Fed’s Bowman Pivots From Wall Street Lenders to Community Banks

(Bloomberg) -- The Federal Reserve’s top banking cop is kicking off what some executives hope will be the start of an increased focus on community lenders. 

Michelle Bowman, the Fed’s vice chair for supervision, is a fifth-generation banker who often touts the importance of these smaller institutions — even keeping a red baseball cap in her office at one point with the words “make community banks great again.” But since she took the post in June, she hasn’t unveiled plans for the smaller lenders.

Trade groups, including the Independent Community Bankers of America, are eyeing a conference she’s hosting Thursday on the state of the sector as the moment that’ll change. In a twist that’s puzzled some in the industry, executives from community banks will be joined by speakers including Blackstone Inc.’s Stephen Schwarzman and Robinhood Markets Inc.’s Vlad Tenev.

“Community banks are facing more pressure than ever,” said Kelly Brown, chief executive officer of Ampersand Inc. “They are competing with fintechs for deposits and navigating new challenges like private credit drawing borrowers away from their local banks.”

The plight of smaller lenders was thrust into the spotlight in the wake of the 2023 regional banking crisis. The community bank industry said at the time that they were “vastly different” from the failed lenders and opposed footing the bill for refilling the government’s deposit insurance fund. 

Now the wish list for industry groups includes the community bank leverage ratio — an optional framework that was designed as an alternative to risk-based capital measures for community banks. 

Bowman has previously said the Fed is looking at that issue, adding that while there were more than 4,000 community banks as of the first quarter of 2025, only 1,662 lenders had opted into it.

Brandon Milhorn, the head of the Washington-based Conference of State Bank Supervisors, wants the Fed to re-examine compliance regulatory frameworks for community banks.

“Adjusting static, asset-based regulatory thresholds that fail to grow with the economy is a great place to start,” said Milhorn in a speech this week.

Bowman has said her handling of community bank reforms begins with engagement.

“My approach to prioritizing these issues remains consistent and clear — it starts with outreach,” Bowman said in August. “What are the most significant threats to their business? How have regulations harmed or improved their ability to operate safely and soundly?

Wall Street Rules

While Bowman continues to solicit feedback from community banks, proposals to ease the rules for Wall Street lending giants are already underway. Shortly after she took the post, regulators unveiled a proposal in June to roll back a key rule known as the enhanced supplementary leverage ratio. They are also in the process of overhauling stress tests, which gauge how big banks would fare during a hypothetical recession. 

Bowman is also taking the lead in crafting a new risk-based capital proposal tied to the what’s known as Basel III endgame. She was a sharp critic of the plan as originally drafted, which would have increased the biggest banks’ capital requirements by 19% to buffer against losses and a financial crisis. The Fed later walked back that proposal.

Fed Governor Michael Barr offered a warning on Wednesday about plans to roll back capital standards for large lenders like JPMorgan Chase & Co. and Goldman Sachs Group Inc., saying the recent proposals threaten protections for smaller banks. 

“As community bankers well know, it was not community banks that fueled the 2008 financial crisis — it was the largest, most complex firms whose excessive risk-taking nearly brought down the system,” said Barr, who previously served as the Fed’s top bank cop. 

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