Federal Reserve Governor Michelle Bowman criticized proposed banking regulations at the 2023 Ohio Bankers League meeting held on Tuesday. The regulations, detailed in a 5,000-page document, include updates to the Community Reinvestment Act (CRA) and increased bank capital requirements. The proposed rules have sparked concerns about the potential destabilization of banks and uncertainty over their effectiveness in strengthening the U.S financial system.
Bowman voiced apprehensions over the final CRA modernization rule due to its complexity and prescriptiveness. The rule classifies banks with assets exceeding $2 billion as 'large', obliging them to comply with the same CRA standards as a bank with $2 trillion in assets. This, according to Bowman, goes beyond congressional authority by evaluating banks outside their conventional footprint. She warned that this could lead to decreased support for communities requiring credit accessibility.
The Fed Governor also expressed worries about a suggested cap on debit card interchange fees. While the proposal hints at potential consumer benefits, Bowman questioned the certainty of these benefits, suggesting they might instead result in increased costs for consumers.
In addition to her concerns about the CRA rules and interchange fees, Bowman criticized the Federal Reserve Board's pilot climate-scenario program involving six leading U.S. banks as costly and difficult to implement.
Despite calls for increased capital requirements, Bowman argued that the U.S financial system demonstrates resilience without them. She supports the CRA's objective of promoting lending in low-income neighborhoods but fears that the proposed regulations could impose an undue regulatory burden on community banks. Bowman maintained that these rules are overly complex and could lead to a cost-benefit imbalance.
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