Federal Reserve Reducing Bank Supervision Staff By 30 Percent

The Federal Reserve is planning to reduce its banking supervision staff by 30 percent by the end of next year, which would cut the supervision and regulation division from a previous authorized staff count of 500 down to roughly 350. Fed Vice Chair for supervision Michelle Bowman announced the staff cuts during a morning meeting last week.

“The goal is to accomplish this reduction as much as possible through natural attrition, retirements, and by offering a voluntary separation incentive to all S&R division employees, with details to come in the following weeks,” Bowman wrote in a memo, according to Banking Dive. Her goal for the division is “to operate with a flatter organizational structure and fewer management layers.”

The banking supervision sector manages the Fed’s regulation and oversight of thousands of state-chartered banks and bank-holding companies. The Wall Street Journal noted that Bowman plans to rename the division’s operations unit the “business enablement group” and to create a new position focused on industry engagement.

Bowman is working on selecting new leadership at the supervision division after longtime director Michael Gibson announced his retirement earlier this year. The staff reduction comes after the Trump administration criticized the Fed for playing too large a role in economic policy, potentially compromising its monetary policy independence.

Bowman said that the division should focus on issues that present material risks to banks instead of process-related errors that do not affect a business’s safety and soundness. She also stressed that it should rely on examinations of a bank’s primary federal regulator instead of duplicate efforts.

Senator Elizabeth Warren (D-Mass.) criticized the news of the Fed’s staff reduction, accusing the agency of “recycling its pre-2008 crisis playbook.” “I’m deeply concerned American families will pay the price once again,” she expressed.