randal k quarles : spontaneity and order - transparency, accountability and fairness in bank supervision speech by mr randal k quarles, vice chair for supervision of the board of governors of the federal reserve system, at the yale law school, new haven, connecticut, 11 february 2020. * * * it ’ s a great pleasure to be with you today at yale law school to deliver this dean ’ s lecture. i first arrived here at the yale law school on a sunny september afternoon almost 40 years ago, and i have a very clear memory of the first time i sat in this hall, not long after, to hear a lecture from a worthy public servant come to deliver wisdom to those who thought they might one day follow in his footsteps. it was gene rostow, former dean of the law school, former under secretary of state, then serving as head of the arms control and disarmament agency in the reagan administration. i remember the impression of erudition and experience he conveyed. i remember the sense of tradition, sitting here in these wood - paneled surroundings, being addressed with respect on issues of consequence. there was a sense then, in the early 1980 ’ s — which turned out to be correct — that the cold war could be reaching its climax, and widespread concern among the great and good in the country ( not least among them the yale law school faculty ) that the more aggressive stance of the reaganites ( not least among them gene rostow ) greatly increased the odds of a miscalculation. and here was the man himself, patiently but boldly discussing the state of the world with a group of first - year law students. i remember that he referred more than once to don quixote, and this brooklyn - born american pronounced it in the british way — dun quixit — which i found oddly both affected and endearing at the same time. and i remember absolutely nothing else of what he said. not a word. which puts me in a properly humble frame of mind for my own remarks today. you won ’ t remember for very long anything i say here today, but i hope your time at the law school gives you the same experience of patiently but boldly examining matters of consequence that i found to be the most valuable and lasting legacy of my own time here in new haven. the themes and goals of this speech are objectives i will be pursuing over the next year and should resonate for this audience. i

supervisory estimates. consequently, the remaining common equity buffer that must be raised is $ 75 billion. the firms that are determined to need an additional capital buffer will have 30 days to develop a capital plan to be approved by their supervisors and six months to implement that plan. we have strongly encouraged institutions requiring additional capital to obtain it through private means, including, for example, new equity issues, conversions, exchange offers, or sales of businesses or other assets. to ensure that all of these firms can build the needed capital cushions, however, the treasury has made a firm commitment to provide contingent common equity, in the form of mandatory convertible preferred stock, as a bridge to obtaining private capital in the future. banking organizations will also have the option to exchange their existing preferred stock, issued under treasury's earlier capital purchase program, for the new contingent common equity. the treasury has indicated that it expects that any such exchange will be either accompanied or preceded by new capital raises or the conversion of private capital securities into common equity. process and methodology to properly understand the results of the capital assessment program, it is helpful to understand the process that produced the results. all u. s. - owned bank holding companies with year - end 2008 assets exceeding $ 100 billion were required to participate in the program. these 19 firms collectively hold two - thirds of the assets and more than one - half of the loans in the u. s. banking system, supporting a very significant portion of credit intermediation in the united states. the assessment process can perhaps best be characterized as a simultaneous examination of 19 large bank holding companies that addressed all major categories of assets as well as revenue expectations. the assessment was a resource - intensive undertaking, involving extraordinary efforts by more than 150 examiners and analysts from the federal reserve, the office of the comptroller of the currency ( occ ), and the fdic. these staff members conducted a detailed, firm - specific analysis over a 10 - week period. their efforts were aided by access to data and management available only to bank supervisors. the supervisors also incorporated statistical tools and quantitative models in their evaluation of each firm's data to facilitate comparative analysis across the 19 firms. the analysis was a comprehensive one, which included an exhaustive review of loan portfolios, investment securities, trading positions, and off - balance sheet commitments. typically, supervisory examinations focus on individual business lines or asset classes at a single firm. in this case, we simultaneously reviewed all of the major portfolios and business