Federal Reserve's Bowman: The effectiveness of the liquidity regulatory framework should be examined, and the discount window mechanism should be reformed.

In a speech titled "Liquidity Resilience, Financial Stability, and the Role of the Federal Reserve" at a roundtable hosted by the Committee on Capital Markets Oversight, Federal Reserve Chairman Bowman pointed out that 15 years after the global financial crisis, it is necessary to reassess whether the current regulatory framework for bank liquidity has truly enhanced the resilience of the financial system, rather than merely "appearing effective" at the compliance level. The current prudential liquidity framework mainly includes tools such as the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), Internal Liquidity Stress Test (ILST), and resolution planning, which theoretically can help banks cope with short-term withdrawals and long-term market shocks. Without fundamental reform of the discount window to make it a truly usable and consistent liquidity safety net, the banking system will continue to build additional buffers by hoarding high-quality liquid assets, thereby compressing credit supply, increasing demand for reserves, and forcing the Federal Reserve to maintain a larger balance sheet. Future reforms should focus on whether regulatory requirements truly translate into systemic resilience and carefully assess the potential impact of liquidity regulation on bank behavior and the macroeconomy.