The nature of financial regulation and supervision in the country “argues strongly” for better coordination between state and federal financial regulators – as well as between the federal regulators themselves, a member of the Federal Reserve Board said Tuesday.
In a speech before the Conference of State Bank Supervisors (CSBS), Federal Reserve Gov. Michelle (“Miki”) Bowman noted that – to a much greater extent than in other nations – in the United States financial oversight is divided between the federal government and subnational authorities (the states).
“At the federal level, responsibility is further divided between different agencies, such as the Fed, the FDIC (Federal Deposit Insurance Corp.), the Office of Comptroller of the Currency, and the National Credit Union Administration,” she said. “This system evolved over time, and as things stand, there are some advantages to this specialization. But this division of labor may, at times, inhibit information sharing, and as a general principle, better communication can help overcome this challenge.”
But Bowman also cautioned that better communication doesn’t mean federal regulators, or state and federal authorities (such as the Fed), will always agree. “We won’t, and perhaps we shouldn’t,” she said. “A diversity of views can be a strength. A robust discussion requires a thorough analysis of differing views, which leads to a more informed understanding of issues,” which she said can lead to better outcomes.
She pointed to the rulemaking process at the Fed and the other federal banking agencies for the community bank leverage ratio (CBLR). “Here is an excellent example of where it makes good sense to consult closely. I know you have a lot of knowledge and expertise to bring to bear on this issue, which helps explain why Congress has required the agencies to consult with the states,” she said. “As you know, the Fed and the other agencies are now gathering and evaluating comments on the CBLR and getting feedback on this interagency proposal. So, now is a good time to re-engage. I am committed to re-engaging with you on the interagency proposal and ways we might be able to improve it. I am eager to hear your thoughts.”