The Federal Reserve is set to get its first board member dedicated to community banking.
On Thursday afternoon the U.S. Senate voted 64 to 34 to confirm Michelle “Miki” Bowman to fill a Fed governor seat reserved for someone with experience in community banking or community bank supervision. Bowman is currently the Kansas State Bank Commissioner and prior to that worked for the Farmers & Drovers Bank, which her great-great grandfather chartered.
Bowman will be the fourth Fed member appointed by President Donald Trump to the board. Lael Brainard is the last remaining Obama-era appointee still on the board.
Bowman said she would use her community banking experience to bring small bank perspectives on industry regulation and monetary policy. She told the U.S. Senate in May that regulatory burden was making it hard for community banks to survive, arguing that the costs of compliance were forcing the industry to consolidate.
She criticized the current regulatory framework for applying the same regulations on large banks to companies only a fraction in size.
“It’s important to be able to understand the burden on a [bank] staff of three to implement the same regulations that apply to much larger institutions,” Bowman said.
Bowman will arrive at the Fed as the major banking regulators begin work on implementing the regulatory relief bill signed by Trump in May. The bill offered a number of relief for smaller community banks, such as shorter reporting forms and blanket exemptions from certain rules for healthily-leveraged banks.
Critics of the bill argue that the relief may have gone too far by offering some regulatory relief – such as lighter stress test requirements – on banks with up to $250 billion in total assets. The Fed recently extended some concessions in the form of looser liquidity and funding requirements to banks with up to $700 billion, covering the likes of Capital One (COF), Charles Schwab (SCHW), U.S. Bancorp (USB), and PNC Financial (PNC).
For community banks, generally defined as those with less than $10 billion in total assets, having a small bank-minded member on the Fed is a big deal.
“We needed someone who could recognize the need for tiered regulation,” said Paul Merski, executive vice president of congressional relations for the Independent Community Bankers of America. The ICBA lobbied Congress to create the community banking seat on the Fed.
As a Fed governor, Bowman will also be a voting member of the Federal Open Market Committee. In her testimony, Bowman mostly focused on regulatory items but said the Fed’s efforts to shrink its balance sheet is “the appropriate path forward.”
Doug Wareham, President and CEO of the Kansas Bankers Association, told Yahoo Finance that the monetary policy-setting side of the job “will be a new role for her” but said she should bring a familiarity with rural communities to her decision making.
“The impact of rate changes impacts communities large and small and she’s certainly going to bring the perspective of what effect Fed monetary policy has on small family-owned businesses and Main Street America, especially rural communities,” Wareham said.
Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.