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The Fed's Bowman: A Focus on Communication with State Regulators

During the annual CSBS fly-in, where state regulators visit Washington to meet with their federal counterparts, Federal Reserve Board Governor Michelle Bowman described how she wants to foster better communication between the Federal Reserve and state financial regulators. Bowman, a former Kansas state financial regulator and community banker, was confirmed as Board Governor last fall.

You can read her full remarks here. Below are highlights:

On the U.S. financial regulatory system: "The nature of financial regulation and supervision in the United States argues strongly for better coordination. To a much greater extent than in other nations, in the United States financial oversight is divided between the federal government and...the states. At the federal level, responsibility is further divided between different agencies...This system has evolved over time, and...there are some advantages to specialization. But this division of labor may, at times, inhibit information sharing."

On the benefits of greater coordination: "Better communication and information sharing between state banking commissioners and the Federal Reserve can further improve the early identification and resolution of emerging issues at community banks....[Also,] better communication...leads to better outcomes." 

On federal rule-making: "The community bank leverage ratio (CBLR)...is an example where it makes good sense to consult closely. I know you have a lot of knowledge and expertise to bring to bear on this issue, which helps explain why Congress has required the agencies to consult with the states....The Fed and the other agencies are now gathering and evaluating feedback on the CBLR...I am committed to re-engaging with you on the interagency proposal and ways we might be able to improve it." 

On community banks: "When community banks are the source for more than half of all lending to small businesses, which together account for two-thirds of private sector job creation, then the health of community banking has a big influence on the health of the U.S. economy....Since the financial crisis, the health of the community-banking sector has improved significantly....[with] sound levels of capital...strong earnings...[and that] no community banks failed in 2018." 

On vibrant communities: "Strong communities are the building blocks of a strong nation. They provide safety, education and economic opportunities, and help define the values we hold dear. Community banks...help us save and plan for a better future. The credit they extend helps preserve farming as a way of life for American families, and provides the means for small businesses to start and to thrive, which is so important to the health of communities." 

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