WASHINGTON, Nov 18, 2025 (BSS/AFP) - The US central bank's top banking regulator on Tuesday defended efforts to revamp oversight of the sector, as she faces warnings that weakened supervision could be destabilizing for the financial system.

"Our supervisory approach is not about narrowing our focus -- it is about sharpening it," Michelle Bowman, Federal Reserve vice chair for supervision, said in a statement.

Her comments came after the recent release of a memo that called on supervisory staff to prioritize attention on a firm's "material financial risks," rather than devoting too much attention to processes and documentation that do not pose significant risks to a firm's safety and soundness.

The memo also called on Fed supervisory staff to rely more on state or federal supervisors, and only independently verify if an issue was resolved if a firm's internal audit was deemed unsatisfactory.

The aim, Bowman said, is to build "a more effective supervisory framework."

Shortly after the Fed released the memo, however, Fed Governor Michael Barr delivered a speech in Washington stressing the need for "clear guardrails, underpinned by effective banking supervision."

"Periods of relative financial calm have led to efforts to weaken regulation and supervision," added Barr, who is Bowman's predecessor and an appointee of former president Joe Biden's administration.

"This has often had dire consequences, as we saw prominently during the Global Financial Crisis," he added.

Barr cautioned that the country was at a "moment of inflection," citing the rising pressures to weaken supervision "in ways that will make it harder for examiners to act before it is too late to prevent a build-up of excessive risk."

"These pressures present real dangers to the American people," he said.

He also argued that recently unveiled plans to cut staffing at the Fed's supervision and regulation division by 30 percent by end-2026 will impair supervisors' ability to act swiftly to respond to risks.

He warned that weakening bank supervision could "be profoundly damaging to banks and destabilizing to the financial system."

"What they're doing is undermining our ability to hold the banking system accountable and to make sure it stays safe in the future," Barr said in a question and answer session.