Michelle Bowman, the Federal Reserve's Vice Chair for Supervision, stated that regulators should evaluate the impact of their liquidity rules on banks during periods of market volatility and address weaknesses within the framework. Bowman said on Tuesday that although the components of liquidity requirements should work together to reduce the risk of bank failures, the framework does not account for banks' actual performance under stress scenarios. "We need to determine whether these tools are delivering the promised resilience, or if the framework we've built looks impressive on paper but fails to capture the vulnerabilities exposed during times of stress," Bowman remarked in prepared remarks for an event in Washington. "It is time to move beyond asking whether banks are compliant and instead ask whether compliance truly translates into resilience." Bowman pointed out that a key issue with the current framework is that banks are over-allocating high-quality liquid assets to demonstrate their balance sheet resources can meet liquidity needs. She also noted that traditional Federal Reserve liquidity sources, such as the discount window, still carry a stigma. "There is no doubt these are challenging issues, but if we are committed to building a more resilient banking system, we need clarity on what works in our current approach and what needs improvement," Bowman stated.