Bowman: Tailored bank asset thresholds needed

Current bank asset thresholds are not accounting for activities, risk profiles or business models, said Federal Reserve Vice Chair for Supervision Michelle Bowman..Testifying Feb. 26 before the Senate Banking Committee, Bowman supported raising asset thresholds she sees as not keeping pace with inflation and economic growth. Bank regulators under the Trump administration have proposed increasing FDIC continuous exam thresholds to $30 billion and raising OCC supervision thresholds to $700 billion for large banks. Bowman also reiterated her support for regulatory tailoring, including revising the community bank leverage ratio. The Federal Reserve, FDIC and Office of the Comptroller of the Currency have proposed lowering the leverage ratio — an optional framework intended to simplify capital requirements — to 8 percent from 9 percent.Bowman called for updating thresholds under the Bank Secrecy Act and anti-money laundering, arguing long-unchanged reporting triggers for currency transactions and suspicious activity reports place an uneven burden on smaller banks.She also described other regulatory changes underway. The central bank is conducting its third review under the Economic Growth and Regulatory Paperwork Reduction Act to eliminate perceived outdated or overly-burdensome rules. She said regulators are exploring ways to streamline M&A and de novo charter applications for community institutions.The Federal Reserve Board recently ended the use of “reputational risk” as a supervisory factor and proposed a rule to prohibit Fed personnel from pressuring banks to deny services to customers based on political or religious beliefs.“Our supervision and regulation must support a safe and sound banking system that fosters economic growth while also safeguarding financial stability,” Bowman told lawmakers.Bowman also discussed the condition of the banking system, which she said remains “sound and resilient” amid strong capital levels, ample liquidity and solid profitability. Lending is increasing and non-performing loans have fallen across most categories, she said.