Financial regulations proposed by Bowman may jeopardize the stability of the financial system, according to Bowman's recent statement.

Federal Reserve Governor Michelle Bowman recently spoke at the Marrakech Economic Festival in Morocco, addressing various financial stability risks and the role of effective regulation in mitigating vulnerabilities.

Bowman highlighted the need for U.S. banks to meet new proposed capital requirements, particularly those with over $100 million in credit exposures. While specific banks were not named, the proposal aims to address reputational risks and promote regulatory clarity, particularly for institutions involved with digital assets and blockchain innovation.

The governor emphasised that capital alone cannot substitute for sound risk management and supervision. She criticised supervisory practices leading up to the failure of Silicon Valley Bank, noting that recent bank failures have exposed deficiencies in supervision, heightening financial stability risks.

Bowman also addressed concerns about rising interest rates, stating that they could erode loan quality and earnings. Banks relying on expensive deposits and holding long-term, low-rate assets could potentially face revenue drags due to these rate increases.

In addition, Bowman emphasised the importance of monitoring nonbank financial institution risks, as the sector continues to expand. Large nonbank financial institutions, such as hedge funds, prime money market funds, insurance companies, and some corporate bond mutual funds, remain vulnerable to run risks.

The governor also reiterated her stance on the proposed regulatory capital requirement changes, stating that inhibiting innovation in the banking sector could lead to less transparency and potentially greater financial stability risk.

Meanwhile, the Consumer Financial Protection Bureau (CFPB) has proposed trimming its nonbank purview. This move could have implications for the regulatory landscape, particularly in the area of consumer protection.

Elsewhere, the Federal Deposit Insurance Corp. (FDIC) chair, Martin Gruenberg, stated that maintaining Basel III standards could have prevented the liquidity run at Silicon Valley Bank. The FDIC's continued adherence to these standards could help maintain stability in the banking sector.

In other news, the Federal Reserve's Cook is involved in a lawsuit against Trump over an attempted firing. No ruling has been made in the Cook hearing as of yet.

Lastly, Bowman noted that regulatory reform can pose significant financial stability risks, particularly if changes fail to take sufficient account of incentive effects and potential consequences. The focus should be on expanding the regulatory boundary and addressing regulatory gaps, rather than making hasty changes that could potentially exacerbate existing risks.