Fed's Michelle Bowman says responsible banking innovation is 'critically important'

Federal Reserve Board Governor Michelle Bowman said Wednesday that banking regulators' support in innovating banking responsibly via certain emerging technologies is indispensable. "And, frankly, there is greater risk in standing still—in not recognizing the need to move forward," Bowman said in a prepared speech at the Venture Center in Little Rock, Arkansas. "Failure to innovate can undermine a bank's competitiveness, posing a threat to safety and soundness just as innovating recklessly can." For instance, a slew of depository institutions have taken interest in offering services involving cryptocurrencies. But before a lender starts engaging in crypto-related services, such as custody of crypto, facilitation of customer buys/sales of cryptos and loans collateralized by cryptos, "it must seriously and carefully consider the risks involved—both to the bank and its customers," Bowman said. Bowman's remarks come just shortly after the Fed introduced new guidelines for banks considering such activities. An important aspect of that release is that "firms should contact their supervisors about these types of activities and expect that supervisory staff will provide timely feedback, as appropriate," she emphasized. With regards to the innovation of payments, FedNow, an interbank settlement service enabling instant payments, "will help transform the way payments are made through new services that allow consumers and businesses to ma...