##makers, ” ( speech at the south carolina bankers association 2024 community bankers conference, columbia, south carolina, january 8, 2024 ), https : / / www. federalreserve. gov / newsevents / speech / files / bowman20240108a. pdf. - 10 finally, one of the core principles for effective regulation and supervision — to reduce the incremental burden, especially for the smaller regional and community banks — is tailoring. while important for all institutions, tailoring is particularly important for community banks. effective and efficient regulation and supervision must be calibrated to the activities and risks of the community banking model, and the tradeoffs and unintended consequences carefully considered. in addition to the basel proposal, one of the most consequential regulatory developments over the past year was the finalization of revisions to the regulations implementing the cra. the new regulatory thresholds under this final rule define a “ small bank ” and an “ intermediate bank ” to include only the smallest community banks. all banks with more than $ 2 billion are deemed to be large. as i noted at the time the final rule was approved, the lack of recognition that these banks are fundamentally different, with different balance sheets and business models, represents a missed opportunity to appropriately tailor cra expectations to a bank ’ s size, risk, service area, and business model. 10 i remain convinced that it is not sensible bank regulatory policy to apply the same evaluation standards to a bank with $ 2 billion in assets and to a bank with $ 2 trillion in assets. another missed opportunity is with supervisory guidance, which can also be a significant source of risk for banks. for example, the federal banking agencies published third - party riskmanagement guidance that applies to all banks, including community banks. and yet, as i noted at the time, this guidance had known shortcomings even at the time it was published, shortcomings that were not addressed in advance by the agencies. 11 while i expect that the see dissenting statement, “ statement on the community reinvestment act final rule by governor michelle w. bowman, ” news release, october 24, 2023, https : / / www. federalreserve. gov / newsevents / pressreleases / bowmanstatement - 20231024. htm. see statement on third party risk management guidance by governor michelle w. bowman ( june 6, 2023 ) ( “ … federal

cash, based on a rate or price determined in a separate highly liquid market with a very large or virtually unlimited deliverable supply. furthermore, prices established in otc transactions do not serve a price - discovery function. thus, even if the price of an otc contract were somehow manipulated, the adverse effects on the economy would be quite limited. with respect to fraud and other unfair practices, the professional counterparties that use otc derivatives simply do not require the protections that cea provides for retail investors. if professional counterparties are victimized, they can obtain redress under the laws applicable to contracts generally. the working group also considered whether the introduction of centralized mechanisms for the trading and settling of what heretofore have been purely bilaterally negotiated and settled transactions would give rise to a need for additional regulation. in the case of electronic trading systems, the working group concluded that regulation under the cea was unnecessary and that such systems should be excluded from the act, provided that the contracts are not based on non - financial commodities with finite supplies and that the participants are limited to sophisticated counterparties trading solely for their own accounts. electronic trading of such contracts by such counterparties, it was reasoned, would be no more susceptible to problems of manipulation and fraud than purely bilateral transactions. it was suggested that some limited regulation of such systems might become necessary in the future if such trading systems came to serve a price - discovery function. but it was agreed that creation of a regulatory system for such systems in anticipation of problems was inappropriate. as i have already noted, the vast majority of otc derivatives simply are not susceptible to manipulation. thus, even if those contracts come to play a role in price discovery, regulation of the trading mechanism might still be unnecessary. in the case of clearing systems for otc derivatives, the working group concluded that government oversight is appropriate. clearing tends to concentrate risks and responsibilities for risk management in a central party or clearinghouse. consequently, the effectiveness of the clearinghouse ’ s risk management is critical for the stability of the markets that it serves. depending on the types of transactions cleared, such oversight might appropriately be conducted by the cftc under the cea. alternatively, it might be conducted by the securities and exchange commission, the federal reserve, the office of the comptroller of the currency, or a foreign financial regulator that one of the us regulators has determined satisfies appropriate standards. provided such government oversight is in place, otc transactions that would otherwise be excluded from