Senator Elizabeth Warren is demanding that the Federal Reserve turn over internal records about changes inside its bank supervision division and explain how it plans to revisit the 2023 collapse of Silicon Valley Bank. When it comes to the biggest banks, Michelle said regulators are reworking four key parts of the capital rulebook: stress tests, the supplementary leverage ratio, Basel III rules, and the extra capital charge for the largest global banks. She said the Fed released the final 2026 stress test scenarios earlier this month and also shared more details about how those models are built so banks can see what they’re being measured against. She added that last fall the Fed, along with the OCC and FDIC, signed off on changes to the enhanced supplementary leverage ratio for the largest U.S. banks, making clear that the leverage rule is meant to serve as a safety backstop and not stop banks from doing low-risk things like holding U.S. Treasurys. In the letter, Warren and Senator Ruben Gallego wrote that it would be “highly inappropriate” to remove bank examiners at the request of banks. The lawmakers also said they want clarity in regards to plans about producing a new report on Silicon Valley Bank’s failure in 2023, when the lender collapsed right in the middle of what was an intense and historic crypto winter. Michelle is one of several regulators appointed by President Donald Trump to change how federal agencies oversee banks. She has reduced staff inside the supervision unit and introduced guardrails against what she calls “abusive” supervisory practices. Treasury Secretary Scott Bessent and other officials in the administration have criticized post-2008 financial crisis rules, arguing those reforms made banks less competitive and slowed economic growth. Warren and other Democrats have warned that rolling back safeguards could weaken oversight. Michelle explains her approach at banking conference Meanwhile on the same day, Michelle also delivered opening remarks at the Fed’s 2026 Banking Outlook Conference. Michelle has served as Vice Chair for Supervision since June of last year. She pointed out that she is the first governor in that role with community banking experience, having worked at her family’s small-town Kansas bank and served as a state banking commissioner. Michelle told attendees she would discuss “what’s next on the horizon.” She said regulatory and supervisory tailoring guides her work. Oversight, she said, must match the size and risk profile of each institution. Community banks often face less stringent standards than large banks, but Michelle said more can be done to make sure rules fit the limited risk those banks pose. She said the Fed is reviewing merger and acquisition processes and de novo charters for community banks. Applications are being streamlined, and the competitive analysis framework is being updated to better assess competition among small banks. She also said regulators are reviewing comments on proposed changes to the community bank leverage ratio to provide flexibility while keeping capital standards nearly double the minimum requirement. The mutual bank capital framework will also be revisited to maintain safety and soundness while allowing flexibility. Michelle updates capital and leverage rules Michelle said regulators are modernizing rules for large banks by revising four pillars of the capital framework: stress testing, the supplementary leverage ratio, Basel III, and the G-SIB surcharge. She said the Fed recently disclosed stress test models, scenario design details, and the 2026 stress scenarios. The final 2026 scenarios were published earlier this month. Last fall, the Fed, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation finalized changes to the enhanced supplementary leverage ratio for U.S. global systemically important banks. Michelle said the update ensures leverage requirements serve as a backstop to risk-based standards and do not restrict low-risk activities like holding Treasury securities. On Basel III, Michelle said regulators are advancing U.S. implementation using a bottom-up approach instead of targeting a predetermined outcome. Adjustments were made to the capital treatment of mortgages and mortgage servicing because the prior framework reduced bank participation in mortgage lending and limited access to credit. She also said regulators are refining the G-SIB surcharge to balance safety and soundness with economic growth. Michelle said the Fed published supervisory operating principles last October for the first time. She said examiners are being directed to focus on core financial risks that could lead to deterioration or failure. If you're reading this, you’re already ahead. Stay there with our newsletter .
