BPInsights: June 7, 2025

BPI Response to Vice Chair Bowman’s Speech on Bank Supervision

Federal Reserve Vice Chair for Supervision Miki Bowman, newly confirmed by the Senate on Wednesday, delivered a speech today at the Georgetown University McDonough School of Business Psaros Center for Financial Markets and Policy. The speech outlined her vision for key bank examination and supervision reforms, including the elimination of regulatory box-checking, a renewed focus on regulatory tailoring, stress testing and potential modification of the supplementary leverage ratio.

BPI issued a statement:

“Vice Chair Bowman’s remarks signal a constructive return to evidence-based rulemaking. Financial regulation directly affects the health of the U.S. economy and has real implications for banks’ ability to support businesses and communities. Given the stakes, bank examination should be measured by the risk it reduces, not the paperwork it produces.”

Additional Highlights:

• Material focus: Supervision focused on material financial risks is “inherently more effective and efficient,” Bowman said. “We should be cautious about the temptation to overemphasize or become distracted by relatively less important procedural and documentation shortcomings.” She also said: “Checklists should not distract examiners from the central purpose of examinations.” Bowman said she will review the use of horizontal reviews, with the goal of ensuring they are transparent and compliant with the Administrative Procedure Act, and the use of guidance in supervision, which she said should clarify expectations.
• Tailoring: Bowman, a longstanding advocate of regulatory tailoring, recommended applying that principle to supervision as well as rulemaking. She noted past tendencies at the Fed to “push down” requirements meant for the largest banks to smaller ones. She warned against the gradual erosion of distinct regulatory and supervisory standards – “essentially the subtle reversal of tailoring over time.” Regulators and lawmakers should “consider whether the bank regulatory framework includes appropriate thresholds for defining distinct categories of institutions, and whether simple fixes—for example, the indexing of thresholds to inflation or growth—could better ensure a sound, tailored approach that remains durable over time.”
• Correcting the ratings mismatch: Fed supervisory ratings last year suggested that a majority of large banks were in unsatisfactory condition, yet the majority of the same banks met all supervisory expectations for capital and liquidity – suggesting the ratings are not reflective of banks’ material financial risks. “The Federal Reserve will soon begin to address this mismatch, by proposing changes to the Large Financial Institution ratings framework,” Bowman said. “The proposed changes will be designed to result in a more sensible approach to determining whether a firm is well-managed, no longer disproportionately weighting a single framework component for a firm that has demonstrated resilience under a range of conditions and stresses.” She also called for considering whether the broader ratings framework, including CAMELS ratings, is appropriately tailored.
• Capital: When it comes to capital, policymakers should look at the big picture, Bowman said. “While each component is important, the aggregate calibration of requirements is ultimately the most meaningful, and we must examine whether this approach in totality appropriately captures risk.” Over-calibrated capital requirements can create market distortions, “disfavoring some activities over others in a way that is divorced from prudential safety and soundness goals and economic conditions” – she noted leverage ratios as a key example. “I expect that in the near future, the agencies will publish a proposal to help address this concern and ensure that the eSLR resumes functioning as a backstop capital requirement,” Bowman said.
• Basel, GSIB, stress tests: This change is necessary, but may not be sufficient, Bowman said, previewing a Fed conference in July that will feature discussions on the capital framework. “In addition to considering potential changes to leverage ratio requirements and stress testing, the capital conference will also include a discussion of potential reforms to the GSIB surcharge and the Basel III capital requirements,” she said. She noted the Fed’s ongoing effort to provide more transparency in stress testing. “The lack of transparency around the models used in stress testing prevents meaningful discussions about how the stress tests can be improved,” she said.
• Unintended consequences: Bowman discussed the need to review post-Global Financial Crisis regulations – many of which were “backward-looking” — with a view to addressing unintended consequences. “Some of the regulations put in place immediately after that financial crisis resulted in pushing foundational banking activities out of the regulated banking system into the less regulated corners of the financial system,” she said. “We need to ask whether this was and continues to be appropriate.”
• Waiting in limbo: In the speech and the Q&A following the remarks, Bowman warned against the harmful consequences of lengthy delays in merger applications. “We need to understand the consequences of delaying decisions, and we need to make sure that we’re creating a system that’s transparent, fair and predictable,” she said.

Five Key Things

1. Bipartisan Lawmakers Urge Leverage Ratio Reform

A bipartisan group of House lawmakers called on the Fed and OCC in a letter this week to enact leverage ratio reform. Reps. Andy Barr (R-KY), Ann Wagner (R-MO), Brad Sherman (D-CA) and Bill Foster (D-IL), subcommittee leaders on the House Financial Services Committee, urged Fed Chair Jerome Powell and Acting Comptroller Rodney Hood to consider adjusting key leverage capital ratios to support Treasury market liquidity. Binding leverage ratios disincentivize banks from intermediating in the Treasury market, which can exacerbate liquidity crunches under stress, the lawmakers said. “Effective intermediation of financial markets is critical to the functioning of our nation’s economy, and we urge you to consider adjustments to the leverage ratios that will both promote financial stability and a resilient market for U.S. Treasuries,” the members of Congress wrote.

