The Federal Reserve's top banking regulator does not want the government telling lenders which technology to use - or when to use it.
Michelle Bowman, the Fed's Vice Chair for Supervision, made that clear on July 14, 2026, in prepared remarks at a financial-inclusion conference. She argued that banks know their own customers and risks better than Washington does. "The decision of when and how to innovate rests with each bank and its management," Bowman said.
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She said the Fed should "set clear expectations, be transparent, and not micromanage individual business decisions" tied to innovation. When regulators lay out clear rules and focus on real risks, she said, "banks can innovate to reach more Americans with affordable financial services." The flip side? "When we create unnecessary complexity or prescriptive requirements, we risk limiting the very innovation that can expand access."
Bowman's comments land in the middle of a bigger debate about how fast AI is moving. The speed of AI adoption has raised concerns among policymakers about potential systemic risks, particularly following the discovery of vulnerabilities in advanced models like Mythos. Some industry observers argue that a cautious approach is necessary to avoid destabilizing the financial system, while others warn that overly restrictive rules could stifle innovation and hurt competition.
During April 2026, then-Fed Chair Jerome Powell and Treasury Secretary Scott Bessent gathered leading Wall Street institutions to alert them to cybersecurity dangers posed by AI systems like Mythos. A Bloomberg report revealed that after that meeting, banks and officials have been working together to create coordinated plans to fix the vulnerabilities uncovered by Mythos. The emergence of Mythos exposed critical gaps in existing security frameworks, prompting a coordinated response that balances rapid technological change with the need to protect the financial system from unexpected shocks.
Earlier on Tuesday, Fed Governor Michael Barr addressed the same gathering and stated that while he supports innovation, it remains uncertain if artificial intelligence will narrow or widen the gap in income and wealth. "We have heard many bold pronouncements about what AI will be able to do in the near and distant future. Some will likely come to pass and others won't. But future inequality will depend not only on what AI can do, but on what we choose to do with AI," Barr said.
Following Barr's remarks, Bowman underscored that prudent innovation and broadening financial access are closely linked. "When we provide clear regulatory expectations and focus supervision on material risks, banks can innovate to reach more Americans with affordable financial services," said Bowman. "When we create unnecessary complexity or prescriptive requirements, we risk limiting the very innovation that can expand access."
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