michelle w bowman : remarks on the economy and bank supervision and regulation remarks by ms michelle w bowman, member of the board of governors of the federal reserve system, at the 2023 ohio bankers league " main event, " columbus, ohio, 7 november 2023. * * * it is a pleasure to be with you in columbus this afternoon. 1 i always find it helpful and informative to travel outside of washington, d. c., to learn about views on the economy, the financial system, and, more recently, regulatory reforms. this month marks five years of my service as a member of the board of governors of the federal reserve system. over the years, i have drawn heavily upon my experience as a former state bank commissioner and a banker in my responsibilities, especially as they relate to bank supervision, payments, and consumer and community affairs. this perspective informs my views about evolving bank regulations and the real - world impact that changes can have on financial institutions, their local communities, and the broader u. s. economy. as you know, the federal regulatory agenda has been very active lately, with a significant volume of rules, guidance, and supervisory reforms either recently published or in the pipeline. today, i will offer my thoughts on some of these developments. as the agencies move forward with an active and potentially disruptive reform agenda, we should pause, reflect upon these changes, and ask some questions : are these reforms efficient? in totality, do they work together to enhance the regulatory framework, resulting in a rational and efficient framework? are the reforms within the scope of our statutory authority? and have we met the appropriate standards of due process and public engagement? before i dig a bit deeper into these questions and we turn to our conversation, i'd like to offer a few thoughts on the economy and monetary policy. after sharply tightening monetary policy over the past year and a half to reduce inflation, at our november meeting, the federal open market committee ( fomc ) voted to maintain the target range for the federal funds rate at 5 - 1 / 4 to 5 - 1 / 2 percent and continued the run off of the fed's securities holdings. we have seen considerable progress on lowering inflation, but inflation remains high and recent readings have been uneven. the latest personal consumption expenditure ( pce ) inflation index data showed 12 - month changes in total and core inflation of 3. 4 percent and 3. 7 percent, roughly similar to the previous month's reading. however,

progress on inflation has stalled or is insufficient to bring inflation to 2 percent in a timely way. returning inflation to the fomc's goal is necessary to achieve a sustainably strong labor market and an economy that works for everyone. i will turn now to developments in the ongoing bank regulatory framework reform agenda and share some of my observations and takeaways. while this is by no means a comprehensive list of all of the current reforms - or reforms that may still be to come - i will focus my remarks on capital requirements reform, the community reinvestment act, the cap on debit interchange fees, and climate guidance. capital requirements reform in july of this year, the agencies proposed significant reforms to capital requirements for banks with more than $ 100 billion in assets. given this threshold, many banks would not be directly impacted based on their asset size, but the proposal does provide important insights about how regulators are considering reforms more broadly. the proposal would increase total risk - weighted assets across bank holding companies subject to the rule by an estimated 20 percent. these impacts would vary based on firm - 2 / 10 bis - central bankers'speeches specific attributes - but not by asset size. the contemplated capital increases do not appear to be supported by facts and analysis and will likely result in significant unintended consequences. one could reasonably ask whether there is cause for such material change. is this proposal designed to address identified regulatory deficiencies and shortcomings? the u. s. banking system remains strong and resilient. the system is much better capitalized than after the 2008 financial crisis, with substantially more liquidity. and u. s. banks are subject to a range of new supervisory tools that did not exist prior to 2008. the current framework represents a risk - based, tailored approach, which strives to align regulation with risk and fulfill the congressional mandate to tailor the prudential regulatory framework. 2 the current level of capital in the u. s. banking system is a strength, not a weakness, and is complemented by liquidity regulations and other prudential requirements that have contributed to the resilience of u. s. banks. i am skeptical of assertions that the costs of the proposal are justified by the benefits. the proposed capital increases, if implemented, would have a tangible effect on banking activities and unintended - but predictable - consequences. for example, increases of this magnitude are likely to have a detrimental impact on u. s. market liquidity and lending,