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Bowman - Challenges to the Community Banking Model

Governor Michelle W. Bowman's speech at the Community Bankers Symposium highlights several challenges and opportunities facing community banks within the current regulatory and competitive landscape. The speech underscores the critical role of community banks in local economies while acknowledging the increased regulatory pressures they face. Bowman emphasizes the necessity for regulators and banks to collaboratively address risks and learn from past regulatory missteps, such as those evident in the management failures surrounding Silicon Valley Bank. Cybersecurity and third-party risk management are highlighted as key areas of concern, necessitating robust operational resilience and a strong regulatory framework. Significantly, the evolving competitive landscape—marked by internet banks, fin-techs, and non-bank entities—requires regulators to ensure a level playing field without distortion. Bowman calls for a more uniform regulatory approach that does not disproportionately disadvantage community banks. Overall, the speech advocates for regulatory frameworks that support financial stability while encouraging innovation and competition.



- Positivity: 65
- Uncertainty: 50

HEW: October’s Wave of Easing

• US inflation joined the punchy payrolls release in exceeding expectations, defying the dovish bias. The RBNZ followed the Fed’s 50bp, and Korea started cutting, but Peru hawkishly surprised with rates on hold. The early-easers are having second thoughts.
• Next week’s policy focus is the ECB, which we expect to cut amid a dis-inflated outlook and disappointing demand. The market and consensus agree although it is not inevitable. UK inflation data are set to slow while the labour market remains tight.

By Philip Rush

Korea: 25bp Rate Cut To 3.25% (consensus 3.25%) in Oct-24

• The Bank of Korea cut its base rate by 25bp to 3.25%, in line with the consensus, citing stabilised inflation and a slowdown in household debt growth.
• Future rate decisions will depend on the domestic demand recovery, which remains sluggish, alongside heightened global economic risks such as geopolitical tensions and volatility in foreign exchange markets.
• The central bank will continue to weigh the trade-offs between growth and financial stability, with particular attention to household debt and housing market dynamics amid potential further rate cuts.

Peru: Policy Rate Held at 5.25% (consensus 5.0%) in Oct-24

• The Central Reserve Bank of Peru’s decision to hold the rate at 5.25% surprised markets expecting a 25bp cut, signalling a more hawkish stance driven by moderating inflation trends and anchored expectations.
• Inflation has declined, with headline inflation at 1.8% and core inflation at 2.6%, but a temporary rise is expected in Q4, underscoring the BCRP’s focus on inflation data to guide future rate decisions.
• The BCRP’s future policy path will depend on inflation dynamics and global risks, with volatility in international markets and geopolitical concerns, such as rising fuel prices, playing critical roles in determining rate adjustments.