Crypto, FedNow, climate change, CRA proposal top Fed agenda for New Year, Bowman asserts

Crypto and digital assets, innovation in payments, climate change supervision, and changes to anti-redlining rules are among the items on the agenda for the Federal Reserve in the upcoming year, according to a member of the agency board.

In remarks Tuesday to a meeting of the Florida Bankers Association in Miami, Fed Board Member Michelle W. Bowman (who sits on the board seat representing community banks) said – despite recent bankruptcies and other turbulence in the crypto-asset industry – she expects some banks will continue to explore crypto-related activities. “The Fed and other banking agencies will continue to focus in this area, in light of the significant risks these activities may pose,” she said. “But the bottom line is that we do not want to hinder innovation. As regulators, we should support innovation and recognize that the banking industry must evolve to meet consumer demand.”

On payments, Bowman reiterated past statements from Fed leaders that the agency’s new payments system – which she purported would be faster – would be available in the first half of this year. “FedNow will help transform the way payments are made through new direct services that enable consumers and businesses to make payments conveniently, in real time, on any day, and with immediate availability of funds for receivers,” she said. She added that the new service will help banks of all sizes and in “every community” to provide safe and efficient instant payment services.

However, on a central bank digital currency (CBDC), Bowman was less sanguine. She said although the Fed continues to study the idea, she expects FedNow (and existing systems) to achieve what CBDC supporters hope for that method.

On climate change supervision, Bowman said the Fed’s interest is limited to the large banks. “Smaller and community banks already integrate and comply with robust risk management expectations,” she said. “The Fed views its role on climate as a narrow focus on supervisory responsibilities and limited to our role in promoting a safe, sound and stable financial system.”

However, Bowman said, a longstanding supervisory requirement is that banks manage their risks related to extreme weather events and other natural disasters that could disrupt operations or impact their business lines.

On changes to rules applying the anti-redlining Community Reinvestment Act (CRA), Bowman said she supports the changes outlined in the proposal but shares concerns by commenters that “some of the elements included in this overhaul of the CRA framework result in significant new regulatory burden, particularly for the smallest and community banks.”

She said it will be critical for the Fed to weigh costs and benefits of any changes before finalizing a rule.

Gov. Michelle W. Bowman: Brief Remarks on the Economy and Bank Supervision

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