The US Federal Reserve is preparing to withdraw some previously issued confidential warnings to banks, signalling a further relaxation of its supervisory approach under vice chair Michelle Bowman. 

Earlier this month, Fed supervision staff informed banks that examiners would start reviewing outstanding private directives that require firms to address operational shortcomings, according to people with knowledge of the process. 

These directives include “matters requiring attention” and “matters requiring immediate attention,” which range from concerns over financial health to areas such as cyber security and management succession planning. 

The review will lead to the elimination of warnings that are not consistent with recent instructions for examiners to focus more on immediate threats to a bank’s financial condition and less on internal processes, according to media reports.  

Bank executives will have a say in how any remaining warnings are addressed. 

While the Fed will still issue such directives during routine examinations, when necessary, the criteria for doing so will be tightened. 

Efforts by US regulators during President Donald Trump’s administration have included reducing regulatory complexity, which bankers argue has increased costs without always improving stability.  

Bowman has committed to making the oversight framework more transparent and risk focused. 

In a memo seen by Bloomberg, the Fed stated the review aims to help examiners “enhance the effectiveness of supervision by focusing on material financial risks to a bank’s safety and soundness.” 

As per the memo, the review supervisory findings are “based on deficiencies which, if not remediated in a timely manner, would create a significant probability of higher-than-normal harm to the financial condition of the supervised firm,” rather than concerns about policies, procedures or controls, according to the Fed memo.  

Recently, the Fed decided to maintain current bank stress capital buffer requirements through 2026, delaying updates until 2027, as it seeks public input for new models.  

The central bank has also finalised hypothetical scenarios for its 2026 stress tests, which assess how large banks would handle a severe economic downturn.