Federal Reserve Governor Bowman: Regulators should evaluate the impact of their liquidity rules on lending institutions during times of turbulence.

Federal Reserve Governor Bowman stated that regulatory agencies should assess the impact of their liquidity rules on lending institutions during turbulent times and address the weaknesses in the framework. Bowman noted that while the components of liquidity requirements should work together to reduce the risk of bank failures, the framework did not take into account the actual performance of lending institutions under stress. In a speech prepared for an event in Washington, Bowman mentioned, "We need to understand whether these tools truly deliver the promised resilience, or if we have created a framework that looks perfect on paper but fails to capture the vulnerabilities that surface during times of stress. It is time to move beyond the question of 'Are banks compliant?' and instead explore 'Does compliance truly resilience?'" Previously, the Federal Reserve had considered adjusting its liquidity framework, including requirements aimed at protecting uninsured depositors, but that potential Biden-era plan was never finalized.