Vice Chair Michelle Bowman's Testimony on the Federal Reserve Supervision and Regulation Report

**Joe Silvia** (0:01)
Hello, and welcome to the Money and Banking Law Podcast with Joe Silvia, brought to you by Duane Morris, an international law firm with roughly 30 offices and 1,000 lawyers all over the world. I'm your host, Joe Silvia. I'm a former Federal Reserve lawyer who represents banks, fintechs, and financial services clients on M&A, payments, and regulatory matters at Duane Morris. I'm also a core member of our banking, fintech, and digital assets and blockchain practices. Now, while we can't provide legal, financial, investment, or tax advice on the podcast, our goal for the Money and Banking Law Podcast is to inform and educate our clients and friends on both the fundamental concepts and structure of the banking ecosystem, as well as critical developments in the law and regulation of money and banking. Thanks for joining us today. As always, if you have any questions from any of our podcast episodes, please reach out to me at jsilvia at duanemorris.com. On today's episode, we're going to be talking about Vice Chair for Supervision, Nikki Bowman's recent testimony and the release of the Federal Reserve Supervision and Regulation Report in June of 2026
Okay, so what was interesting about Mickey Bowman's report and testimony is a couple of different things. She first kind of went through some of the current banking conditions in the United States and indicated that right now, the banking system remains sound and resilient. She talked about strong capital ratios at financial institutions in the United States and significant liquidity buffers.
But she also talked about recent developments. She talked a little bit about innovation. She talked about some of the things that are in the Federal Reserve Supervision and Regulation Report that I'll mention in a minute. But I wanted to run through her testimony first and just kind of give an overview of some of the thoughts that came to mind when I was looking through this. So she talks about banking conditions, but within the banking conditions, she also mentions the competitive landscape that banks are seeing and as it evolves and specifically with respect to non-bank financial institutions. She mentions that they are capturing a growing share of the lending market, which is true in the United States. They're competing and she says, displacing traditional banks in some cases without facing comparable regulatory standards. So what's fascinating here is that she's calling these non-bank financial institutions out and saying, hey, you guys are competing with banks, especially in the lending context, you don't have the same regulatory standards or expectations. So this is something that we need to be looking at in terms of the growth for the future.
She indicates that the financial system is continuing to adapt and evolve to technological advances. She mentions the rapid evolution of AI capabilities. Here, I think there's a glimpse into the supervisory expectations and maybe supervisory priorities to some degree for Vice Chair Bowman because with respect to these technological advances, what she talks about after indicating that there's adaptation, there's rapid evolution, so on and so forth is she talks about cyber vulnerabilities and the need to identify the new vulnerabilities and the potential for cybersecurity attacks and cybersecurity issues and threats. So if I'm a financial institution in the United States, that's one thing, obviously, you've likely been paying attention to that already, but that's definitely something to take away as a potential supervisory priority for the Fed and I think for others as well.
In terms of recent developments, she talks a lot about the capital regulations and how they've been changing, how they look like they're changing based on what the Federal Reserve and some others are doing.
She talks about the community bank leverage ratio. She says the community banks generally remain a priority for the Federal Reserve. The Federal Reserve's supervisory and regulatory framework needs to be appropriately calibrated to support the growth of community institutions and community banks while also maintaining safety and soundness standards.
One of the things that I've mentioned before and that Vice Chair Bowman talks about a lot is tailoring. That idea, the concept of tailoring or customizing the supervisory process and expectations for banks based on their size and complexity is something that flows throughout her testimony or her prepared remarks, at least for her testimony. She goes on in recent developments to talk about the capital framework modernization beyond just the community bank leverage ratio. She talks about how there's been proposals out now, or there are proposals out now, to try and align risks, reduce overlaps and duplications, and support extensions of credit to the US economy, especially in mortgage lending context, while still preserving strong capital levels. The proposals to modernize the capital framework, they want capital to flow more efficiently while maintaining strong prudential standards that protect financial stability. These are her words through her testimony.