2. Lawmakers Examine GLBA, Section 1033 and the Future of Financial Data Privacy Laws

House lawmakers examined the role of data privacy and sharing laws in a Subcommittee on Financial Institutions hearing this week, focusing on whether existing statutes appropriately balance innovation and consumer protection.  

• Key Quote: “Gaining access to a consumer’s data is just as lucrative as gaining access to their bank account.” – Rep. Bill Huizenga (R-MI).  
• GLBA and Federal Preemption: Subcommittee Chair Andy Barr (R-KY) acknowledged the effectiveness of the Gramm-Leach-Bliley Act but questioned whether it remains “fit for purpose” in today’s digital financial landscape. Witnesses argued that the growing patchwork of conflicting state privacy laws underscores the need to reinforce, rather than replace, GLBA through clear federal preemption. Andrew Morris of America’s Credit Unions warned that this fragmentation “siphoned resources away from services to consumers and the core lending activities of credit unions.” Scott Talbott of the Electronic Transactions Association echoed the concern in his written testimony, stating: “Consumers deserve consistent rights, and businesses deserve consistent rules, regardless of geography.” 
• Section 1033: The hearing also spotlighted concerns with the CFPB’s Section 1033 rule. While lawmakers and witnesses expressed broad support for empowering consumers with data access, many argued that the CFPB’s rule falls short in key areas:
  • Secondary Data Uses and De-identifying Data: Future of Privacy Forum’s Zoë Strickland referenced the rule’s failure to address standard practices such as secondary data uses and the role of de-identified data practices: “One is the secondary uses of information. They didn’t allow those — even consumers to agree to them. And that’s what open banking is all about, so it made for a very awkward, sort of, consumer experience. It also didn’t really allow the use of de-identified data, which is a common practice not only in the financial sector but in every sector.” 
  • Fraud and Liability: Rep. Brad Sherman (D-CA) pointed to failures to enforce third-party liability: “One of the issues that arises is one we’ve seen for a long time, and that is what happens if there’s hacking. We’ve seen this issue with regard to giant retailers having information; getting hacked; and then, turning to the banks and saying, ‘You have to pay all the costs of dealing with consumers on this issue.’ It’s been well established in tort law theory for well over a hundred years that the liability, the cost of an accident should be put on the party who could have invested to prevent that accident. So whether — whenever a fintech company is the entity that gets hacked, they’re the ones that should bear the cost of the consumer repair. The 1033 rule asks fintech companies that want to access to [a] bank’s data to comply with the same Gramm-Leach-Bliley financial data protection requirements that bank must comply with, but there’s no specific enforcement mechanism for this rule.” 
  • Screen Scraping: The rule also failed to fully eliminate screen scraping. Rep. Bill Foster (D-IL) addressed the problems with this practice in his remarks: “As someone who’s done a share — a fair share of programming of screen scraping as well as APIs, I share your enthusiasm for getting rid of screen scraping. It’s unstable, it’s dangerous to privacy, and it’s just a pain in the ass.” 

When asked about what would happen if the rule was eliminated, Strickland stated, “…open banking does exist today and has been a developing practice in the United States for a few years. So it would still continue.”

3. Fintech, Tailoring, Capital: Acting OCC Chief Outlines Agenda

OCC Acting Comptroller Rodney Hood laid out regulatory priorities, including tailoring regulation, adjustments to the capital framework and promoting innovation, in remarks at a conference this week. He also called for supporting financial inclusion. Here are a few highlights. 

• Tailoring and supervision: The OCC “categorically reject[s] a one-size-fits-all approach” to regulation and supervision, Hood said. He called instead for a risk-based approach. “This ensures that every institution is evaluated based on its individual profile—not a rigid template,” he said. Hood also called for increasing certainty and focus in supervision. He hailed the agency’s recent action to remove reputational risk as an examination element, calling it “a move that enhances transparency and reinforces that business decisions belong to banks, not to regulators.” He added: “By focusing supervisory attention on clear, well-defined risk categories, we provide certainty that allows banks to serve all legal businesses, consistent with their policies and risk tolerance.” 
• Capital: Hood expressed support for a capital framework that “supports resilience – but does not constrain growth.” He cautioned against gold-plating capital requirements. “I’ve engaged extensively with my U.S. and global counterparts to advocate for capital levels that are strong, but appropriate—not excessive,” he said. “At a recent meeting in Basel, I conveyed that sentiment directly. I was heartened to see consensus from the international community that the U.S. proposal had gone beyond what was necessary.” The OCC is also examining adjustments to the supplementary leverage ratio “to ensure it functions as a true backstop—not a primary constraint that limits lending unnecessarily,” he noted. Separately, Acting FDIC Chairman Travis Hill said this week that he expects a reproposal of the Basel III Endgame measure.  
• Innovation: Hood also emphasized his goal to enable innovation in digital assets and support bank-fintech partnerships. He noted the OCC’s recent removal of restrictive language about banks engaging in digital asset activities. “That single action restored confidence in regulatory clarity and allowed banks to proceed with innovation in a way that is both prudent and purposeful,” Hood said. 

