Industry applauds the Federal Reserve's introduction of new guidelines for bank supervision.

On June 25, 2025, Michelle Bowman, Vice Chair for Supervision of the Federal Reserve Board of Governors, sits down for an open meeting of the Board of Governors at the Federal Reserve in Washington.

WASHINGTON — Industry trade associations applauded the Federal Reserve's top banking regulator on Tuesday for releasing new rules for the organization's oversight of the financial system, while her predecessor criticized her.

The guidelines demand that bank examiners "not become distracted from this priority by devoting excessive attention to processes, procedures, and documentation" and instead concentrate on material financial hazards. The rules are outlined in a memo that was first sent to Fed workers on October 29 but was made public on Tuesday.

The principles would "sharpen" the central bank's focus and create "a more effective supervisory framework," according to Michelle Bowman, the Fed's vice chair for supervision.

In a written statement, Bowman stated, "We strengthen the foundation of the banking system while upholding transparency, accountability, and fairness by anchoring our work in material financial risks." In March, President Donald Trump appointed Bowman as vice chair.

Federal bank regulators have begun reducing rules governing the country's banking sector and other financial services firms since Trump assumed office. The Consumer Financial Protection Bureau was established in the wake of the 2008 financial crisis, but it is currently essentially dormant and has nullified a number of the rules it implemented under President Joe Biden.

The changes in banking monitoring at the Fed and other agencies this year were also harshly attacked on Tuesday by Fed governor Michael Barr, who was Bowman's predecessor as vice chair for supervision.

In a speech, Barr stated, "I think we are at a moment of inflection in the regulatory and supervisory approaches that help keep banks healthy." "There is increasing pressure to reduce supervision in ways that will make it more difficult for examiners to take action before it is too late to prevent an accumulation of excessive risk."

The Fed's announcement is consistent with a similar action taken by the Office of the Comptroller of the Currency, which likewise relaxed the way it assesses risk among the banks under its supervision and eliminated factors like reputational risk from examiners' assessments of the institutions.

According to Greg Baer, president and CEO of the Bank Policy Institute, "banks are most resilient when their examiners prioritize material financial risks, not check-the-box compliance exercises."

In terms of who should oversee and inspect these organizations, the Fed will also yield to other significant bank regulators, including as the OCC and state-level regulators, under the new framework.

Additionally, Bowman has taken steps to decrease the Fed's regulatory manpower by roughly 30%, primarily through attrition; Barr also criticized this action on Tuesday.

According to Barr, the changes "will impair supervisors' ability to act with the speed, force, and agility appropriate to the risks facing individual banks and the financial system." "Such a drastic staff reduction will limit supervisory findings and enforcement actions, erode supervisors' ability to be forward-looking, and slow response times for both the public and the banks themselves."