The Fed's Top Supervisor Wants 'Community Bank' to Stop Meaning Under $10 Billion

Michelle Bowman, the Federal Reserve's Vice Chair for Supervision, used a speech to the 2026 Community Banking Research Conference in St. Louis on October 6 to list what the Board has already changed for smaller banks and what it intends to take up before the year is out. The through-line is that thresholds written at one moment keep applying long after the conditions that justified them have gone.

Every standard reflects a policy decision at a particular point in time.

The $10 billion line

Bowman noted that the under-$10 billion asset definition of a community bank has been in use for roughly 15 years, and suggested expanding which institutions are treated as community banks on the basis of business model and risk rather than size alone. She said the Board will also consider reforms to asset-size-based bank categories and updates to the large bank tailoring framework later in 2026.

On fixed-dollar thresholds more broadly, she said the Board will consider raising static figures for inflation and economic growth, with a mechanism to update them every five years rather than leaving them to be revisited ad hoc. The Board's July 2026 proposal to revise Regulation O, the insider lending rule, is the live example: Bowman noted the rule has not been comprehensively updated since 1979. The comment period on that proposal was extended on October 2, from October 5 to November 4.

What has already changed

• The Fed issued a Statement of Supervisory Operating Principles focusing supervision on risks that could materially weaken a firm's financial condition.
• With the OCC and FDIC, the agencies set the community bank leverage ratio at the statutory level of 8 percent, which Bowman called a material simplification.
• The Novel Activities Supervision Program was eliminated, which she said had been a barrier to innovation.
• Guidance affecting community banks will now be accompanied by tools and compliance guides, including one for third-party risk management.
• The Fed is indexing outdated asset thresholds and reworking the management component of CAMELS ratings.

The CAMELS change

Revisions being finalised through the Federal Financial Institutions Examination Council would focus ratings on material financial risks, and would end the practice under which the management component alone can determine a bank's composite rating.

The 'M' rating will no longer singularly drive a composite rating.

Mergers, new charters and the call report

On mergers and acquisitions, Bowman said the Fed's competitive analysis understates competition from credit unions, nonbank lenders, farm credit institutions and branchless banks, and that the effect falls disproportionately on rural banks. On new bank formation, she said agencies should clarify the capital requirements applied to approvals, meet specific processing timelines, and use conditional approvals where appropriate; she noted the FFIEC reaffirmed its support for de novo institutions in June. The FFIEC issued a request for information in December 2025 on streamlining the call report.

Structure and transparency

Bowman criticised the Fed's reliance on committees in supervision, saying they caused delays and obscured accountability, and that in practice they became a source for plausible deniability. Supervision will be realigned into five regions following state lines rather than Reserve Bank district boundaries, with examiners remaining in their current Reserve Bank locations. On transparency, she pointed to the publication of LISCC examination manuals and targeted guidance, and set out a standard for what examiners may hold banks to.

A bank should not learn about and then be held accountable for changed expectations during an examination.

For a bank sitting just under or just over a fixed threshold, the practical question is not the principle but the number. On that, the speech sets a direction and a timetable without yet setting a figure.