For starters, the Federal Reserve now makes its most consequential supervisory decisions on a system-wide level through the Large Institution Supervision Coordinating Committee or “LISCC.” The committee comprises representatives across professional disciplines from several Reserve Banks and the Board of Governors. The New York Fed supplies only three of its 16 members. LISCC sets supervisory policy for the 15 largest, most systemically important financial institutions in our country and develops innovative, objective, and quantitative methods for assessing these firms on a comparative basis. LISCC also coordinates the supervision of the largest supervised institutions through its Operating Committee, which reviews and approves supervisory plans for exams, receives regular updates on major supervisory issues, and makes material supervisory decisions regarding matters that affect the firms’ safety and soundness. In this respect, the Operating Committee provides an important safeguard against regulatory capture by ensuring that no one person or Reserve Bank has the power to make a final decision on a matter of significance. Another procedural change is our increased application of cross-firm, horizontal review. This technique enables peer-to-peer comparison of banks, facilitates a better assessment of the overall health of the financial system, and safeguards against regulatory capture by providing insight from across the Federal Reserve System. The analysis is done not only at the level of the Board of Governors – for example, through CCAR and Dodd-Frank stress testing – but also within the New York Fed. We hold weekly discussions among senior supervisory and risk officers to identify developing concerns that may pose a systemic risk.

Prior to the crisis, liquidity practices did not generally anticipate the possibility of severe drops in the prices of saleable assets. 3  See, e.g., 12 U.S.C. § 5365(a)(1). 4  See 12 U.S.C. § 5365(i). 5  Board of Governors of the Federal Reserve System, Press Release, October 23, 2014. 6  Daniel Tarullo, “Stress Testing after Five Years,” Remarks at the Federal Reserve Third Annual Stress Test Modeling Symposium, Boston, Massachusetts, June 25, 2014. 7  See Board of Governors of the Federal Reserve System, Comprehensive Capital Analysis and Review 2014: Assessment Framework and Results, March 2014, at 7–8. 8  See 12 C.F.R. §§ 225.8(c)(2) and (e)(2)(iv). 9  See Citigroup, Inc., “Citi Statement on 2014 CCAR Results,” March 26, 2014. 2  BIS central bankers’ speeches  Following the crisis, the Federal Reserve imposed new liquidity regulations, including the Basel III Liquidity Coverage Ratio. The objective of these new regulations is to require large firms to hold levels of liquid assets sufficient to protect against constraints on their funding during times of financial turmoil. We have also implemented liquidity stress test assessments for systemically important financial institutions. These assessments provide important insight into the adequacy of liquidity positions and bank preparedness for upcoming regulatory standards. Beyond capital and liquidity, the Federal Reserve has increased its focus on risk management practices at the largest and most systemically important financial institutions. We learned from the crisis that risk management in the financial services industry had not always kept pace with changing market practices.