Federal Reserve Board Governor Michelle Bowman speech on concerning trends for “Defining a Bank,” was a highlight at the American Bankers Association’s 2024 Conference for Community Bankers in San Antonio earlier this week. The speech included her views on the cumulative and negative impacts of recent Federal regulatory actions on community banks.
“The tendency of policymakers can be to add new regulations, guidance, and supervisory expectations, becoming more and more prescriptive and creating a never-larger body of material that a banker must digest and apply over time,” Gov. Bowman said.
“At some point, however, this overwhelming body of material (more than 5,000 pages just last year) is simply undigestible by the individual or small staff at a community bank primarily responsible for making sure the bank meets all relevant expectations.”
Gov. Bowman also said she is concerned about shifting regulatory thresholds. She says the new CRA rule, under which banks with an asset size of $2billion are considered “large” is an example of the failure of joint Federal regulators to right-size.
“As I noted at the time the final rule was approved, the lack of recognition that these banks are fundamentally different, with different balance sheets and business models, represents a missed opportunity to appropriately tailor CRA expectations to a bank's size, risk, service area, and business model," she said. “I remain convinced that it is not sensible bank regulatory policy to apply the same evaluation standards to a bank with $2 billion in assets and to a bank with $2 trillion in assets.”
It continues to be clear that Gov. Bowman, a former community banker and Kansas state regulator, gets it. This is an important speech which other Federal regulators should read. See the full speech here.