Federal Reserve outlines financial regulation modernization agenda in U.S. and global oversight

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Fed outlines regulation modernization

Highlights

Federal Reserve Board Governor Bowman outlines that the Financial Stability Board will publish a public consultation report in fall, advancing global regulatory modernization with G20 review.
Federal Reserve's 2026 Basel III proposal, now closed for comment, aims to simplify U.S. capital rules, recalibrate systemic bank surcharges, and reduce stress testing overlaps.
U.S. reforms include publishing new Supervisory Operating Principles, updating fixed asset thresholds, refining exam standards, and promoting safe adoption of AI with public consultation open through July 22.

FSB principles shape current reform agenda

As outlined in a speech published by the Federal Reserve Board, Bowman says the Financial Stability Board's Standing Committee on Supervisory and Regulatory Cooperation is developing principles to guide regulatory and supervisory modernization across jurisdictions.

She says the work centers on four priorities, focusing supervision on material financial risks, tailoring rules to institutions' risk profiles, improving transparency and accountability, and keeping oversight forward-looking as new technologies reshape finance. Bowman argues supervisors in the United States learned from the failure of Silicon Valley Bank that a high volume of findings does not necessarily produce effective supervision, and that oversight should move away from a "more is better" approach toward targeted, risk-based action.

The FSB has reviewed modernization efforts across its members and standard-setting bodies, she says, with common themes including proportionality, lower unnecessary burden, support for responsible innovation, and greater use of data and technology in supervision. The next stage is a public consultation report due in the fall, which is then set to go to the G20 as a milestone in the modernization effort.

U.S. reforms target capital, supervision and technology

Bowman says the United States is already applying those principles through several regulatory initiatives, including reform of the U.S. capital framework. She points to the Federal Reserve's 2026 Basel III proposal, published for public comment in March, which seeks to simplify requirements, recalibrate the global systemically important banks surcharge, reduce overlap between stress testing and risk-based rules, and limit incentives for traditional banking activity to move outside the regulated banking sector.

The comment period on that proposal has recently closed, and the Federal Reserve is now evaluating feedback as it works to finalize the rules. Bowman says the objective is to preserve robust capital levels while reducing barriers that limit credit availability without equivalent prudential benefits.

She also highlights the publication of Supervisory Operating Principles as the first time the Federal Reserve discloses the principles underpinning its supervisory approach. In parallel, the central bank is working on updating fixed asset thresholds that Bowman says no longer reflect economic growth and inflation, while refining exam standards so that less severe issues can be cited as supervisory observations instead of being treated in the same way as more serious concerns.

On technology, Bowman says U.S. modernization efforts now include helping banks adopt emerging tools safely. She points to an FSB consultation report published last month on sound practices for financial institutions using AI, with public comments open through July 22, saying the approach is intended to provide practical guidance rather than impose one-size-fits-all requirements.

Our earlier coverage of the UK’s tokenisation roadmap explained how policymakers and a 54-firm task force are pushing a 12-month plan to expand tokenised wholesale finance, including a blockchain-based sovereign bond and using tokenised assets as collateral in repo markets. The report argued faster digitisation could lift UK output and tax receipts over the next decade, while warning that competition from other jurisdictions is intensifying and that regulatory follow-through will be crucial.

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