The Fed’s New Top Bank Regulator May Take Friendlier Tone

The Federal Reserve’s newly appointed head of bank oversight is pledging to be pragmatic, a change welcomed by the industry, which felt the previous administration overstepped at times.

President Donald Trump nominated Fed Governor Michelle Bowman to be the central bank’s vice chair for supervision on Monday. The four-year post requires Senate confirmation, which analysts said is likely.

Her pick would be a “major, bank-friendly shift” from former President Joe Biden’s appointee, according to Capital Alpha Partners analyst Ian Katz. Bowman’s predecessor, Michael Barr, remains on the Fed board but left its top regulatory post last month. In addition to voting on the Fed’s interest rate policies, its board members also vote on the Fed’s regulation of the country’s financial system.

Bowman Will Be ‘Pragmatic,’ She Says

As the Fed’s top banking official, Bowman is expected to help shape a new proposal that’s more palatable to the industry, manage the central bank’s stress tests for banks, oversee its rules for consumers and figure out whether and how banks can adopt new technologies.

In a statement, Bowman said she will use her “hands-on experience” as a banker and regulator to help shape financial policies.

“If confirmed, I will promote a safe and sound banking system through a pragmatic approach to supervision and regulation with a transparent and tailored bank regulatory framework that encourages innovation,” Bowman said.

Bowman joined the Fed in 2018 when Trump nominated her to a post on the central bank’s seven-member board. Her term at the central bank ends in 2034, though her appointment as the vice chair for supervision would last four years.

Before joining the Fed, Bowman was the Kansas bank commissioner, overseeing the state’s banking system along with mortgage companies and other lenders. She had earlier been a vice president at her family’s bank, Kansas-based Farmers & Drovers Bank, which she joined after an earlier career in Washington D.C.

Trump said in a Truth Social post that she will help the country “achieve Economic heights never before seen in our Nation’s History,” saying Bowman has the “’know-how’ to get it done.”

Banking Groups Praise Bowman’s Nomination

The Independent Community Bankers of America, a trade group representing smaller banks, praised her nomination.

“Governor Bowman has championed regulations that prioritize safety and soundness, pragmatic oversight that ensures proposed reforms clearly target stresses in the financial system, and rules that meticulously follow administrative procedures to maximize transparency and avoid confusion that can hinder access to credit,” ICBA President and CEO Rebeca Romero Rainey said in a statement.

Rob Nichols, the president and CEO of the American Bankers Association, urged the Senate to “quickly confirm her” and called her a “a thoughtful, principled voice for sensible regulatory and monetary policy.”

Analysts Expect This to Be a ‘New Era’ for Policy

The Fed’s board members approve the vast majority of its regulatory decisions unanimously, but some of its more contentious rules spark dissent among board members. 

Bowman dissented on a few decisions during the Biden administration. These included guidance for larger banks on managing climate-related risks, a rule overseeing banks’ lending in lower-income communities, and efforts to boost the capital cushions that big banks must preserve in case of a downturn where customers can’t repay loans.

Dissents are now likely to be the opposite. In January, for example, two Biden-appointed Fed board members dissented from a decision that withdrew the Fed from the Network of Central Banks and Supervisors for Greening the Financial System. The group is an international collaboration of financial regulators across the world looking to tackle climate-related risks in the financial system.

Betsy Graseck, an analyst who covers bank stocks at Morgan Stanley, wrote in a recent note to clients that the country is now entering “a new era for bank regulation.” She pointed to a speech this month from Treasury Secretary Scott Bessent, who argued that banks have been “weighed down by unduly burdensome regulatory requirements and a broken supervisory culture.”

Changes in bank regulations never happen quickly, Graseck noted, but the “direction of travel seems clear.” 

“The Trump administration is looking for a less onerous, tailored regulatory approach that is supportive of lending, corporate activity, and bank earnings growth,” she wrote.