Bank Supervision Failure: Focus Shift Needed Immediately

Bank supervision is stuck in the wrong gear.

Too much focus on process.

Not enough focus on outcomes.

Ask any banker what frustrates them most about exams, and you’ll hear some version of: “We’re getting dinged for foot-faults, not real risks.”

Not material threats to the bank.

Not actual consumer harm.

But documentation misses.

Policy version control.

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This obsession with checkbox compliance might shield regulators from criticism—but it does little to fortify the financial system.

In fact, it may distract from the very real risks—cyber threats, liquidity mismatches, credit model drift—that can bring a bank down.

The best supervision doesn’t just ask: Did you follow the process?

It asks: Is your process producing the right outcomes?

We need supervision to shift from audit mode to risk radar mode—and start rewarding institutions that can prove their systems are working, not just that their paperwork is pristine.

Let’s stop confusing form with function—and give banks room to focus on what really matters.