), publicly - posted examination manuals and other guidance. on a day - to - day basis, banking supervisors collect information on financial institutions through examinations and analysis. examiners look at key aspects of a supervised firm ’ s businesses and risk management functions. they use this information to assess the adequacy of the firm ’ s systems and processes for identifying, measuring, monitoring and controlling risks at the firm and in the financial sector more generally. that said, the ultimate responsibility for risk identification and risk management remains with the supervised institution. the federal reserve ’ s role is to ensure that the institution has the necessary strong processes in place to achieve this objective. as risks emerge, supervisors intervene, within the realms of their safety and soundness mandates, to require that banks take corrective actions as necessary. supervision can reduce the chance that a financial firm fails, but it can never provide a guarantee against failure. supervisory policies have undergone important changes over the past few years, especially in the context of the largest financial institutions. banking supervision no longer focuses solely on the safety and soundness of individual institutions – so - called micro - prudential supervision – but now also focuses on the implications for financial stability more generally. the evolving supervisory framework has resulted in a number of organizational changes in the way supervision is conducted at the new york fed and in the federal reserve system more broadly. a very important change in the federal reserve system is that supervision of the largest, most systemically important financial institutions are now coordinated across districts through the large institution supervision coordinating committee ( liscc ). the liscc is a system - wide committee, chaired by the director of the board of governors of the federal reserve ’ s division of banking supervision and regulation, and composed of senior officers at the board and reserve banks. in addition, the federal reserve has instituted three major horizontal evaluations, which are a key element of the new enhanced supervisory framework for large banking companies. these horizontal evaluations, which focus on capital adequacy, liquidity resiliency and preparedness for recovery and resolution, examine practices and conditions across a group of firms simultaneously, enabling supervisors to develop peer perspectives about best practices and approaches. these programs involve a consistent and systematic assessment board of governors of the federal reserve system. “ consolidated supervision framework for large financial institutions. ” supervision and regulation letter 12 – 17. december 17, 2012. http : / / www. federalreserve. gov / bankinforeg / srlette

s. and overseas, we hope to broaden the understanding of the role and objectives of supervision. the goal is to spur conversation and new research on what supervision should be trying to achieve and the best means for achieving those ends. just as important, we want to generate ideas for how to better assess the effectiveness of supervisory activities. in a world of limited resources, how do we deploy our people and technology in the most effective way to limit disruption and distress at individual firms and to the financial system, while still fostering an efficient and innovative financial system? in considering these questions, a good starting point is to understand more fully what supervisors do and how they do it in the current environment. the papers that are being presented here today are largely aimed at achieving this goal. as described in the first paper – “ supervising large, complex financial institutions : what do supervisors do? ” – bank supervision has long been an integral component of the federal reserve ’ s beverly hirtle, david lucca and joseph tracy assisted in preparing these remarks. bis central bankers ’ speeches responsibilities. at a broad level, federal reserve supervision of large financial institutions is guided by two key objectives : “ enhancing the resiliency of a firm to lower the probability of its failure or inability to serve as a financial intermediary [ and ] reducing the impact on the financial system and the broader economy in the event of a firm ’ s failure or material weakness. ” 2 in addressing these objectives, bank supervisors enforce laws and regulations, but there is much more to supervision than just enforcement. the activities and practices at large, complex financial organizations are simply too intricate and evolve too quickly to be fully described ex ante in regulation. banking supervision works in concert with regulation as the more flexible element of banking policy. supervisory policy and standards can, and do, evolve over time to reflect the evolution in practice in the banking industry and in financial markets. overall, supervisors are guided by the mandate to identify any practices or conditions at supervised firms that are a threat to the safety and soundness of those firms – and, of course, to ensure that the firms take all necessary steps to promptly remediate any such conditions. critically, the definition of what constitutes “ safe and sound ” is not hard - coded into regulation, but is guided by the information and analysis done by supervisors and other federal reserve staff, such as economists, attorneys and market analysts. supervisory expectations and standards are expressed through public guidance such as supervision and regulation letters ( sr letters