Federal Reserve Board Vice Chair for Supervision Michelle W. Bowman, in remarks on the economy and community bank capital, set out her case for beginning to gradually lower the federal funds rate toward a neutral setting and outlined priority areas for community bank-focused supervisory and regulatory reform. She also announced that the Board will host a community banking conference in Washington, D.C., on October 9. Bowman dissented from the Federal Open Market Committee decision to hold the policy rate, noting the target range has been held at 4-1/4 to 4-1/2 percent and arguing that inflation is moving closer to 2 percent once temporary tariff effects are excluded while labor market conditions show increasing fragility. On community banking, she said the Federal Reserve is already reviewing the community bank leverage ratio (CBLR), liquidity sources and related expectations, and capital options for mutual banks, and suggested the CBLR may need redesign and recalibration to better deliver regulatory relief, including potentially reducing the requirement from 9 percent to 8 percent within the statutory 8 to 10 percent range. She also pointed to recent supervisory changes such as the decision to remove reputational risk from the examination process, alongside additional work on supervisory transparency and efficiency, defining “safety and soundness,” reviewing asset thresholds used for supervisory categories and regulatory requirements, and updating Bank Secrecy Act and anti-money-laundering requirements. Bowman noted that additional employment and inflation data will be available before the next FOMC meeting in September. On fraud, she highlighted the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency request for information on payments and check fraud, with comments due by September 18, and pointed to the need for a coordinated strategy that could include revisiting Regulation CC.
Federal Reserve Board 2025-08-09
Federal Reserve Board’s Bowman argues for beginning gradual rate cuts and signals potential changes to the community bank leverage ratio
Federal Reserve Board Vice Chair for Supervision Michelle W. Bowman advocated for gradually lowering the federal funds rate and outlined priorities for community bank regulatory reform, including potential changes to the community bank leverage ratio. She dissented from the Federal Open Market Committee's decision to maintain the policy rate, citing inflation trends and labor market fragility. Bowman also highlighted reviews of supervisory practices and a coordinated strategy to address payments and check fraud.