4. Are In-House Courts Unconstitutional? That’s the Question for the 5th Circuit

Federal banking regulators’ in-house courts are at the center of three cases before the Fifth Circuit. Oral arguments in the cases this week raised legal concerns about banking agencies’ use of in-house tribunals to impose penalties. It is not yet clear how the Fifth Circuit will rule, but the Supreme Court’s ruling in SEC v. Jarkesy last year restricted the SEC’s ability to use such courts. The enforcement actions in the three Fifth Circuit cases were brought by the FDIC, OCC and NCUA. The defendants say the in-house proceedings violated their constitutional right to a jury trial, a similar logic to that used in the Jarkesy decision. The banking agencies argue that their enforcement proceedings fall within a “public rights” exception permitting in-house adjudication of claims involving government benefits, privileges or resources. 

5. FSOC Discusses Supervision, Digital Assets

The Financial Stability Oversight Council met on Wednesday to discuss bank supervision, digital assets and other topics, according to a readout of the closed-door meeting. The convening forum of financial regulators is chaired by the Treasury Secretary. At the meeting this week, the prudential regulators provided updates on “their efforts to enhance their supervisory and regulatory frameworks and to focus bank supervision on material financial risks,” according to the readout. Supervision reform has been a major focus for Treasury Secretary Scott Bessent. The regulators also “discussed their continued collaboration to facilitate support for economic growth by banks and other financial institutions.” In addition, the meeting featured a Treasury staff briefing on the work of the President’s Working Group on Digital Asset Markets and updates on that topic from leaders of the SEC and CFTC, as well as discussions on private credit and commercial real estate. 

In Case You Missed It

What’s New in M&A: Recent Regulator Remarks

The Biden administration demonstrated a “misguided” hostility to mergers in general, including bank M&A, Acting FDIC Chairman Travis Hill said at a recent conference. He rebutted the notion that mergers have diminished competition in the banking sector, noting the prevalence and competitive impact of nonbanks offering bank-like services. A recent decline in bank charters, sometimes cited by bank merger critics, is partly due to a drop in new bank formation, he said. He noted the potential benefits of bank mergers to financial stability.  

• OCC: Acting Comptroller Rodney Hood also mentioned M&A in remarks at the same U.S. Chamber of Commerce conference, noting the OCC’s approval of a merger in April after a “rigorous review” of its competitive, consumer and financial system effects. “We also issued an interim final rule restoring streamlined application and expedited review procedures, ensuring that well-managed and well-capitalized institutions can merge responsibly—supporting scale, innovation, and economic vitality,” Hood said. 
• DOJ: A shift in policy was evident in remarks by Bill Rinner, a senior Justice Department antitrust official, at a George Washington University conference. Rinner, who serves as Deputy Assistant Attorney General and Head of Merger Enforcement in the DOJ’s Antitrust Division, said the department does not “view dealmaking with inherent suspicion.” He likened the antitrust process to a “scalpel” rather than a regulatory “sledgehammer.” Keeping the scalpel sharp “allows us to surgically remove unlawful transactions (or their unlawful aspects) without nicking neutral deals or wounding procompetitive ones,” Rinner said. “The statutory enforcement regime, including available remedies, implicitly recognizes that the vast majority of mergers do not give rise to competitive concerns,” he said. “For those that do, remedies may be available that adequately mitigate potential harm.” 

The Crypto Ledger

Here’s what’s new in crypto.

