Bloomberg News
A top Federal Reserve official wants the central bank to revisit its post-financial crisis regulatory reforms.
Fed Gov. Michelle Bowman, in a speech this week, said the regulatory changes implemented as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 were “backward looking,” as they focused too squarely on the issues that led to the subprime mortgage crisis of 2007-9.
She also argued that since the crisis, regulators have taken an overly restrictive approach to minimizing risk in the banking sector and unduly hampered banks’ profitability.
“With well over a decade of change in the banking system now behind us post-implementation, it is time to evaluate whether all these changes continue to be relevant,” Bowman said. “Some of the regulations put in place immediately after that financial crisis resulted in pushing foundational banking activities out of the banking system into less regulated corners of the financial system. We need to ask whether this is appropriate.”
During her speech, delivered at the American Bankers Association’s Conference for Community Bankers, Bowman called for Dodd-Frank reforms to be examined during the Fed’s ongoing policy review, which is being conducted under the auspices of the Economic Growth and Regulatory Paperwork Reduction Act.
The EGRPRA requires agencies to review and collect public feedback on their regulations at least once every 10 years and eliminate rules that are unnecessary or overly burdensome. The Fed began its latest review a year ago and recently announced that it would hold a public outreach meeting as part of the review next month.
Bowman said the Fed’s prior EGRPRA reviews have been “underwhelming,” but she expects this process will be more productive. She added that the organization will be “responsive to concerns raised by the public.”
Should the review and ensuing report to Congress identify shortcomings in the Fed’s post-crisis policies, Bowman could play a key role in reforming or rolling back those policies. She is among the
President Donald Trump has yet to signal his intentions for filling the vice chair position. Because there are no vacancies on the Fed Board of Governors, he can either pick a current governor for the role or
Bowman — who was nominated to the Board twice during Trump’s first administration — has established herself as a leading voice on regulation and supervision, frequently discussing both topics in speeches and other public appearances. During the Biden administration, she also dissented to several regulatory proposals and criticized the approach taken by the Fed and other federal regulators.
Because of her advocacy, several state banking groups have
During her latest speech, Bowman also called for reforms to bank supervision, application reviews — for both new bank charters as well as mergers and acquisitions — and anti-money laundering enforcement, noting that the Fed should always look for ways to optimize its oversight of the banking industry.
“Our work to maintain an effective framework is never really complete,” she said. “Just as complacency can be fatal to the business of a bank, complacency can also prevent regulators from meeting their statutory obligation to promote a safe and sound banking system that enables banks to serve their customers effectively and efficiently.”