Federal Reserve reform “three arrows in one go”? Bowman loosens Wall Street regulation Waller reforms local Federal Reserve Walsh rewrites monetary policy framework
The Zhitong Finance App learned that Bauman, the US Federal Reserve's highest-ranking bank regulator nominated by US President Trump and officially confirmed by the Senate in 2025, warned the Global Financial Stability Board (FSB) not to enforce “strict regulatory rules” that are unsuitable for diverse groups of countries, and said that such practices may greatly weaken the effectiveness of this regulatory framework for international markets.
Federal Reserve Vice Chairman Michelle Bowman (Michelle Bowman), who is responsible for regulatory affairs, said in a speech prepared for the Bank Policy Research Institute meeting held in London on Monday local time that the Global Financial Stability Council should encourage “flexibility” to ensure that regulatory measures suit the specific circumstances of each jurisdiction.
The Financial Stability Board (FSB) is an international organization responsible for monitoring risks in the global financial system, coordinating countries' regulatory policies, and proposing international financial supervision recommendations. Its members include central banks, financial departments, and financial regulators of major G20 economies, as well as international institutions such as the International Monetary Fund and the World Bank. However, the FSB is not a “global financial supervisory authority” with supranational enforcement powers. Its rules and recommendations are generally not directly legally enforceable, but are implemented by member states themselves in line with their own laws and financial structures; Bauman's latest requirement to “maintain flexibility” essentially opposes mechanically enforcing uniform international standards to all countries.
From unifying supervision to adapting to local conditions, the Federal Reserve is promoting a shift in global banking rules to flexibility
Despite the Trump administration's withdrawal from a number of other multilateral organizations, the US continues to participate in the Financial Stability Council and the Basel Committee on Banking Supervision. Bauman said that this latest situation reflects the importance the US attaches to “basic standards” because these standards can “ensure a level playing field.”
However, Bauman and her colleagues have been pushing global financial regulators to prioritize what they believe to be core financial risks rather than administrative matters; in her view, the latter has no significant positive impact on the safety and soundness of the global banking system.
The US government is moving in this direction domestically, including reducing the size of capital buffers banks must hold to withstand potential losses, reducing the scope of supervision for major banks, and implementing other reforms. The US government refers to this project as “modernizing the global financial system.”
“Modernization is a long-term, sustainable way to ensure financial stability — starting with the banking sector. It means a continuous commitment to improving, learning, and continuously adapting our approach as the market, technology, and risk evolve,” Bauman said.
As US regulators comprehensively reform relevant rules, some European policymakers are also considering adopting similar adjustments, but they emphasize their opposition to the kind of capital requirement cuts currently being promoted by the US.
Earlier this month, the Bank of England proposed easing minority capital rules, although Bank of England officials are still concerned about the deepening threat posed by artificial intelligence and the dangerous geopolitical outlook. Bank of England Governor Andrew Bailey said that the proposed reform is a “carefully balanced judgment” and should not unduly damage the safety and soundness of financial institutions.
In May of this year, the Basel Committee on Banking Supervision, which is responsible for formulating capital rules for global banks, also agreed to conduct a limited review of a special arrangement in its capital rules. Earlier, US officials said that the arrangement constituted unfair favorable treatment for European banks.
Bauman said on Monday that international regulators can learn from her approach, which includes implementing differentiated regulations and prioritizing transparency and accountability in the regulatory process. The Financial Stability Council is modernizing regulations globally, and Bauman said policymakers will submit a report this fall.
She also emphasized that relevant work must be forward-looking to ensure that this process “takes into account emerging risks and promotes responsible financial regulatory framework innovation.”
Trump's personnel landscape penetrates deep into the Federal Reserve: Bowman loosens supervision, Waller reshapes the local Federal Reserve, and Walsh initiates institutional reforms
Michelle Bauman was first nominated by Trump to the Federal Reserve Board in 2018, then nominated and confirmed again in 2020; Trump also nominated her in 2025 as Vice Chairman in charge of regulatory affairs, which was confirmed by the Senate in June of the same year. Waller was also nominated by Trump in 2020 and confirmed by the Senate; current chairman Kevin Walsh was nominated by Trump in 2026 and took office after confirmation by the Senate in May. So, judging from personnel sources and policy mandates, the three will probably be an important part of Trump's reshaping the Federal Reserve's leadership.
Trump's influence on the Federal Reserve's personnel and institutional agenda is deepening markedly. Bowman's push for a drastic loosening of regulatory policies for the big Wall Street banking giants, Waller's promotion of the centralization of local federal bank operations, and Walsh presided over a comprehensive system review, which has largely concentrated the Federal Reserve's power and reform agenda more on the Washington Council and the current chairman; however, major monetary policy and institutional reforms still require broad consensus among the Board, the Federal Open Market Committee, and the Federal Reserve's regional Federal Reserve systems. However, if investors believe that the reform begins to serve the White House's interest rate demands, the Fed's independence discount may translate into higher long-term inflation expectations and US bond maturity premiums, forming a trading mix of “bank stocks benefit, long-term debt is under pressure, and the yield curve is getting steeper.”
Bauman is most in line with the Trump administration's deregulation agenda: she advocates reducing unnecessary capital and compliance burdens, reducing the weight of subjective and procedural scrutiny in regulation, and requiring global rules at the Financial Stability Council level to allow flexible enforcement by various jurisdictions, which means that the US is trying to export domestic “regulatory modernization” into international rule principles. Walsh's push for interest rate cuts and balance sheet reduction, and the restructuring of market communication mechanisms and policy supervision frameworks also clearly reflects Trump's direction of demanding that the Federal Reserve lower interest rates and return to its narrow legal responsibilities.
However, Waller cannot simply be classified as a loyalist — although he is responsible for promoting the centralization of local Federal Reserve back-office functions such as manpower, information technology, and procurement in Washington, he clearly stated that reforms should not weaken the Federal Reserve's FOMC's monetary policy independence principle, and opposes the dismissal of the Federal Reserve's major regional federal bank governors due to differences in interest rates. However, Waller's initiative to carry out comprehensive reforms at the operating level of the 12 local Federal Reserve branches of the Federal Reserve may eventually shift power and decisions from the local Federal Reserve Bank to Washington, and cause the Federal Reserve to face even greater political pressure from President Trump.