Michelle W. Bowman, the Vice Chair for Supervision, Board of Governors of the Federal Reserve System, in a speech dated June 6, 2025, corroborated the facts of gradual erosion of the link between supervisory ratings and actual financial condition of supervised entities in the United States. The Federal Reserve’s supervisory statistics for the first half of 2024 showed that a majority of institutions that met all supervisory expectations for capital and liquidity standards were nevertheless rated unsatisfactory in their supervisory reports.These mismatches were described as “odd”, and the existing approach is now being subjected to a comprehensive overhaul in the US. The intended outcome is a more coherent framework that can assess whether a firm is well managed and has demonstrated resilience under a range of conditions and stress scenarios.
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