supervision and systemic risk regulation. another feature of the recent crisis was the extensive use of leverage, often in conjunction with maturity transformation. the consequences of this combination were dramatic. when doubts arose about the quality of the assets on shadow banking system balance sheets, a classic adverse feedback loop ensued in which lenders were increasingly unwilling to roll over the short - term debt that was used as funding. liquidity - constrained institutions were forced to sell assets at increasingly distressed prices, which accelerated margin calls for leveraged actors and amplified mark - to - market losses for all holders of the assets, including regulated firms. here, too, government regulators and supervisors had insufficient data to determine the degree and location of leverage in the financial system. more generally, the crisis revealed that regulators, supervisors, and market participants could not fully measure the extent to which financial institutions and markets were linked. a critical lesson from this crisis is that supervisors and investors need to be able to more quickly evaluate the potential effects, for example, of the possible failure of a specific institution on other large firms through counterparty credit channels ; financial markets ; payment, clearing, and settlement arrangements ; and reliance on common sources of short - term funding. a better system of data collection and aggregation would have manifold benefits, particularly if the data are shared appropriately among financial regulators and with a systemic risk council if one is created. it would enable regulators and a council to assess and compare risks across firms, markets, and products. it would improve risk management by firms themselves by requiring standardized and efficient collection of relevant financial information. it also would enhance the ability of the government to wind down systemically important firms in a prompt and orderly fashion by providing policymakers a clearer view of the potential impacts of different resolution options on the broader financial system. additional benefits would result from making data public to the degree consistent with protecting firm - specific proprietary and supervisory information. investors and analysts would have a more complete picture of individual firms ’ strengths and vulnerabilities, thereby contributing to better market discipline. other government agencies, academics, and additional interested parties would be able to conduct their own analyses of financial system developments and identify possible emerging stresses and risks in financial markets. one area in which better information is particularly important is the web of connections among financial institutions though channels such as interbank lending, securities lending, repurchase agreements, and derivatives contracts. regulators also need more and better data on the links among institutions through third - party sponsors, liquidity providers, creditsupport providers,

economic developments. for supervision of the largest institutions, new quantitative efforts have been started to better measure counterparty credit risk and interconnectedness, market risk sensitivities, and funding and liquidity. the focus of these efforts is not only on risks to individual firms, but also on concentrations of risk that may arise through common exposures or sensitivity to common shocks. for example, additional loan - level data on bank exposures to syndicated corporate loans are now being collected in a systematic manner that will allow for more timely and consistent measurement of individual bank and systemic exposures to these sectors. in addition, detailed data obtained from firms ’ risk - management systems allow supervisors to examine concentration risk and interconnectedness. specifically, supervisors are aggregating, where possible, the banks ’ largest exposures to other banks, nonbank financial institutions, and corporate borrowers, which could be used to reveal large exposures to individual borrowers that the banks have in common or to assess the credit impact of a failure of a large bank on other large banks. additional time and experience with these data will allow us to assess the approach ’ s ability to signal adverse events, and together they will be a critical input to designing a more robust and consistent reporting system. furthermore, we are collecting data on banks ’ trading and securitization risk exposures as part of an ongoing, internationally coordinated effort to improve regulatory capital standards in these areas. moreover, analysis of liquidity risk now incorporates more explicitly the possibility of marketwide shocks to liquidity. this effort also is an example of the importance of context and the need to understand the firms ’ internal risk models and risk - management systems in designing data collection requirements. data that only capture a set of positions would not be sufficient since positions would not incorporate behavioral assumptions about firms, based on information about firms ’ business models and practices. the federal reserve ’ s responsibilities for monetary policy are also relevant for systemic risk monitoring. systemic risk involves the potential for financial crises to result in substantial adverse effects on economic activity. as the nation ’ s central bank, the federal reserve assesses and forecasts the u. s. and global economies using a wide variety of data and analytical tools, some based on specific sectors and others on large - scale models. in the wake of the crisis, research has been expanded to better understand the channels from the financial sector to the real economy. for example, building on lessons from the recent crisis, the federal reserve added questions to the survey of