Top US bank regulators will testify before Congress, arguing that easing post-2008 rules will boost economic activity and innovation. They aim to focus supervision on material risks while encouraging new technologies like AI and blockchain.
Top U.S. bank regulators are scheduled to inform Congress on Thursday that their initiatives to reduce bank regulations and oversight will stimulate economic activity and innovation while maintaining financial system safeguards. The chiefs of the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency are expected to appear before the House Financial Services Committee. They will provide an update on a broad effort to re-evaluate and ease numerous banking rules implemented after the 2008 financial crisis. Fed Vice Chair for Supervision Michelle Bowman stated in prepared remarks that the Federal Reserve is fostering conditions for banks to thrive by tailoring requirements to actual risk, focusing supervision on critical areas, and integrating innovation. Bowman and other regulators have been reviewing stricter standards, contending that excessive oversight has impeded banks' capacity to support the economy. Bowman noted that examiners have identified procedural or documentation gaps rather than actual financial risks in numerous bank deficiencies. FDIC Chairman Travis Hill indicated in his prepared remarks that supervision has been reformed for over a year to concentrate on material financial risks instead of process-oriented, check-the-box requirements. Concurrently, regulators intend to convey their support for financial sector innovation, encompassing banks' use of blockchain technologies and artificial intelligence, as well as nonbank entities. Comptroller Jonathan Gould stated in his testimony that their role is to facilitate, not hinder, responsible innovation. However, they also cautioned that emerging technologies present risks to banks, with Bowman highlighting that new AI models have significantly accelerated the identification of vulnerabilities within the banking system.
The testimony could signal a shift towards less stringent banking regulations, potentially impacting lending capacity, financial innovation, and the stability of the financial system.