WASHINGTON–The ways technology is changing as well as evolving attitudes about workplace preferences has led the Federal Reserve to launch an effort aimed at investigating what it means to its supervisory functions.
Speaking to the Community Banking in the 21st Century Research and Policy Conference in St. Louis, Federal Reserve Governor Michelle W. Bowman said, “We need to look ahead and make sure that we’re adjusting our supervisory model in ways that allow banks greater flexibility to innovate to compete in today’s quickly evolving banking environment – without sacrificing important consumer protections or the health and safety of our banking system.”
Five Principles
Bowman told the meeting she believes there are five principles that should guide a new approach to supervision at the Fed, including:
- Maintaining a commitment to preserve the stability, integrity, functionality, and diversity of the banking system.
- Preserving consumer protection as the Fed innovates and ensures banks can safely offer financial products and services that consumers demand and that are uniquely tailored to their circumstances and goals.
- Avoiding adding, when adjusting the supervisory approach, new burdens on banks, particularly on those that maintain a more traditional business model.
- Enhancing transparency around supervisory expectations for safety and soundness and consumer compliance matters and be timelier in feedback to banks. “We must fully leverage our distributed structure to delegate decision making to our Reserve Banks, without diminishing the Board’s important policymaking and oversight role over the supervision of banks,” Bowman said.
- Ensuring the ability to adjust supervisory expectations “effectively and efficiently” as conditions warrant to enable banks to be more flexible in serving their communities and in providing credit to the areas of the economy that most need it.
Changes to be Considered
In order to ensure those principles are followed, Bowman said the Fed will need to consider changes in its supervision workforce, processes and technology; the structure of its supervisory activities for all supervised firms; alignment of the agency’s supervisory function; and how innovations in technology (such as artificial intelligence) can be best used.