Federal Reserve Updates Banking Rules to Balance Safety and Economic Growth
Washington, Thursday, 10 September 2026.
Federal Reserve Vice Chair Michelle Bowman outlined regulatory updates to Congress today, addressing risks from artificial intelligence and non-bank lenders while keeping capital requirements supportive of commercial lending.
Federal Reserve Updates Banking Rules to Balance Safety and Economic Growth
Federal Reserve Vice Chair for Supervision Michelle Bowman presented testimony to the House Financial Services Committee on September 10, 2026, outlining the central bank’s updated framework for financial regulation [1]. Addressing Committee Chairman French Hill and Ranking Member Maxine Waters, Bowman detailed regulatory priorities designed to safeguard financial stability while ensuring capital requirements do not unnecessarily restrict commercial lending [1]. The testimony emphasized a calibrated approach to supervision that supports economic growth without compromising the resilience of the banking system [1].
Banking System Resilience and Non-Bank Shift
According to the Federal Reserve, the U.S. banking system remains sound and resilient with strong capital ratios and liquidity, despite a slight increase in delinquencies that remain within historical averages [1]. However, a significant structural shift is occurring as non-bank financial institutions (NBFIs) capture a growing share of the lending market, particularly in mortgage loan origination and servicing [1]. Data indicates the share of bank-originated mortgages dropped from approximately 60% in 2008 to 35% in 2023, representing a 25 percentage point decline in bank market share over this period [1].
Supervisory Concerns and Lending Standards
Federal Reserve surveys indicate banks have tightened lending standards for NBFIs due to concerns regarding underwriting and collateral quality [1]. This tightening reflects a cautious stance as traditional banking activities shift away from regulated entities toward less regulated sectors [1]. To address this, federal banking regulators have finalized reforms to the community bank leverage ratio (CBLR) framework to better calibrate oversight and support economic growth in local communities [1].
Emerging Risks in AI and Cybersecurity
The Federal Reserve is actively monitoring artificial intelligence (AI) advancements, noting that while AI improves cybersecurity defense capabilities, it simultaneously exposes new vulnerabilities to cyberattacks within critical infrastructure [1]. Effectively managing these emerging cyber risks will require ongoing collaboration between public and private entities, continuous monitoring of AI developments, and agile regulatory frameworks [1]. A report on sound practices for AI in financial institutions is scheduled for publication by the Financial Stability Board’s Standing Committee on Supervisory and Regulatory Cooperation during the week of September 14 to September 20, 2026 [1].
Future Regulatory Roadmap and Innovation
Looking ahead, the Federal Reserve is conducting a comprehensive review of regulatory thresholds to adjust for inflation and economic growth, alongside developing regulations for stablecoin issuers as mandated by the GENIUS Act [1]. Federal banking agencies have also updated capital treatment for tokenized securities to be technology-neutral and revised model risk management guidance to be more flexible for banking organizations [1]. Vice Chair Bowman stated that appropriately calibrating regulatory and supervisory requirements strengthens both financial stability and economic growth [1].