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Fed vice chair for supervision urges tailoring and greater transparency for community bank oversight
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Summary
In closing remarks at the conference, the Federal Reserve’s vice chair for supervision argued that fixed asset thresholds unfairly push small banks into heavier regulation, urged indexing thresholds for growth, called for clearer regulatory application reviews and said the Fed has issued mutual-bank capital FAQs and templates.
The Federal Reserve’s vice chair for supervision addressed community bankers at the conference, urging regulators to tailor supervisory approaches to bank size and risk and to increase transparency in supervisory practices.
The vice chair said fixed asset thresholds used to define community banks "fail to account for economic growth and inflation over time," producing the unintended consequence of subjecting stable, small institutions to requirements designed for much larger firms. "We should question whether this additional complexity is necessary or helpful," the official said, and proposed adjusting thresholds to preserve the policy intent when they were originally set.
Why it matters: The remarks outlined concrete supervisory concerns that affect how banks are examined, how capital and mergers decisions are made, and how quickly banks can obtain regulatory approvals for transactions. The speaker emphasized that delayed and opaque regulatory application reviews can damage transaction value and slow critical integrations. "Regulatory application review should be effective, timely, and efficient," the vice chair said, urging clear standards and prompt action within statutory timeframes.
The speaker pointed to recent Federal Reserve work to improve mutual-bank capital options, noting that the board issued frequently asked questions and two templates to guide mutual banks considering capital instruments that could qualify as tier 1 common equity or additional tier 1 equity. The Fed official said these are a starting point and encouraged banks to provide feedback for refinement.
On supervisory practices, the vice chair called for revising the scope of Confidential Supervisory Information (CSI) to promote public transparency and accountability, and for calibrating supervisory standards so that exam findings and ratings better reflect material financial risk rather than producing disproportionate downstream consequences such as constrained M&A options.
The remarks closed with an invitation to coordinate reforms with the FDIC and OCC and a commitment to continue tailoring approaches to ensure rules are appropriate for different bank sizes and business models.
