The Fed Pushes for More Flexible Bank Regulations
A senior Federal Reserve official overseeing the banking sector has warned the Financial Stability Board (FSB) against imposing overly rigid regulations across multiple countries. Fed Vice Chair for Supervision, Michelle Bowman, believes global regulations must remain flexible because each country has its own economic conditions, financial systems, and risks.
In her speech at the Bank Policy Institute conference in London on Monday (July 13), Bowman said the FSB should encourage a more flexible approach so that banking supervision can be tailored to the needs of each jurisdiction. She argued that overly uniform regulations could actually reduce the effectiveness of these international supervisory bodies.
The United States remains active in the FSB and the Basel Committee on Banking Supervision, despite the Trump administration's withdrawal from several other multilateral organizations. This demonstrates that the US continues to value basic global standards that can maintain a level playing field among banks.
However, Bowman believes global institutions need to focus more on core risks in the financial sector, rather than overly addressing administrative matters that have little impact on bank safety and soundness. Domestically, US regulators are also pursuing a modernization agenda, including relaxing some bank capital regulations and narrowing the scope of supervision.
Bowman described modernization as an ongoing effort to maintain financial stability. He stated that regulations must be continuously improved, studied, and adapted to market developments, technology, and emerging risks.
Several other countries have also begun reviewing their banking regulations. The Bank of England recently proposed relaxing some capital rules, while emphasizing that such changes should not compromise the security of the financial system. Meanwhile, the Basel Committee also approved a limited review of capital rules after US officials assessed that the current treatment favored European banks.
For the market, Bowman's statement indicates that the direction of global banking regulation is shifting toward a more flexible approach. If bank capital rules are relaxed, banks could potentially have greater leeway to extend credit. However, investors still need to be mindful of financial stability risks, especially amid geopolitical uncertainty, developments in AI, and changes in central bank policy. (arl)
Source: Newsmaker.id
