Federal Reserve Overhauls Bank Supervision with Risk-Focused Approach

The Federal Reserve has introduced sweeping changes to its bank supervision framework, shifting examiners' focus toward material financial risks rather than procedural compliance. Vice Chair Michelle Bowman championed the reforms as a necessary step to enhance transparency and accountability while reducing regulatory overhead.

The updated guidelines prioritize Core threats to banking stability—credit quality deterioration, liquidity crunches, governance breakdowns, and operational vulnerabilities. "This targeted approach fortifies the system's foundations without compromising our oversight mandate," Bowman stated, dismissing criticism from former officials who warned of diluted supervision.

Examiners received the revised manual on October 29 before its public release this week. The MOVE reflects growing consensus among regulators that risk-based supervision proves more effective than box-ticking exercises in maintaining financial stability.