Implementing a Macroprudential Approach to Supervision and Regulation, Chairman Ben S. Bernanke At the 47th Annual Conference on Bank Structure and Competition, Chicago, Illinois, May 5, 2011
“Relative to traditional regulation and supervision, executing a macroprudential approach to oversight can involve heavier informational requirements and more-complex analytic frameworks. In particular, because of the highly interconnected nature of our financial system, macroprudential oversight must be concerned with all major segments of the financial sector, including financial institutions, markets, and infrastructures; it must also place particular emphasis on understanding the complex linkages and interdependencies among institutions and markets, as these linkages determine how instability may be propagated throughout the system. Moreover, broadly speaking, macroprudential regulators must be concerned with at least two types of risks. The first type encompasses aspects of the structure of the financial system–such as gaps in regulatory coverage or the evolution of shadow banking–that pose ongoing risks to financial stability. The second class of risks are those that vary over time with financial or economic circumstances, such as widespread buildups of leverage in good times that could ultimately unwind in destabilizing ways.”
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