that Fed examiners were slow to act, partly due to structural inefficiencies. Bowman stated that the new model aims to "implement a culture of accountability and clear decision-making authority."

Under the new plan, regional leaders will oversee all supervisory activities, though examinations will still be conducted by staff at regional Reserve Banks. Bowman also criticized the Fed's reliance on committees, arguing that they created delays and unclear responsibilities. She suggested streamlining their use to prevent "plausible deniability" and encourage prompt action.