On January 31, Fed Member Michelle Bowman addressed challenges faced by mutual banks and community banks at a New England CEO summit. Bowman provided a brief update on the state of the U.S. economy, including the rate of inflation and alluded to the future movement of the federal funds rate, indicating a preference that future adjustments to the policy rate should be gradual. Bowman also highlighted difficulties mutual banks encounter in raising capital and suggested offering regulatory flexibility through mutual capital certificates, which Bowman indicated could provide mutual banks an additional way to raise capital without disrupting their mutual structure. Additionally, Bowman discussed procedural hurdles mutual banks face in managing the dividend process, which imposes significant costs and inefficiencies. Bowman suggested the regulatory framework should be more transparent and efficient to help mutual banks thrive in their communities.
Bowman also addressed climate-related financial risks, noting that while banks must manage all material risks, the banking agencies’ climate-related financial risk guidance arguably pushes the boundaries of appropriate regulatory responsibilities, and risked influencing credit allocation decisions, which should not be dictated by banking regulators. In a Q&A session, Bowman acknowledged the need for improved transparency in regulatory communication and the importance of addressing cybersecurity threats and technological innovation. Bowman also emphasized the necessity of a tailored regulatory approach to support community banks, particularly in rural and underserved areas amid ongoing consolidation trends.
