communication. take, for example, the frictions associated with cross border payments, including the speed and cost and the ability to transfer money. at first blush, this seems like a prime opportunity for innovation to come in with a new approach. the challenge in cross - border payments historically has been achieving the goal of serving new types of customers and increasing the speed of payments, without losing or watering down important compliance safeguards that deter criminal activity. some perceived payment frictions exist for specific policy reasons and do not stem from issues with existing technology. therefore, new technology alone cannot solve the issue unless it also addresses the required safeguards. regulators can serve a valuable role in identifying where a technology solution may have an important " gap, " as in the case of cross - border payments, by identifying how a solution can meet the needs of both customers and regulators. innovation and regulatory and legal requirements can coexist - providing both enhanced capability and regulatory compliance. transparency can promote innovation. policymakers should strive to define a clear and sensible regulatory framework designed to meet policy objectives that also enables the private sector to innovate within the established guardrails. a clear regulatory framework supports private sector innovators by providing clarity and consistency that encourages long term business investment in pursing innovation, while continuing to support today's products and services. a regulatory framework empowers supervisors to focus on safety and soundness and ensuring a safe and efficient payment system. in the past, i have described an approach to innovation that solves specific problems and enables banks and other providers to meet the needs of their customers in a safe and sound manner. 3 this approach recognizes the role of the private sector and focuses policymakers on payment and financial system infrastructure while balancing the public policy objectives with the benefits provided. in this construct, the same 4 / 6 bis - central bankers'speeches activities that present the same risks must be subject to the same regulatory expectations - regardless of what the product is called or where it is offered. the active promotion of innovation has proven to be successful in the past. one example from 2019 highlights the benefits of this approach, specifically as it relates to the use of alternative data to support small dollar consumer loans. 4 timely guidance and regulatory clarity in the interagency statement clarified that, with a customer's consent, a bank may use alternative data, like checking account balance activity to help evaluate the potential borrower's creditworthiness who might not have otherwise qualified for a loan. this example

. we should have no illusions that “ getting it right ” — finding the right combination of regulatory and - 10 supervisory changes — is a simple task. this fine tuning is a core element of maintaining an effective system, constantly re - evaluating whether our tools are effective and used appropriately. there are a few specific areas where i see a need to revisit our approach, specifically in supervision, regulation, and technology. supervision starting with supervision, effective bank supervision requires both transparency in expectations, and an assertive supervisory approach when firms fail to meet these expectations. in the past, i have spoken about the virtue of transparency in supervision. 7 transparency in supervisory expectations builds legitimacy, promotes a compliance culture, and is critical to ensuring that we preserve due process. transparency between a bank and its examiners can be a profoundly effective tool by allowing bankers to air issues early with their examiners. this type of communication promotes understanding — of the bank and its operation by examination staff, and of regulatory expectations by the bank ’ s management and board of directors. amorphous standards or standards that change without prior notice frustrate this goal. if regulators are clear in our expectations with banks, and banks fail to meet those expectations, regulators are well - positioned to take strong action and demand remediation of supervisory issues. when a bank fails to promptly address identified issues, the bank and the banking system run the risk that those issues can become far more damaging over time. there is a significant cost to delay. while the specific timelines for remediation of supervisory issues vary significantly across firms, the board has published statistics on the number of and general nature of see michelle w. bowman, “ independence, predictability, and tailoring in banking regulation and supervision, ” speech to the american bankers association community banking conference, orlando, florida ( february 13, 2023 ), https : / / www. federalreserve. gov / newsevents / speech / files / bowman20230213a. pdf. - 11 supervisory findings, and how those have evolved over time. 8 remediation of technology infrastructure, data, and operational resilience issues often take longer to address than those in other business areas or related to risk management. 9 some variability is reasonable as these issues vary in complexity. and, to the extent that a bank is reliant on third parties, core providers, or others to help remediate issues, providing sufficient remediation time can be necessary and appropriate