Vice Chair for Supervision Michelle Bowman laid out changes Tuesday to the Fed’s supervisory structure intended “to implement a culture of accountability and clear decision-making authority.”

The consolidated structure will hold regional leaders accountable for supervisory activity within their zone, Bowman said. Fed examiners will remain at existing reserve bank locations and continue to oversee the banks they already supervise.

“This approach clarifies accountability and decisionmaking and enables a consistent application of supervision,” she said.

Adhering to state lines rather than reserve bank district boundaries can help the Fed “coordinate more effectively and efficiently with our state and federal regulatory partners,” Bowman said. “The regional structure creates scale in our operations. It simplifies our leadership structure while preserving local supervision by examiners.”

Revamping the central bank’s organizational structure is intended to tackle structural issues that hinder the Fed’s ability to conduct supervision optimally, according to Bowman.

The web of committees, for example, “became a source for plausible deniability and a disincentive for examiners to take prompt and decisive action to address identified risks,” prompting the need for improvements, she said.

Bowman referenced the recent Starling Advisory Group preliminary report on the failure of Silicon Valley Bank, which highlighted “a long-standing structural issue in the supervisory function — a mismatch between authority for decisionmaking and accountability for supervisory decisions.”

The Fed’s existing structure has “disincentivized” a link between responsibility and accountability, with the committee web causing further complication, leading to dysfunction, she said.

“We have to address long-standing issues embedded in our institutional culture, long-held assumptions and beliefs, and institutional inertia,” Bowman said.

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