Opening remarks by Governor Bowman at the 2024 New York Fed Regional & Community Banking Conference | Summary and Q&A

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April 18, 2024
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Federal Reserve
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Opening remarks by Governor Bowman at the 2024 New York Fed Regional & Community Banking Conference

TL;DR

Risks in the banking industry, such as liquidity risk and cyber security risk, are evolving, requiring banks and regulators to adapt their risk management frameworks to mitigate these challenges.

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Key Insights

  • ✳️ Liquidity risk and interest rate risk are now higher priority concerns for banks and regulators.
  • ✳️ Third-party risk and cyber security risk continue to evolve and pose new challenges.
  • ✳️ Banks and regulators must adapt their risk management frameworks to identify, measure, monitor, and control for both traditional and emerging risks.
  • 🏦 Responsible innovation is important, and regulators should support banks in expanding their product offerings.
  • 🫢 Contingency funding plans are crucial for banks to effectively respond to challenges and shocks.
  • 🏦 Supervisors must ensure efficient, effective, and consistent supervision based on a bank's complexity, size, risk profile, and activities.
  • 💯 Changes to supervisory expectations and processes should not distract banks from focusing on core and emerging risks or impair the long-term viability of the banking system.

Transcript

good morning it's really a pleasure to join  you by video I'd like to thank supervision at   the New York fed for inviting me to join you  at this year's Regional and Community banking   conference these forums enable us to continue  our engagement with Bankers in the industry   to address a variety of issues and challenges  that exist in the curre... Read More

Questions & Answers

Q: What are some of the challenges and risks that banks have faced in recent years?

Banks have faced challenges such as the pandemic, inflation and rapid rise in interest rates, market uncertainties, increased fintech engagement, and bank failures.

Q: How should banks ensure the safety and soundness of their operations?

Banks should have risk management frameworks that can appropriately identify, measure, monitor, and control for both existing and emerging risks. They should also innovate responsibly and adapt their risk management frameworks as products and customer engagement evolve.

Q: What role do regulators play in ensuring the safety and soundness of the banking system?

Regulators play an important role in ensuring the safety and soundness of the banking system by identifying, supervising, and regulating emerging risks. They should encourage responsible innovation and ensure that liquidity requirements and supervisory expectations are commensurate with the bank's size, complexity, and risk profile.

Q: How should banks plan for contingency funding in case of emergencies?

Banks should have emergency contingency funding plans in place, which may include access to funding sources like borrowing from federal home loan banks or from the discount window. These plans should be regularly tested and evaluated for adequacy.

Summary & Key Takeaways

  • Traditional risks like liquidity risk and interest rate risk have become higher priorities for banks and regulators, while risks like third-party risk and cyber security risk continue to evolve.

  • Banks must ensure their risk management frameworks can identify, measure, monitor, and control both existing and emerging risks.

  • Regulators must support responsible innovation in the banking industry and appropriately identify, supervise, and regulate emerging risks.

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