On March 31, Fed Vice Chair for Supervision Michelle Bowman delivered remarks on the “vital” role small businesses play in the U.S. economy and the importance of regulatory support for small business lending. Characterizing small businesses as the backbone of the U.S. economy, Bowman noted that, as of 2023, they employed 59 million Americans and generated $16 trillion in revenue. Bowman observed that while banks hold roughly $600 billion in business loans originated under $1 million, credit conditions remained tight, with 9 percent of banks, on net, reporting tightened credit standards on commercial and industrial loans to small firms in the third quarter of 2025, largely citing economic uncertainty.

Bowman outlined the federal banking regulators’ recent proposed rules to modernize the regulatory capital framework (covered by InfoBytes here), particularly as they relate to small business lending. Bowman stated the proposals would lower risk weights on small business loans — reducing them from 100 percent to 65 percent for “investment grade” loans over $1 million, and from 100 percent to 75 percent for loans under $1 million. She asserted the proposed changes would better align capital treatment for small business credit cards with actual risk tied to repayment history. Bowman concluded by highlighting the importance of stakeholder feedback during the open comment period to ensure that future regulations effectively balance safety with continued access to credit for small businesses that drive economic growth.