michelle w bowman : opening remarks – " monetary policy ’ s impact on workers and their communities " opening remarks by ms michelle w bowman, member of the board of governors of the federal reserve system, at " monetary policy ’ s impact on workers and their communities ", a fed listens event, sponsored by the federal reserve bank of chicago, chicago, illinois, 17 october 2019. * * * thank you, president evans, for hosting this event today, and to our moderator and participants for taking part in this valuable discussion. today ’ s event is the last in our series of fed listens events held across the country to learn about how americans think about monetary policy and how they think about the federal reserve. in keeping with the purpose of fed listens, i would like to spend most of our time in conversation. but i do want to offer a few thoughts about why the fed is reaching out to seek a broad range of views, and what we are hoping to accomplish through this initiative. fed listens is a new comprehensive outreach to the public on monetary policy. for many decades there was a sense at the board that the public wasn ’ t interested or even willing to dive into the complexities of monetary policy. that view has changed in a fundamental way, especially in the aftermath of the financial crisis when it was urgently important that the public understand what we were doing. so we began explaining as accessibly and as clearly as we could what we were doing and why. now we are listening carefully. since i became a board member almost a year ago, it has become clear to me that people are not only willing to engage on complex economic issues, but they also want to know that their concerns are being taken into consideration on issues that affect their financial well - being. the fed ’ s movement toward greater transparency and public engagement is well underway, and advancing that effort is one of my top priorities. at the same time, we recognize that the clear communication of our policies actually helps us achieve our goals. when we communicate our views on the economic outlook and our expectations for where interest rates may be heading, consumers and businesses take that information into account when making decisions on spending, investment, and hiring. for that reason, our policy communications are an important part of the fed ’ s toolkit for influencing the direction of the economy. fed listens is a natural outcome of this commitment to public engagement. we have heard from many people from different parts of the country and from different sectors of the economy

not require banks to increase capital as their potential for losses rises. basel ii addresses this by including in pillar 2 the requirement that the bank have a plan in place to ensure that sufficient capital will be available in the downturn of the economic cycle. thus, for the largest organizations, we need to move beyond basel i to a more risk - sensitive and more comprehensive framework for assessing capital adequacy. basel ii represents the concerted efforts of the international and u. s. supervisory community, in consultation with banks and other stakeholders, to develop such a framework, drawing upon wellknown economic capital concepts that the largest banks already employ as part of their risk management efforts. in addition to its supervisory authority, the federal reserve, as the nation ’ s central bank, has responsibility for maintaining stable financial markets and ensuring a strong financial system. that responsibility mandates that we require banking organizations to operate in a safe and sound manner with adequate capital that appropriately supports the risks they take. this is especially critical in today ’ s environment where we have a growing number of banking institutions with more than $ 1 trillion in assets, complex balance sheets, opaque off - balance sheet transactions, and far - reaching operations that pose significant risk - management challenges that are fundamentally different from those faced by smaller institutions. naturally, we must also ensure that our regulations and supervisory oversight are in tune with bank practice, are able to identify the risks being taken by banks today, and have enough flexibility that they will continue to be prudent and relevant in an everchanging risk environment. as chairman bernanke has noted, a regulatory and supervisory system that is not in tune with the financial marketplace may increase the costs of regulation, stifle efficiency and innovation, and ultimately be less effective in mitigating the moral hazard problems associated with the federal safety net. the advanced approaches of basel ii are much more risk sensitive, cover more areas of potential risk facing banking organizations, and provide better incentives for institutions to improve risk measurement and management. in addition, basel ii provides supervisors with a more conceptually consistent and more transparent framework for evaluating systemic risk in the banking system, particularly through credit cycles. in sum, basel ii will establish a more coherent relationship between regulatory measures of capital adequacy and day - to - day supervision of banks, enabling examiners to better evaluate whether banks are holding prudent levels of capital given their risk profiles. continuing the implementation process the agencies ’ proposed rulemakings, representing our view about