Federal Reserve to Centralize Bank Supervision Under New Plan

The Federal Reserve is planning a major overhaul of its bank supervision system, shifting away from a regional model to one more centralized in Washington. Fed Vice Chair for Supervision Michelle Bowman outlined the proposal on Tuesday, which would establish five new geographic regions for bank oversight, each led by a regional leader. Currently, policy is set in Washington, but the actual supervision is carried out by the twelve regional Fed banks. Bowman argued that the current structure weakens accountability, citing an independent review of the Silicon Valley Bank failure that found Fed examiners were slow to act.

Under the new plan, regional leaders would oversee all supervisory activities, though the work would still be performed by staff at the regional Reserve Banks. Bowman also criticized the Fed's reliance on committees for bank supervision, stating that this practice led to delays and blurred responsibilities. She suggested streamlining the use of committees to promote faster decision-making and clearer accountability.

Since taking on her role in 2025, Bowman has been leading a broader overhaul of the Fed's supervision of large and complex banks. She has replaced supervisory leaders, reduced staff, and issued new guidelines to focus examiners on material financial risks rather than minor procedural issues. Additionally, Bowman announced that the Fed would consider updating the asset thresholds that determine when banks face stricter regulations, potentially allowing banks more room to grow before triggering new requirements on capital, liquidity, and stress testing.