Bowman advocates for further investigation into regulatory thresholds and deposit insurance requirements.

Michelle Bowman, Governor of the Federal Reserve, recently spoke at a banking conference co-hosted by the Federal Deposit Insurance Corp. (FDIC) and the Conference of State Bank Supervisors. In her address, Bowman outlined her vision for a more adaptable and resilient banking system, emphasizing the importance of evidence-based rulemaking.

Bowman began by referencing the FDIC's May report, specifically focusing on the deposit insurance program and the concept of unlimited or targeted deposit insurance coverage. She expressed her belief that thorough research can insulate the banking system from policy swings over time, helping to prevent overreactive regulation and ineffective measures that fail to address systemic banking risks and challenges.

One of the key points Bowman raised was the need to reconsider the $10 billion-asset threshold used to define a community bank in the Dodd-Frank Act. She suggested moving beyond asset size thresholds when tailoring rules and instead considering business models. This shift, she believes, would lead to more targeted and effective regulations.

In 2023, Bowman announced that the Federal Reserve would conduct a review and broader discussion regarding the calibration of regulatory thresholds for banks and the insurance capital requirement system. This review aims to modernize the banking framework and ensure it can support technology-driven banking, as money movement can pose unprecedented risks.

The banking sector has faced turbulence this year, with three bank failures in March and May. In light of these events, Bowman advised policymakers to exercise restraint and patience, consider the evidence, and strive for well-calibrated policies that complement, rather than complicate or contradict the existing regulatory framework.

Bowman also called for increased engagement from shareholders, the public, and community bankers in dialogue on evolving deposit practices. She emphasized the importance of an "evidence-based approach" to bank regulation and the need for extensive research and analysis on various options, beyond just those developed in response to a bank run crisis.

Finally, Bowman addressed the trend of community banks being acquired by credit unions and questioned whether the current view that credit unions do not compete with banks is consistent with reality. She stressed the need for further research on bank funding models and deposit infrastructure to better understand this dynamic.

In conclusion, Bowman's speech at the banking conference underscored her commitment to evidence-based rulemaking and her vision for a more adaptable and resilient banking system. Her call for increased engagement, updated regulations, and a more nuanced understanding of the banking landscape will likely shape the future of banking policy in the United States.

Bowman advocates for further investigation into regulatory thresholds and deposit insurance requirements.