and accounting and legal experts. this program will be distinct from the activities of on - site examination teams so as to provide an independent supervisory perspective, as well as to complement the work of those teams. as we adapt our internal organization of supervisory activities to build on lessons learned from the current crisis, we are using all of the information and insight that the analytic abilities the federal reserve can bring to bear in financial supervision. conclusion a year ago, the world financial system was profoundly shaken by the failures and other serious problems at large financial institutions here and abroad. significant credit and liquidity problems that had been building since early 2007 turned into a full - blown panic with adverse consequences for the real economy. the deterioration in production and employment, in turn, exacerbated problems for the financial sector. it will take time for the banking industry to work through these challenges and to fully recover and serve as a source of strength for the real economy. while there have been some positive signals of late, the financial system remains fragile and key trouble spots remain, such as cre. we are working with financial institutions to ensure that they improve their riskmanagement and capital planning practices, and we are also improving our own supervisory processes in light of key lessons learned. of course, we are also committed to working with the other banking agencies and the congress to ensure a strong and stable financial system.

##ting a severe refinancing problem in that sector. the talf has had some success. rate spreads for asset - backed securities have declined substantially, and there is some new issuance that does not use the facility. by improving credit market functioning and adding liquidity to the system, the talf and other programs have provided critical support to the financial system and the economy. availability of credit the federal reserve has long - standing policies in place to support sound bank lending and the credit intermediation process. guidance issued during the cre downturn in 1991 instructs examiners to ensure that regulatory policies and actions do not inadvertently curtail the availability of credit to sound borrowers. 4 this guidance also states that examiners should ensure loans are being reviewed in a consistent, prudent, and balanced fashion to prevent inappropriate downgrades of credits. it is consistent with guidance issued in early 2007 addressing risk management of cre concentrations, which states that institutions that have experienced losses, hold less capital, and are operating in a more risk - sensitive environment are expected to employ appropriate risk - management practices to ensure their viability. 5 we are currently in the final stages of developing interagency guidance on cre loan restructurings and workouts. this guidance supports balanced and prudent decisionmaking with respect to loan restructuring, accurate and timely recognition of losses and appropriate loan classification. the guidance will reiterate that classification of a loan should not be based solely on a decline in collateral value, in the absence of other adverse factors, and that loan restructurings are often in the best interest of both the financial institution and the borrower. the expectation is that banks should restructure cre loans in a prudent manner, recognizing the associated credit risk, and not simply renew a loan in an effort to delay loss recognition. on one hand, banks have raised concerns that our examiners are not always taking a balanced approach to the assessment of cre loan restructurings. on the other hand, our examiners have observed incidents where banks have been slow to acknowledge declines in cre project cash flows and collateral values in their assessment of the potential loan repayment. this new guidance, which should be finalized shortly, is intended to promote prudent cre loan workouts as banks work with their creditworthy borrowers and to ensure a balanced and consistent supervisory review of banking organizations. guidance issued in november 2008 by the federal reserve and the other federal banking agencies encouraged banks to meet the