Earlier today, the Board of Governors of the Federal Reserve System released an internal memorandum, dated October 29, 2025, that communicated to Federal Reserve supervision staff a set of principles for implementing Vice Chair for Supervision Michelle Bowman’s policy priorities (the “Statement”).[1] As noted in the Statement, these priorities and operating principles “represent a significant shift from past operating practices” and call upon Federal Reserve supervision staff to “continually consider whether their work, conclusions, messaging, and other actions are aligned with the specific changes outlined in this statement of supervisory operating principles and, more broadly, with the overall shift in direction and posture.”[2]
The Statement covers a number of key elements of the approach the Federal Reserve plans to take to supervision going forward including: (1) a core focus on material financial risks,[3] (2) a greater degree of reliance as holding company regulator on the work of the principal supervisory agencies at the depository institution level, (3) granting significant deference to the findings of a supervised firm’s own internal audit function in concluding that an outstanding supervisory criticism or requirement in an enforcement action has been fully remediated,[4] (4) a presumption against conducting horizontal reviews and (5) a set of expectations intended to ensure that Matters Requiring Attention will be more infrequently issued and more speedily closed once remediated.
The Federal Reserve indicated that it is training examiners to help ensure prompt implementation of the principles contained in the Statement and “expects to formalize them in public supervisory guidance or regulatory changes, where appropriate.”[5]
The Statement is available on the Federal Reserve’s website at the following link: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20251118a1.pdf.
[3] The Statement stresses that supervisory staff “should not become distracted from this priority by devoting excessive attention to processes, procedures and documentation that do not pose a material risk to a firm’s safety and soundness.” Statement at 1.
[4] The Statement indicates that examiners “should rely on an institution’s internal audit when that function is rated satisfactory.” Statement at 2.