Federal Reserve Vice Chair Michelle Bowman on modernizing financial regulation

Federal Reserve Vice Chair for Supervision Michelle Bowman details the impact of recent regulatory reforms, specifically the recalibration of the Enhanced Supplementary Leverage Ratio (ESLR). This adjustment has increased dealer capacity to intermediate the U.S. Treasury market, enhancing liquidity and resilience during periods of stress. Beyond capital requirements, the Federal Reserve is modernizing its stress testing framework to increase transparency while streamlining internal supervisory processes to address past cultural inefficiencies. As the banking sector integrates artificial intelligence, the focus remains on mitigating emerging risks like fraud and cyber threats through principle-based oversight. Regarding monetary policy, current data suggests a period of observation is necessary to evaluate the economic effects of recent interest rate actions before determining the need for further tightening. These initiatives reflect a commitment to ensuring financial regulations remain proportionate, effective, and responsive to evolving market conditions.