this low level until we are confident that the economy has weathered the storm and is on track to achieve our maximum - employment and price - stability goals. even more importantly, we have acted to safeguard financial markets in order to provide stability to the financial system and support the flow of credit in the economy. as a result of the economic dislocations caused by the virus, some essential financial markets had begun to sink into dysfunction, and many channels that households, businesses, and state and local governments rely on for credit had simply stopped working. we acted forcefully to get our markets working again, and, as a result, market conditions have generally improved. many of the programs we are undertaking to support the flow of credit rely on emergency lending powers that are available only in very unusual circumstances — such as those we find ourselves in today — and only with the consent of the secretary of the treasury. we are deploying these lending powers to an unprecedented extent, enabled in large part by the financial backing from congress and the treasury. we will continue to use these powers forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery. 1 / 2 bis central bankers'speeches i would stress that these are lending powers, not spending powers. the fed is not authorized to grant money to particular beneficiaries. the fed can only make secured loans to solvent entities with the expectation that the loans will be fully repaid. in the situation we face today, many borrowers will benefit from these programs, as will the overall economy. but there will also be entities of various kinds that need direct fiscal support rather than a loan they would struggle to repay. our emergency measures are reserved for truly rare circumstances, such as those we face today. when the economy is well on its way back to recovery, and private markets and institutions are once again able to perform their vital functions of channeling credit and supporting economic growth, we will put these emergency tools away. none of us has the luxury of choosing our challenges ; fate and history provide them for us. our job is to meet the tests we are presented. at the fed, we are doing all we can to help shepherd the economy through this difficult time. when the spread of the virus is under control, businesses will reopen, and people will come back to work. there is every reason to believe that the economic rebound, when it comes, can be robust. we entered this turbulent period on a strong economic footing

become large and costly. to do that in today ’ s markets, and in an environment in which technology and financial innovation can lead to rapid change, the federal reserve is pursuing a more risk - focused supervisory approach. we are well underway toward implementing this new supervisory framework, and initial indications about it - - from both examiners and bankers - - have been favorable. this risk - focused approach to supervision is seen as a necessary response to a variety of factors : the growing complexity and pace of change within the industry, the increasingly global nature of u. s. and world financial markets, and the methods available today for managing and controlling risk. as banking practices and markets continue to evolve, i believe this emphasis on risk - focused supervision will be even more necessary in the years to come. what is “ risk - focused ” supervision? with that introduction, let me clarify what i mean by risk - focused supervision. how does it differ from the way supervisors have traditionally done their job? what does it mean to the banking system? what is it? in short, risk - focused supervision simply means that in conducting bank examinations and other supervisory activities, we will seek to direct our attention and resources to the areas that we perceive pose the greatest risk to banks. in many respects, that would seem rather obvious and hardly earth shaking, and in many ways it is, indeed, nothing new. the federal reserve and the other banking agencies have long sought to identify exceptions and to prioritize examination activities. in the past, though, the business of bank supervision has focused on validating bank balance sheets, particularly the value of loan portfolios, which have been historically the principal source of problems for banks. much of the prior emphasis was on determining the condition of a bank at a point in time. in the process, we would go through the balance sheet, assuring ourselves that a bank ’ s assets and liabilities were essentially as stated and that its reserves and net worth were real. as part of the process, there was a review of sound management practices, internal controls, and strong internal audit activities, but that review was not the initial or primary focus. in earlier times that approach was adequate, since bank balance sheets were generally slow to change. banks held their loans to maturity ; they acquired deposits locally and at a pace similar to local economic growth ; their product lines were stable ; and management turnover, itself, was typically low. by tracking the quality of loans and other assets, examiners could generally detect