Global banking regulators want one set of rules for everyone. But the U.S. says that approach doesn't work for every country. That clash came into focus when Fed Vice Chair Michelle Bowman spoke to the Financial Stability Board (FSB) - the global watchdog that coordinates financial rules - and told them to be flexible.
Bowman argued that forcing the same strict rules on countries with very different banking systems makes the FSB less effective. She said regulation should be tailored to each jurisdiction. She urged the FSB to focus on major financial risks instead of procedural issues that carry little weight for a bank's safety.
The Trump administration has pulled the U.S. out of many multilateral groups, but the United States continues to participate in the FSB as well as the Basel Committee on Banking Supervision, the group that sets global bank capital rules.
She wants regulators to be forward-looking and consider emerging risks and responsible innovation. The United States is already updating its system by cutting the capital reserves banks must keep for possible losses and reducing the extent of banking oversight.
Get the market news that matters in a five-minute read with Market Briefs, our free daily newsletter
In her prepared remarks, Bowman stated: "Modernization is an evergreen approach to ensuring financial stability - starting with the banking sector. It is an ongoing commitment to improve, to learn, and to adapt our approach as markets, technology, and risks evolve."
The FSB is working on a global modernization effort and will deliver a report in the fall of 2026. Bowman's push for flexibility comes as the U.S. and Europe take different paths on bank rules.
The FSB and Basel Committee are central to international financial regulation, but their efforts often clash with national interests. The U.S. has long argued that one-size-fits-all rules ignore differences in banking structures, such as the prevalence of community banks in America versus large European lenders. Bowman's remarks reinforce that stance, as Washington seeks to maintain autonomy over its financial system while still engaging with global bodies. The upcoming FSB modernization report and the Basel Committee's review will test whether these institutions can accommodate divergent national approaches.
The contested provision in the Basel capital rules involves the treatment of mortgage servicing assets and other items, which U.S. officials argue disproportionately benefits European banks. The review announced in May 2026 is limited in scope, but it marks a rare concession by the Basel Committee to a member country's concerns. Bowman's speech signals that the U.S. will continue to press for such accommodations.
Earlier in July 2026, the Bank of England, led by Governor Andrew Bailey, put forward a set of modest relaxations to some capital regulations. Bailey described the changes as a "finely balanced judgment" and stated they would pose no major risk to the stability of banks and financial entities.
In May 2026, the Basel Committee decided to conduct a restricted examination of a peculiar aspect of its capital rules, following complaints from U.S. authorities that the regulations give European banks an unfair edge. That review is still underway.
Bowman's speech shows the U.S. wants the FSB to give countries room to adjust rules to their own markets. The FSB should concentrate on core financial risks instead of procedural matters that do not alter bank safety.
The Basel Committee's review of the capital rules twist is underway. For now, the U.S. and Europe remain on separate tracks.
Join Market Briefs, our free daily newsletter, for a quick daily rundown of the markets
