BPInsights: October 10, 2026

Fed's Bowman Announces Supervision Revamp, Tailoring Update

In remarks this week, Federal Reserve Vice Chair for Supervision Michelle Bowman unveiled a restructuring of the Fed's supervision function and previewed updates to the regulatory tailoring framework. "In recent years, our examinations had drifted to focus on process over substance, prioritizing checklists of requirements instead of applying judgment and expertise to evaluate safety and soundness," Bowman said in the speech, which also highlighted community bank regulatory reforms. The Fed is now refocusing supervision on material risks that threaten a bank's financial viability, she reiterated.

• 'Much More to Be Addressed.' Bowman outlined the Fed's work on supervision reform so far, while noting that work remains to be done. Bowman highlighted the Federal Reserve's statement of supervisory operating principles and recent third-party risk management guidance as two examples intended to clarify supervisory expectations. "While these examples demonstrate the commitment to updating and modernizing the bank regulatory and supervisory framework, there is much more to be addressed," she said, naming CAMELS rating reform as one pending initiative.
• Restructuring. The Fed's supervision function will be "realigned to implement a culture of accountability and clear decisionmaking authority," Bowman said. She expressed concern about a "mismatch between authority for decisionmaking and accountability for supervisory decisions" springing from the division of labor between the Federal Reserve Board and the Reserve Banks. Issues with this distribution of responsibility were highlighted in the recent Starling review of Silicon Valley Bank's failure, Bowman said. "The execution of Federal Reserve supervision is the responsibility of the Vice Chair for Supervision, but it is conducted by the Reserve Banks," Bowman said. "As the review noted, for decades that structure has disincentivized a critical link between responsibility and accountability and has been further complicated by a complex web of dozens of committees, resulting in dysfunction when critical decisions are most needed." The new structure will include five regions, each led by a regional leader overseeing all supervisory activity in the area. According to one press report, the regional leaders will report to the Board's Deputy Director of Supervision.
• Tailoring. Bowman previewed forthcoming changes to asset thresholds under the regulatory tailoring framework. "Later this year, the Board will consider broader structural reforms to bank portfolios defined by asset size and updates to the large bank tailoring framework," she said. The Fed will also expand the range of institutions treated as community banks, Bowman said, preserving safety and soundness "while effectively applying appropriately tailored and risk-calibrated supervision and regulation." The contemplated proposal would increase static dollar thresholds in the Board's regulations to account for inflation and economic growth and establish a mechanism for updating those thresholds every five years, reducing the need to reopen individual regulations solely to revise outdated dollar amounts.

Five Key Things

1. You Say You Want a Revolution: The Developing Payments Landscape

A new note by BPI CEO Greg Baer, expanding on recent remarks at the Federal Reserve Bank of Philadelphia's Fintech Conference, offers an assessment of the current and likely future state of electronic payments.

Currently, numerous efforts are underway to move payments onto blockchains, with the promise of enabling payments that are instantaneous and can occur at any time of day. Those efforts face significant obstacles, however:

• Legacy systems, particularly in the U.S. retail area, that are sufficient to meet current needs and continuously improving - and therefore do not present a major opportunity for blockchain-based payments;
• Numerous technical challenges, security concerns and interoperability obstacles;
• In a world where technology budgets are limited, rising AI-driven cyber threats and the looming threat of quantum computing demand significant technology resources and the enterprise-wide advantages of AI adoption will also demand such resources;
• In the case of stablecoins, a witches' brew of operational risk, run risk, redemption risk and insolvency risk that make them a bad fit for commercial payments.

The note describes how tokenized deposits offer the most appetizing opportunity, though with interoperability problems that are likely to take a long time to solve.

For perspective, the note also reviews the cautionary tale of real-time payments and central bank digital currencies - which were similarly described as revolutionary and imminent, but were lacking compelling use cases.

2. DeFi Stablecoin Yields: Disconnected from Reality

The GENIUS Act created a legal framework for payment stablecoins that requires them to be backed by short-term safe assets and prohibits issuers from paying yield to stablecoin holders in connection with the holding, use or retention of stablecoins. However, it does not restrict stablecoin holders from lending out their coins on decentralized finance platforms to earn yield. A new BPI note examines how stablecoin yields are determined on DeFi platforms, showing that they are volatile and often much higher than traditional money market rates.

• Why? These characteristics are mostly driven by periods when crypto markets are bullish and the demand for leverage rises. Hacks and other operational disruptions can also drive stablecoin yields higher on DeFi platforms.
• Follow-Up Questions. BPI's analysis raises questions for future research: What are the monetary policy implications of stablecoin yields being unanchored to money market rates? How can there be substantial and persistent gaps between stablecoin yields and traditional money market rates? Can DeFi platforms affect stablecoin yields and, if so, for what purpose?

3. Supervision, M&A, Stablecoins: The Latest from FDIC's Travis Hill

In a Q&A at the Federal Reserve Bank of St. Louis' annual community banking conference this week, FDIC Chair Travis Hill outlined recent proposals to reform supervision, streamline M&A review and implement the GENIUS Act.

