Federal Reserve to restructure US bank supervision model

Investing.com -- The Federal Reserve announced plans Tuesday to restructure its supervision of US banks by replacing the current system where regional bank presidents oversee examinations with a new model that will increase accountability to Washington.

Fed Vice Chair for Supervision Michelle Bowman said the restructuring will establish five new geographic regions for bank supervision, each led by a regional leader. Under the current system, Fed leaders in Washington set bank examination policy while actual supervision is conducted and overseen by the 12 regional Fed banks across the country.

In prepared remarks for a conference at the St. Louis Fed, Bowman said the existing structure "disincentivized a critical link between responsibility and accountability." She referenced an independent review of the collapse of Silicon Valley Bank that she commissioned, which found Fed examiners were slow to take action.

"The Federal Reserve supervisory function will be realigned to implement a culture of accountability and clear decisionmaking authority," Bowman said.

The new regional leaders will be responsible for all supervisory activity, which will continue to be conducted by regional Reserve Bank staff. Currently, regional Fed presidents monitor supervision in their respective districts.

Bowman also criticized the Fed's heavy reliance on committees in conducting bank supervision, arguing this created delays and unclear responsibilities among central bank staff when problems emerged at banks. She said their use should be streamlined.

"In practice, these committees became a source for plausible deniability and a disincentive for examiners to take prompt and decisive action to address identified risks," she said.

Original Article

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