Key insights from Michelle Bowman's discussion on technological advancement, de-banking, and combating fraud
In a forward-thinking yet cautious approach, Michelle Bowman, Vice Chair for Supervision at the Federal Reserve Board, and Travis Hill, Acting Chairman of the Federal Deposit Insurance Corporation (FDIC), advocate for a balanced regulatory approach to new technologies, including cryptocurrency.
Bowman supports easing the enhanced supplementary leverage ratio (eSLR) to enable safe economic growth, freeing up capital for low-risk activities like U.S. Treasury market intermediation at banks. This stance, shared by the FDIC, aims to promote increased lending and economic activity while maintaining capital standards.
Regarding cryptocurrency, Bowman has not made a direct statement on regulation, but her involvement in regulatory supervision indicates a broader support for the sector. The FDIC, too, has not presented a distinct stance on cryptocurrency regulation compared to Bowman’s views. Instead, they appear consistent in supporting measured adjustments to regulatory capital rules that may indirectly affect crypto firms through banking regulations.
Both Bowman and the FDIC leadership emphasize the importance of financial stability while accommodating innovation and economic activity, including emerging technologies like blockchain. Bowman's engagement with initiatives such as the Blockchain Deployment Program and responses to regulatory capital proposals illustrate her supervisory style.
Moreover, Bowman emphasizes the need for smarter regulation, being cognizant of the costs associated with regulatory and supervisory demands, growth in staff and budgets of banking agencies, and the need for efficiency while ensuring safety and soundness. She also expressed concern about credit decisions being dictated by banking regulations or supervisory messages.
Travis Hill, on the other hand, prioritizes an "open-minded approach to innovation and technology adoption," specifically in relation to fintech partnerships with banks and digital assets/tokenization.
Recently, the Securities and Exchange Commission launched a task force dedicated to developing a regulatory framework for the digital asset sector. However, the digital asset sphere is reportedly the source of several de-banking allegations, and Bowman has emphasized the need for regulators to promote an environment that allows legitimate bank customers to obtain banking services.
In conclusion, both the Federal Reserve and the FDIC are advocating for a regulatory balance that protects financial stability while accommodating innovation and economic activity, including emerging technologies like blockchain and possibly crypto. Their approaches emphasize the importance of being cognizant of costs, promoting efficiency, and ensuring safety and soundness, while maintaining a forward-looking yet cautious supervisory style.
Financing low-risk activities such as U.S. Treasury market intermediation at banks is one area where Michelle Bowman and the Federal Deposit Insurance Corporation (FDIC) aim to encourage economic activity through a less restrictive enhanced supplementary leverage ratio (eSLR). In the realm of technology and innovation, like fintech partnerships, digital assets, and tokenization, Travis Hill advocates for an "open-minded approach" to promote growth.
