Fed’s Merger Math Hurts Rural Banks Says Bowman

Federal Reserve Vice Chair for Supervision Michelle W. Bowman has criticized the central bank’s merger review process, arguing that it unfairly disadvantages rural and small-town banks. In a speech on October 6 at the Community Banking Research Conference in St. Louis, Bowman claimed the Fed’s competitive analysis for bank mergers is outdated and harms community lenders. She said the current approach understates the real competition these banks face, which can block or delay mergers that might otherwise strengthen local banking markets.

Bowman highlighted three key areas needing regulatory reform. First, she pushed for modernizing merger reviews to better reflect the competitive landscape in underserved markets. Second, she urged federal and state banking agencies to do more to support the creation of new banks, or de novo formations, including clarifying approval standards and setting reasonable processing timelines. Third, she noted that the call report, a regulatory filing banks must submit, remains overly burdensome and needs further simplification.

The speech aligns with Bowman’s broader agenda of easing regulations for smaller financial institutions. She has previously suggested rolling back certain requirements while maintaining systemic risk oversight. While Bowman did not discuss monetary policy, she did hint that the Fed may update fixed-asset thresholds later this year. Her public criticism of the Fed’s merger test raises the likelihood of future changes to the analysis process.