The Fed Is Cutting Bank Supervision From 12 Districts to 5. Bowman Says the Old System Let Examiners Dodge Blame.

The Federal Reserve is cutting its bank-supervision structure from 12 Reserve Bank districts to five regions, each run by a single accountable official, Vice Chair for Supervision Michelle Bowman said October 6. The change targets the internal committee system that Bowman says let examiners avoid responsibility for acting on bank risks, including at Silicon Valley Bank before its 2023 collapse.

Why Bowman calls the old system a shield

Bowman's criticism traces to an independent review of Silicon Valley Bank's failure, which found examiners had identified the bank's risks well before it collapsed in March 2023 but did not force fast enough action. Fed supervision had relied on multi-level committees to sign off on tough calls, a structure Bowman says let individual examiners avoid responsibility for acting. Each of the five new regions will instead have one leader who owns every supervisory decision made there, aligned to state boundaries rather than the old Reserve Bank map.

“These committees became a source for plausible deniability and a disincentive for examiners to take prompt and decisive action to address identified risks.”

The threshold that hasn't moved since 2011

The reorganization also resets the definition of a community bank, fixed at $10 billion in assets for 15 years even as inflation and ordinary growth pushed smaller, simple institutions into a supervisory tier built for far more complex firms. Bowman's proposal raises the fixed-dollar thresholds and adds a formal review every five years, so the line moves with the economy instead of sitting still for another decade and a half. National Mortgage News, citing analyst estimates, said the new thresholds could run roughly 50 percent higher across several asset tiers once finalized. The Fed has also already eliminated its Novel Activities Supervision Program, the unit that reviewed banks' crypto and fintech partnerships, which Bowman described as a barrier to innovation rather than a safeguard.

A pattern critics are already watching

The five-region plan is barely a day old, and no lawmaker or advocacy group had issued a direct response to it as of this story's publication. But it lands on top of a broader deregulatory record that has drawn sustained criticism. In August, Better Markets, a nonprofit that pushes for stricter bank oversight, attacked a separate Bowman-backed proposal to loosen the CAMELS ratings system banks are graded on, arguing it would let "management, governance, and risk-management failures" go unpunished until financial damage was already visible. Christopher Appel, the group's director of banking policy, said that change would turn supervision "from its proper role as an early-warning system into an ineffective rearview mirror." Whether the five-region reorganization gets read the same way, as faster accountability or as fewer checks on banks, depends on how it is carried out, not on Tuesday's speech alone.

The industry's early read

Rob Nichols, president of the American Bankers Association, told the group's own Banking Journal that the ABA welcomes the focus on risk-based regulation and wants to see how the plan works in practice before judging it. That is a measured response from the industry's biggest trade group, typical for a proposal still short on an implementation date. The Fed has not set a timeline for finalizing the new asset thresholds or completing the regional realignment.

For a bank sitting near the $10 billion line, the practical question is simple: does this reorganization produce a more consistent exam, or just a different office signing off on the same findings. Bowman is betting that naming one accountable leader per region fixes a problem that multiple committees created. The Silicon Valley Bank review that prompted this change found the opposite failure, not too few rules but too little willingness to enforce the ones that already existed. That is the test the next bank failure, if there is one, will apply to this structure.