responsibilities give us important qualitative and quantitative information that not only helps us in the design of monetary policy, but provides important feedback on how our policy stance is affecting bank actions. the macroeconomic stabilization responsibilities of the federal reserve make us particularly sensitive to how regulatory and supervisory postures can influence bank behavior and hence how banks respond to monetary policy actions. for example, capital, liquidity, loan loss reserve, and asset quality evaluation policies of supervisors will directly influence the manner and speed with which monetary policy actions work. in the development of interagency rules and policies, the federal reserve brings to the table its unique concerns about the impact of these rules on credit availability, potential responses to changes in interest rates, and the consequences for the economy. we believe that, as a result, supervisory policy is improved. federal reserve ’ s supervisory role for all of these reasons, the board believes the federal reserve needs to retain a significant supervisory role in the banking system. just exactly how that is achieved depends critically on the types of reforms the congress enacts and the direction the banking industry takes in structuring and conducting its activities. in the board ’ s view, its current authority is adequate for the current structure. for today ’ s financial system, we are able to meet our obligations by the intelligence we gain from, and the authorities we have over the modest number of large banks we directly supervise and the holding companies of these and other large banks over which we have a direct umbrella supervisory role. our information is importantly supplemented by our supervision of a number of other banks of all sizes, namely state member banks. currently, the latter group gives us a good representative sample of organizations of all sizes outside the largest entities. the large entities are essential if we are to address the federal reserve ’ s crisis management and systemic risk responsibilities, deal with international financial issues involving foreign central banks, manage risk exposures in payment systems, and retain our practical knowledge and skill base in rapidly changing financial markets. large bank holding companies are typically at the forefront in financial innovation and in developing sophisticated techniques for managing risks. it is crucial that the federal reserve stay informed of these events and understand directly how they work in practice. directly supervising both these large organizations and a sample of others is also critical to our ability to conduct monetary policy by permitting us to gain first - hand on - the - spot intelligence on how changes in financial markets - including those induced by monetary policy - - are affecting money and credit flows. if in the future

willem f duisenberg : testimony before the committee on economic and monetary affairs introductory statement by dr willem f duisenberg, president of the european central bank, brussels, 12 september 2001. * * * ladies and gentlemen, in the light of the unprecedented and tragic events that occurred in the united states yesterday, i should like to be as brief as possible today in my introductory statement. firstly, i should like to express my deep sympathy with the citizens of the united states and, in particular the relatives and friends of the victims of this brutal attack. moreover, i should like to emphasise that the european central bank and the national central banks are standing ready to support the normal functioning of markets and relevant operational systems, if the need arises. indeed, the ecb has been in close contact with the other major central banks in the world since the events have unfolded. let me now report to you on the recent monetary policy decision taken by the governing council of the ecb. 1. economic and monetary developments over the last few months, the evidence available to the governing council has gradually pointed towards an improvement in the outlook for price developments. this has been particularly apparent from the information stemming from what we call the second pillar of our monetary policy strategy, while the information coming from the first pillar of our strategy has remained consistent with a favourable outlook for price stability in the medium term. at this stage, i do not want to speculate about the possible consequences of yesterday's developments in financial markets on economic and monetary developments. we will have a first discussion on this issue tomorrow, at the meeting of the governing council. as regards the first pillar, the three - month average of the annual growth rates of m3 was 5. 9 % in the period from may to july 2001. this figure, however, has to be carefully analysed. first, the figure needs to be corrected for holdings of money market paper and short - term debt securities by nonresidents of the euro area. as already announced, the ecb intends to publish an m3 series which is adjusted for these non - resident holdings of negotiable instruments towards the end of the year. at present, some preliminary estimates of the impact of these holdings on monetary aggregates are available. when these are taken into account, the three - month average of the annual growth of m3 would turn out to be slightly above 5 %, thus not very far from the reference value of 4½ %. in addition, the increase in the