Federal Reserve Board Vice Chair Bowman calls for indexed community bank thresholds and greater transparency in supervision and applications

In closing remarks at the Federal Reserve Board’s Community Bank Conference, Vice Chair for Supervision Michelle W. Bowman outlined priorities for “right-sizing” regulation and supervision for community banks, including reconsidering how community banks are defined, tailoring regulatory thresholds, and sharpening supervisory focus on material financial risk. Bowman argued that reliance on fixed asset thresholds is increasingly misaligned with inflation and economic growth and can inadvertently subject smaller, less complex banks to requirements and expectations designed for larger firms. She proposed adjusting key thresholds for growth and indexing them for future changes, flagged perceived shortcomings in how the optional community bank leverage ratio (CBLR) was calibrated, and called for a more predictable applications process with clear public standards, clearer information requirements, and action within statutory timeframes. As an example of improved transparency, she pointed to the Board’s issuance on 8 October 2025 of frequently asked questions and two templates for mutual banks considering capital raising, including options for instruments that could qualify as tier 1 common equity or additional tier 1 equity. She also said that ongoing changes in supervisory practices would be more effective if accompanied by revisions to the definition and scope of confidential supervisory information (CSI), and that supervisory standards should be calibrated so ratings reflect a bank’s financial condition and material risks. The mutual bank capital materials were presented as a starting point that could be refined as mutual institutions work to implement the approach.