According to the National Federation of Independent Business, the proportion of small businesses that report credit as hard to get has declined to pre-crisis levels.11 This is consistent with the generally easing credit conditions across most loan classes over the last several years reported in the Fed’s Senior Loan Officer Opinion Survey, particularly in commercial and auto loans, but also expanding more recently into other types of household credit.12 This evidence suggests banks continue to provide this core financial service. 4/7  BIS central bankers' speeches  Turning to capital market activities, (Figure 8) plots non-interest revenues from core businesses —trading, investment banking, fiduciary activities, and securities brokerage. While trading revenue has declined, non-interest revenue of other types has generally grown in line with GDP, showing the compositional shift in revenue. The changes reflect the ongoing shift toward activities that generate more stable income streams such as fiduciary and brokerage activities. Looking within the trading business, there is also some evidence that activities are becoming less risky, less opaque, and less complex, e.g., level 3 trading assets have declined as a share of total trading assets over this period and there has been a shift toward central clearing of derivatives even as volumes continue to grow.13 I conclude this section by emphasizing that the supervisory goal is not to allocate credit or to dictate specific aspects of business models, but rather to ensure that firms are resilient so that they can meet the broader policy objectives of the sustainable provisions of financial services and financial stability.

As the financial industry continues to evolve in response to regulatory, technological and business factors, I expect new issues will emerge that potentially threaten individual firms, and supervisors need to be prepared to address them. Conclusions Effective supervision and regulation help create the environment where financial institutions provide critical intermediation services in a sustainable manner over time. A key lesson of the financial crisis and the post-crisis period is that stronger, more resilient financial firms can dampen rather than amplify shocks to the system. The greater resilience we observe today relative to the pre-crisis period suggests the U.S. financial sector is better positioned to continue to provide the critical services to households and businesses that are necessary to support the U.S. economy across a wide range of potential macroeconomic and financial conditions. It is also essential to distinguish the intended consequences of supervision and regulation where informed choices are made based on careful data analysis from the unintended consequences where outcomes are not consistent with policy objectives. This requires both a conceptual framework to identify costs and benefits to society as a whole, and empirical analysis to measure them. In my view, it is entirely appropriate to continuously evaluate and rigorously assess the impact to ensure that the observed outcomes are consistent with stated objectives such as greater resilience, efficient financial intermediation over time, and financial stability.