The Federal Reserve announced plans on Tuesday to restructure its supervision of U.S. banks.
The current system, in which regional bank presidents oversee examinations, will be replaced by a new model designed to strengthen accountability to the central headquarters in Washington.
Fed Vice Chair for Supervision Michelle Bowman stated that the restructuring will establish five new geographic regions for bank supervision, each led by a regional director. Under the current system, Fed leadership in Washington sets bank examination policy, while direct supervision is carried out by the 12 regional Federal Reserve Banks across the country.
In prepared remarks at a conference hosted by the Federal Reserve Bank of St. Louis, Bowman said the existing structure "undermined the critical link between responsibility and accountability." She cited an independent review she had initiated regarding the collapse of Silicon Valley Bank, which found that Fed examiners had been slow to take action.
"The Federal Reserve’s supervisory function will be restructured to foster a culture of accountability and clearly define decision-making authority," Bowman stated.
The new regional directors will be responsible for all supervisory activities, which will continue to be performed by regional Reserve Bank staff. Currently, supervision within their respective districts is overseen by the presidents of the regional Federal Reserve Banks.
Bowman also criticized the Fed's over-reliance on committees in conducting bank supervision, noting that this practice led to delays and diffused accountability among central bank staff when problems arose at banks. According to her, the use of committees needs to be streamlined.
"In practice, these committees have turned into a tool for evading responsibility and a factor deterring inspectors from taking timely and decisive action to address identified risks," she stated.