• House market structure bill: House Financial Services Committee Democrats are pushing to delay marking up the recently reintroduced crypto market structure bill, according to POLITICO. The lawmakers have raised questions and concerns, particularly about a provision of the bill that would exempt certain sales of digital commodities from SEC oversight. The markup is scheduled for June 10. At a crypto-focused hearing this week, Chairman French Hill (R-AR) said that digital assets offer benefits to the economy, but “to fully recognize these benefits, we must ensure that there is a functional regulatory framework in place.” Democrats such as Ranking Member Maxine Waters (D-CA) and Rep. Stephen Lynch (D-MA) expressed concern about the market structure bill. Rep. Bill Huizenga described the tendency of policymakers to make binary distinctions when categorizing financial assets, and the challenge of binary thinking about digital assets: “Legislators and regulators love to declare things fish or fowl, right? Black or white. Commodity or security. Well, it turns out this is a bit of a platypus as I describe it,” he said. Rep. Barry Loudermilk (R-GA) noted that the market structure bill contemplates the role of stablecoins in a broader digital asset ecosystem despite payment stablecoins being addressed by a separate bill.
• Senate counterpart: The Senate will likely soon introduce its own crypto market structure bill, which Sen. Cynthia Lummis (R-WY) said she expects to look similar to the House version. Lummis expressed hope that the bill will be introduced with bipartisan support.

New York Fed Releases Annual Report on Markets Desk

The Federal Reserve Bank of New York this week released its annual report on the “Desk,” the central bank’s market operations function. The Desk oversees the purchases and sales of securities for the System Open Market Account (SOMA), an important function in its extensive balance sheet policy in recent years. The report covered various topics such as the Fed’s monetary policy implementation, open market operations, balance sheet developments, counterparties and operational flexibility and resiliency. Read the full report here.    

• Crucial intersection: The report explained how the balance sheet and the monetary policy implementation interact. The Fed can purchase assets to maintain “ample” reserves over time, “such that control over short-term interest rates is achieved primarily through administered rates.” Changes in the balance sheet’s size or composition can also influence financial conditions, the report said. Lastly, “asset purchases can on occasion be used to address periods of severe market dysfunction that could impede the transmission of monetary policy and affect broader financial stability.” 
• Money market dynamics: The report’s Open Market Operations section described dynamics in money markets. Money market rates such as Treasury bill yields and repo rates gradually increased in 2024; the spread between SOFR and the IORB became narrower. Money market funds, the largest users of the Fed’s ON RRP facility, responded to increasing private market rates by decreasing uptake of ON RRP and shifting to Treasury bills and private repo. The section also described changes expected as a result of the upcoming rollout of central clearing requirements in the Treasury market. 
• Standing repo facility: The report described recent changes to auction timing for the Fed’s standing repo facility. The Fed added a morning operation to the regularly scheduled afternoon operations, with both settling in the afternoon. The number of SRF counterparties continued to expand in 2024, with 12 banks added and a total of 37 depository institution counterparties at the end of the year. 
• Fed balance sheet and income: The report also includes a projection of the Fed’s balance sheet and income. Drawing on responses to its survey of market participants, FRBNY projects that QT will end in January 2026 and that the Fed will return to profitability toward the end of this year. 

Traversing the Pond

Here’s the latest in international banking policy.   

• Cross-border payment providers: The Bank for International Settlements published a report recently taking note of fragmentation in regulating and supervising cross-border payments services providers, which increasingly include nonbanks as well as banks. The report outlined six Financial Stability Board recommendations to improve consistency in oversight of these firms, such as ensuring regulations are proportional to the risks that are identified; promoting consumer protection and addressing consumer harms; and publishing expectations for payments-related supervision.
• ECB eyes bank links to private markets: Claudia Buch, the ECB’s top supervisory official, signaled that the central bank will apply heightened scrutiny to banks’ connections to private capital markets. In a recent blog post, Buch warned: “As complexity and leverage build up outside the regulatory perimeter, risk management of banks, transparency, and regulatory frameworks need to keep pace.” She cautioned about the risk of shocks amplified through the financial system by links between banks and private market funds (such as private equity or private credit).   

BPI’s Scott Frame Talks Securitization in Recent Podcast

In a recent Structured Credit Investor “SCI in Conversation” podcast interview, BPI Deputy Head of Research Scott Frame discussed how the post-crisis regulatory regime has stymied growth in the securitization market. He also noted potential changes to this market that could occur in the current administration. Listen to the podcast episode here.  

Fed Lifts Wells Fargo Asset Cap

The Federal Reserve on Tuesday announced it had terminated its asset cap on Wells Fargo, marking the end of a seven-year-long restriction on the bank’s growth as the result of a 2018 enforcement action. The action had set out conditions for the bank to meet in order to remove the cap, including requirements to improve its governance and risk management program and complete a third-party review of those improvements. “The removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies and that the bank has fulfilled the conditions required for removal of the growth restriction,” the Fed stated in a press release. 

PNC Names Ma as Chief Investment Strategist of Asset Management Group

PNC Asset Management Group has named Yung-Yu Ma as its chief investment strategist. Ma’s more than 20 years of financial services and consulting experience includes nearly 10 years leading the investment strategies and processes for a leading wealth management firm. In the new role, Ma will be responsible for developing investment solutions for both individual and institutional clients, among other responsibilities.