Michelle Bowman, who serves as vice chair for supervision at the Federal Reserve, testified on Thursday during a hearing in Washington, D.C., hosted by the Senate Banking Committee.

How Bowman said the Federal Reserve approaches supervisory and regulatory activities of banks under her watch might have made auto-finance companies cheer if they were in the gallery.

Bowman told lawmakers her view of the Federal Reserve’s supervisory program over the last seven years.

“I have consistently emphasized the importance of transparency, accountability, and fairness in supervision,” Bowman said. “These principles guided my approach as a state banking commissioner, and they continue to guide my approach today and I remain focused on the Board’s responsibility to promote the safe and sound operations of banks and the stability of the U.S. financial system.

“An effective supervisory framework must focus on the core material risks to banks operations and to the stability of the broader financial system,” she continued. “Let me be clear: those core material risks include non-financial risks where they pose threats to safety and soundness. Strong risk management, whether in credit, liquidity, cybersecurity, or operations, remains essential, and we will continue to examine for these risks.”

Bowman then touched on a part of regulations that sometimes agitate lenders who might not have the same scale and resources as ones with a nationwide footprint.

“Supervision must also be tailored, matching oversight to each institution’s size, complexity, and risk profile,” Bowman said. “I have consistently supported a risk-focused, tailored approach to supervision and regulation. This approach is consistent with the direction I provided to Federal Reserve examiners in guidance that was also publicly released last fall.

“One example of this implementation is our work on new and existing Matters Requiring Attention (MRAs), ensuring they are based on threats to safety and soundness and are aligned with this guidance using clear language and identifying transparent expectations. This review is an opportunity to recalibrate — to prioritize what truly matters — and it complements the supervision that is ongoing. We will also continue to issue supervisory findings when necessary. It is not a reduction of our supervisory toolkit or approach,” she went on to say.

Bowman wrapped up her prepared remarks by addressing potential controversy in the compliance space.

“We have also proposed a regulation to prevent board personnel from encouraging, influencing, or compelling banks to debank or refuse to bank a customer due to their constitutionally protected political or religious beliefs, associations, speech, or conduct,” she said.

“Let me be clear: banking supervisors should never, and will not under my watch, dictate which individuals and lawful businesses a bank is permitted to serve. Banks must remain free to make their own risk-based decisions to serve individuals and lawful businesses,” Bowman added.