Federal Reserve Reviews Secret Bank Scores Again

The Federal Reserve, which oversees banks in the United States, is reviewing secret scores it gives to large banks. The regulator said these scores help it understand how healthy and safe the banks are. Michelle Bowman, picked by former President Trump to be the new supervisor, wants to check these scores. She thinks some banks got bad grades even though they seemed to be doing well.

Last year, only about one-third of the largest banks received good scores in all areas. The rest had problems, especially with handling funds and managing risks. This surprised many because the banks appeared strong in other ways. Bowman said the scoring system might not be fair and wants to change it.

The Fed Could Change How Ratings Are Given To Banks In The Future

The Trump administration is set to reduce rules for banks and give more control to the White House over agencies like the Fed. The US government has mandated a new rule that allows the White House to check new rules from regulators before they are finalized. Experts said this new law will improve how the Federal Reserve supervises banks.

In a recent hearing, Bowman did not say if she would follow this new order. However, her nomination shows that she supports fewer laws for financial institutions. This gives banks the ability to operate well. It could also lead to changes in how banks are scored and what they are allowed to do.

The Fed has said it will think about changing the way it tests banks. The regulator noted that it will ask the public for ideas on how to improve the test process. However, some banks feel this is not enough and want more changes.

Bowman is expected to be less strict than the previous supervisor, Michael Barr. Barr was known for being tough on banks. Experts said Bowman’s approach might be more relaxed, which many banks would welcome. She has not said much about how she will handle the job, but enthusiasts believe she will support changes that help banks grow.

The Federal Reserve Delays The Release Of Bank Scores

According to the Federal Reserve, these secret scores are important. If a bank gets a low score, it might not be allowed to merge with another bank or begin new projects. Bank leaders said the current system is too unclear and stops them from growing. They hope Bowman will bring changes that help them.

Many banks and business groups have complained about the Fed’s scoring system. They said it’s hard to understand and can hurt their plans. Some have even taken legal action, saying the rules are not fair. They want the Fed to explain how they decide on the scores.

The Federal Reserve usually gives out these scores by March each year. However, this time the regulator has not released scores and this has raised concerns among banks. Some experts think the reserve is waiting until Bowman officially takes her new job. Some workers at the Fed are worried about this delay. They said the scores have already been checked and should be released.