• 'Catch-All' M Rating. Hill mentioned the federal banking agencies' recent proposal to overhaul CAMELS ratings. "The way that CAMELS ratings are currently defined is you have the M rating, which is sort of a catch-all for a lot of different potential issues, and then there are within the other components, elements of how banks are managing those factors," he said. "What often ends up happening is a bank has an issue that is reflected in one component, but then it also gets downgraded in the management rating. It shifts the emphasis in the direction of fundamental risks."
• Streamlining Supervision. Hill also explained the rationale behind a proposal to clarify the circumstances under which Matters Requiring Attention can be issued. He addressed criticisms of the proposal: "Some of the criticisms have this perception that supervisors will have their hands tied until there are actual losses on the balance sheet," he said. "The intent … is really to focus supervision. It's not to eliminate supervision or water it down such that examiners are no longer able to identify true safety and soundness."
• Stablecoins. Hill also touched on the FDIC's proposals to implement the GENIUS Act, which establishes a regulatory framework for payment stablecoins. "The proposal that we issued lays out a series of standards and expectations," he said. "It talks about reserve assets, how reserve assets will be defined, the general requirements around maintaining a one-to-one-reserve asset so the reserve assets are always in excess of the outstanding stablecoin issuance."

4. FDIC, OCC Proposals on Confidential Supervisory Information Would Reduce Uncertainty

FDIC and OCC proposals to modernize rules on disclosure of confidential supervisory information would bring welcome flexibility, but targeted changes would further strengthen the framework, the Bank Policy Institute said in two comment letters.

Background. CSI includes bank examination reports and ratings, supervisory sanctions like Matters Requiring Attention and correspondence with examiners. The banking agencies maintain that such materials are their property, and unauthorized disclosure is prohibited.

• Current CSI rules create uncertainty for banks about when they are allowed to share CSI, including within their own institution. The new proposals would reduce that uncertainty by permitting banks to share CSI without prior OCC or FDIC approval with authorized, appropriate recipients like affiliates, majority shareholders or certain service providers.
• However, to fully achieve the proposal's objectives, the FDIC and OCC should make targeted changes that support efficiency and consistency while maintaining appropriate safeguards.

Recommendations. The FDIC and OCC should:

• Define confidential information clearly and precisely, and in a manner that does not result in institution-generated materials becoming CSI in the institution's hands merely because they are provided to, discussed with or reviewed by the FDIC or OCC.
• Replace prescriptive confidentiality agreement requirements with a principles-based framework.
• Revise the framework for disclosure to affiliates, service providers, prospective senior officers, participants in M&A transactions, trade associations and other banking supervisors.
• Expand the categories of third parties that may receive CSI without prior agency approval to include, among others, prospective directors, majority shareholders and, in the case of the FDIC, trade associations of which an institution is a member.
• Provide supervised entities with certain procedural protections, including notice and an opportunity to object, before an agency makes a discretionary disclosure of institution-specific CSI.
• Work together with the Federal Reserve to align the federal banking agencies' regulations on CSI.

5. The Ledger

Here's the latest in crypto.

• FinCEN Moves to Withdraw Crypto AML Proposals. Treasury's Financial Crimes Enforcement Network took steps this week to withdraw two crypto-related proposals. FinCEN submitted draft Federal Register notices on Monday that would rescind two proposals on crypto anti-money laundering oversight of transactions involving self-hosted crypto wallets and crypto mixers. The proposals have lain dormant for several years without being finalized. BPI has called for strengthening restrictions on mixers and tumblers.
• CFTC Proposes Crypto Rules. The CFTC issued a proposal Monday that would regulate leveraged crypto trades offered to retail customers. It would also permit crypto exchanges offering these trades to register with the CFTC. "The American people deserve clarity, certainty, and consumer protections in the crypto asset markets and the agency is committed to delivering this by incorporating crypto asset transactions into its uniform national market regulatory framework," Chairman Michael Selig said of the proposal.
• Crypto Hacker Found Guilty. Cybersecurity consultant Jonathan Spalletta was convicted Wednesday of stealing nearly $55 million in cryptocurrency in a hack against crypto exchange Uranium Finance. Spalletta, who used the stolen funds to buy ancient Roman coins and rare Pokemon cards, faces a maximum of 20 years in prison based on a money-laundering charge from his use of crypto mixers.

In Case You Missed It

Traversing the Pond

Here's the latest in international banking policy.

• ECB's Cipollone Touts Digital Euro. A digital euro would help European banks compete with international rivals, said European Central Bank executive board member Piero Cipollone on Tuesday. "New opportunities are emerging, and we want to make sure that European payment service providers are fully equipped to seize them and gain a strong competitive edge," Cipollone said.
• ECB's Wunsch Skeptical of Reserve Requirement Changes. European Central Bank official Pierre Wunsch expressed concern about a proposal to increase banks' minimum required reserve ratio while keeping required reserves unremunerated. "Honestly, the reasoning here is not very clear or convincing to me," said the Belgian central banker this week. Wunsch warned that it could cross into fiscal policymaking, which is not a central bank's remit. He also cautioned that it could hurt the ECB's credibility.
• Vujcic: Simpler Capital, Not Lower. European Central Bank Vice President Boris Vujcic called for simplifying capital requirements for European banks, but not decreasing them. "The present level of bank capital requirements is not a competitive disadvantage for European banks," Vujcic said at a conference this week. "The fact that our banks are profitable and of sound standing today is a strategic advantage for Europe, because a resilient financial system is a prerequisite for sustainable economic growth." He suggested policymakers could simplify the framework without lowering capital.

Member News

Bank of America Expands Fraud Education for Small Business Owners

Bank of America this week launched a fraud-awareness initiative for business owners, with an updated Fraud Prevention Checklist, educational content and a new webinar. The initiative aims to help small businesses recognize and respond to increasingly sophisticated threats as reported U.S. internet crime losses reached $20.8 billion in 2025.

Job Openings

• Assistant Vice President, Research Analyst
• Assistant Vice President, Regulatory & Policy Affairs

Upcoming Events

• 10/13/2026-10/16/2026: DC Fintech Week
• 10/27/2026-10/28/2026: FOMC meeting