Fed Gov. Bowman on liquidity, supervision and regulatory reform

Federal Reserve Governor Michelle Bowman spoke at a research conference in Dallas on reform and the future of the banking system. Bowman started off noting the passing of the one year anniversary of the Silicon Valley Bank (SVB) and Signature Bank failures; the failure of these banks prompted a big discussion of regulatory reform.

“As part of the reform agenda, we must consider how to operationally enhance and optimize tools like the discount window to meet banking system liquidity needs more effectively,” Bowman said. She emphasizes a current proposal expanding the hours of operation for the Fedwire Funds Service and the National Settlement Service, as well as the discount window.

Bowman highlights an important step in the reform process is to improve the prioritization of safety and soundness in the examination process. “This includes avoiding issues that are only tangential to statutory mandates and critical areas of responsibility. Where necessary, it also includes adopting a more proactive approach for bank management and bank supervisors to deal with identified risks.”

She closes with, “Before proposing regulatory reform measures to remediate or address issues identified during the spring 2023 banking stress, we should first reflect on the causes that contributed to the failures of SVB and Signature Bank. These bank failures were followed by government intervention in the form of a guarantee on uninsured deposits at these institutions, and the creation of a broad-based emergency lending facility—the Bank Term Funding Program—designed to reassure the market about the underlying strength of the U.S. banking system.”

Read Bowman’s full speech here.