Federal Reserve Gov. Michelle Bowman called on banks to bolster their
In a speech delivered at the Texas Bankers Association's annual conference in San Antonio, Bowman encouraged banks to create emergency liquidity plans and ensure they are prepared to act on those plans at a moment's notice.
"Adverse conditions can escalate quickly, and influences beyond a bank management's control, including irrational actors, can impact your business in very short order," she said.
Bowman has been
Instead of blanket reforms to how regulations are tailored, Bowman favors targeted changes that address issues directly relevant to the failures. She said the Fed should establish which issues are in need of reform by commissioning an independent, third-party review of the Silicon Valley Bank failure.
In the meantime, she said regulators should emphasize readiness in the institutions they supervise to ensure they are positioned to absorb further distress.
"In a time of potential stress, we need to be forward-focused on bank preparedness so that banks are positioned to address issues of concern," she said. "These include being prepared to address contingency funding needs, with a plan in place that has been tested and is ready to be executed. Regulators need to be supportive of this kind of planning."
Bowman also noted that emergency access to the discount window, the Fedwire payments system and advances from the Federal Home Loan Banks should all be explored in the outside review.
Bowman also pressed on the importance of transparency both by regulators and banks. The one-time Kansas bank regulator said an open exchange of information leads to effective risk mitigation.
She encouraged state-chartered banks to get in touch with her directly if they have questions or concerns about supervisory standards.
"I'm sure you are not surprised that our largest bank CEOs do not hesitate to engage directly with the Board and Reserve Bank presidents," she said. "I see one of my many functions and roles as a Member of the Board of Governors as providing that open door and opportunity for direct engagement with a policymaker for our regional and smaller banks, as well."
Bowman said she supports improvements to supervisory practices in light of recent shortcomings, but argued that bank examiners already have the tools to hold banks accountable for mismanagement.
"We should avoid using these bank failures as a pretext to push for other, unrelated changes to banking regulation," she said. "Our focus should be on remediating known, identified issues with bank supervision and issues that emerge from the public autopsy of these events."
