areas. today, i would like to highlight these risks and focus on how important it is for banks to integrate their risk management and capital planning processes. also, i would like to focus on how the changing nature of banking is challenging supervisors to rethink their approach to capital regulation and supervision. despite changes in banking over the last few years, many of which already have been discussed today, credit risk remains the predominant risk for most banks. however, credit risk clearly extends beyond conventional credit products such as loans and letters of credit. today, banks are taking on credit risk in the form of margin lending and transactions in the over - thecounter derivatives markets that expose them to large amounts of counterparty risk and can be difficult to measure. they also may be engaged in taking on credit risk in its more subtle forms. the short - term credit risks in futures brokerage, where the clearing broker stands between the customer and the exchange, or the often underestimated, but substantial, credit risks that arise in settling foreign exchange contracts, are examples. credit risk also may exist in more complicated, less conventional forms, such as credit derivatives or tranches of securitized assets. market risk also remains prominent. the upheavals in both global fixed income and equities markets over the last year led to a great deal of volatility in spreads and asset prices and caused large swings in bank profitability. these events demonstrate that the world doesn ’ t necessarily work the way we thought it did, that there are correlations between markets that we had previously thought were unrelated. as banks continue to expand their global trading operations, the need to understand the relationships between markets increases. this challenge is amplified by technological advances and financial product innovations that contribute to ever - more complex market instruments. but clearly, banks are exposed to more than just credit and market risk. operational risk also is a growing concern for the banking industry. the looming issue of year 2000 remediation is just one example. with the continuing diversification of banking, the fast pace of financial innovation and the growing concentration of crucial payments, settlements and custody businesses, the importance of operational risk is rising, especially at many larger institutions. these institutions find that the probability of a financial loss resulting from a breakdown in internal controls or systems is greater than ever. as banks expand into new lines of business, such as electronic banking, this trend is likely to continue. for instance, consider the risk of a breach in electronic security controls that

learning more about how agents update and revise their expectations in response to new information. the sce allows us to carry out this sort of analysis. besides their obvious policy relevance, the sce data are also highly valuable for research. our economists have shown that the sce ’ s expectations data are informative and predictive of respondents ’ current and future behavior. they have also documented the substantial heterogeneity in the formation and updating of expectations across demographic groups. to facilitate further research, we make the survey data available in the center for microeconomic data section of our website. each month we also illustrate the trends in our expectations series through easy - to - use, interactive charts. further, a number of our liberty street economics blog posts describe the data and the analysis we have conducted. we do this because we want researchers, policymakers, commentators and the general public to understand the data and to follow our updates. let me now describe our survey of consumer expectations in more detail. 1 / 3 bis central bankers'speeches the survey of consumer expectations following extensive design and testing, we launched the survey of consumer expectations in june 2013. the survey has a number of innovative and unique features, three of which i would like to highlight today. first and foremost, as i mentioned earlier, it collects households ’ subjective expectations and intentions on a wide range of economic outcomes and behaviors. in addition to short - and medium - term inflation expectations, it collects data on households ’ expectations regarding the housing, labor and credit markets, as well as households ’ financial situations and a host of other macroeconomic variables of interest. for example, the survey elicits beliefs about future wage growth, house price appreciation, job search and labor market transitions, households ’ spending and income growth, and credit applications. by collecting data on a broad range of expectations, it is possible to analyze how they interact with each other and jointly influence households ’ decisions. we also study how expectations vary with demographics and other household characteristics. the broad scope of the sce allows us to study many questions relevant to economic policy — such as understanding housing market decisions, disentangling credit demand from supply, analyzing job search behavior and measuring wage growth as people transition between jobs. in addition, the survey has been used to help answer other policy - relevant questions as they have come up in our discussions. two examples are households ’ spending response to the decrease in gas prices in early 2014, and households ’ early experiences and perceptions of the