Fed’s Bowman Pivots From Wall Street Lenders to Community Banks
(Bloomberg) — The Federal Reserve’s top banking police officer is embarking on an initiative that some executives hope will be the beginning of a greater focus on community lenders.
Michelle Bowman, the Fed’s vice chair for supervision, is a fifth-generation banker who often speaks of the importance of these smaller institutions; At one point, he even carried a red baseball cap in his office that said “make community banks great again.” But he has not announced plans for small lenders since taking office in June.
Trade groups, including the Independent Community Bankers of America, see the conference it hosts on Thursday on the state of the industry as a changing moment. In a change that has confused some in the industry, executives from community banks will be joined by speakers such as Blackstone Inc.’s Stephen Schwarzman and Robinhood Markets Inc.’s Vlad Tenev.
“Anatolian banks are facing more pressure than ever before,” said Kelly Brown, CEO of Ampersand Inc. “They are competing with fintechs for deposits and tackling new challenges, such as luring private borrowers away from their local banks.”
The situation of small lenders came to the fore in the wake of the 2023 regional banking crisis. The community banking industry said at the time that they were “very different” to failed lenders and opposed the introduction of bills to replenish the government’s deposit insurance fund.
Industry groups’ wish list now includes community bank leverage, a voluntary framework designed as an alternative to risk-based capital measures for community banks.
Bowman had previously stated that the Fed was looking at this issue and added that as of the first quarter of 2025, although there were more than 4,000 community banks, only 1,662 lenders had opted for it.
Brandon Milhorn, president of the Washington-based Conference of State Bank Supervisors, wants the Fed to reexamine compliance regulatory frameworks for community banks.
“Setting static, asset-based regulatory thresholds that don’t grow with the economy is a great starting point,” Milhorn said in a speech this week.
Bowman said his take on community bank reforms starts with engagement.
“My approach to prioritizing these issues is consistent and clear, and it starts with outreach,” Bowman said in August. “What are the most significant threats to their business? How have regulations harmed or improved their ability to operate safely and healthily?”
Proposals to ease rules for Wall Street lending giants are already underway, as Bowman continues to get feedback from community banks. Shortly after his inauguration, regulators in June unveiled a proposal to roll back a key rule known as the enhanced supplementary leverage ratio. They are also in the process of overhauling stress tests that measure how well big banks would fare during a hypothetical recession.
Bowman is also taking the lead in preparing a new risk-based capital offering known as Basel III’s endgame. He harshly criticized the first draft of the plan, which would increase capital requirements for the largest banks by 19% to buffer against losses and financial crisis. The Fed later withdrew this proposal.
Fed Governor Michael Barr on Wednesday at JPMorgan Chase & Co. and Goldman Sachs Group Inc. He issued a warning about plans to roll back capital standards by major lenders such as , and said the latest proposals threatened protections for smaller banks.
“As community bankers know all too well, it wasn’t the community banks that fueled the 2008 financial crisis; it was the largest, most complex firms whose excessive risk taking nearly collapsed the system,” said Barr, who previously served as the Fed’s top bank cop.
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