Senior Federal Reserve bank regulator Michelle Bowman, nominated by former President Trump and confirmed by the Senate in 2025, has cautioned the Financial Stability Board against imposing rigid, one-size-fits-all rules on diverse national economies. She argued such an approach could significantly weaken the effectiveness of the international body's regulatory framework.
In prepared remarks for a Bank Policy Institute conference in London, Bowman, the Fed's Vice Chair for Supervision, stated the FSB should encourage flexibility to ensure regulatory measures are tailored to the specific circumstances of each jurisdiction. The Financial Stability Board is responsible for monitoring global financial system risks, coordinating regulatory policies, and making international recommendations. Its members include central banks, finance ministries, and regulators from G20 economies, as well as international institutions like the IMF and World Bank.
However, the FSB is not a global super-regulator with enforcement powers; its rules and advice typically lack direct legal force, relying instead on member states to implement them within their own legal and financial structures. Bowman's call for flexibility essentially opposes the mechanical application of uniform international standards across all countries, signaling a shift from standardized oversight to a more adaptable, jurisdiction-specific approach.
From Standardized Rules to Tailored Approaches: The Fed Advocates for Flexible Global Banking Standards
Despite the Trump administration withdrawing from numerous other multilateral organizations, the United States has continued its participation in the FSB and the Basel Committee on Banking Supervision. Bowman noted this reflects a U.S. commitment to "foundational standards" that help "ensure a level playing field." However, she and her colleagues have consistently urged global regulators to prioritize what they view as core financial risks over administrative burdens, which she believes have little positive impact on the global banking system's safety and soundness.
The U.S. government is advancing this direction domestically through initiatives like reducing the size of capital buffers banks must hold against potential losses, narrowing the scope of oversight for major banks, and implementing other reforms. This agenda is branded as "modernizing the global financial system."
"Modernization is a long-term, sustained approach to financial stability—starting with banking. It means a continuous commitment to improvement, learning, and adjusting our approaches as markets, technology, and risks evolve," Bowman stated.
As U.S. regulators overhaul rules, some European policymakers are considering similar adjustments, though they emphasize opposition to the scale of capital requirement reductions currently pursued in the U.S. Earlier this month, the Bank of England proposed easing a few capital rules, even as its officials express deepening concerns over threats from artificial intelligence and a risky geopolitical outlook.
Bank of England Governor Andrew Bailey described the proposed reforms as a "finely balanced judgment" that should not unduly harm the safety and soundness of financial institutions. In May, the Basel Committee, which sets global bank capital rules, agreed to a limited review of a specific capital rule arrangement after U.S. officials argued it unfairly favored European banks.
Bowman suggested on Monday that international regulators could learn from her approach, which includes implementing tiered supervision and prioritizing transparency and accountability in the regulatory process. With the FSB advancing its own modernization agenda globally, Bowman indicated policymakers would submit a report this autumn. She stressed the work must be forward-looking to ensure the process "incorporates emerging risks and fosters responsible innovation in the financial regulatory framework."
Trump's Influence on the Fed: A Trio of Reform Agendas
Michelle Bowman was first nominated to the Fed Board by Trump in 2018 and renominated and confirmed in 2020; Trump nominated her as Vice Chair for Supervision in 2025, with Senate confirmation following in June of that year. Governor Christopher Waller was also nominated by Trump in 2020 and confirmed. Current Chair Kevin Warsh was nominated by Trump in 2026 and confirmed by the Senate in May. Thus, in terms of personnel origins and policy mandates, these three officials represent a significant component of Trump's reshaping of the Fed's leadership.
Trump's influence over Fed personnel and its institutional agenda is deepening markedly. Bowman's push for substantial deregulation for Wall Street giants, Waller's drive to centralize the operations of regional Federal Reserve Banks, and Warsh's leadership of a comprehensive institutional review are collectively centralizing more power and reform initiatives within the Washington-based Board of Governors and the Chair's office. However, major monetary policy and institutional changes still require broad consensus among the Board, the Federal Open Market Committee, and the Fed's regional bank system.
If investors perceive these reforms as beginning to serve the White House's interest rate objectives, a perceived erosion of Fed independence could translate into higher long-term inflation expectations and a higher term premium on U.S. Treasury bonds. This could create a market dynamic where bank stocks benefit, long-term bonds face pressure, and the yield curve steepens.
Bowman's agenda aligns most closely with the Trump administration's deregulatory goals. She advocates reducing unnecessary capital and compliance burdens, diminishing the weight of subjective and procedural reviews in supervision, and at the FSB level, demanding global rules that allow for flexible implementation by individual jurisdictions. This indicates an effort to export the U.S. domestic "regulatory modernization" agenda as an international principle.
Warsh's efforts to facilitate interest rate cuts, reduce the balance sheet, and overhaul market communication and policy frameworks also clearly reflect Trump's direction for the Fed to lower rates and return to a narrower statutory mandate. Waller, however, cannot be simply categorized as a loyalist. While he is responsible for centralizing back-office functions like human resources, IT, and procurement from the regional banks to Washington, he has explicitly stated that reforms should not undermine the monetary policy independence principle led by the FOMC and opposes removing regional Fed presidents over interest rate disagreements.
Nevertheless, Waller's push for comprehensive operational reforms across the Fed's 12 regional banks could ultimately shift power and decision-making from the regional Federal Reserve Banks to Washington, potentially exposing the Fed to greater political pressure from a Trump presidency.
Comments