- interest rate risk, liquidity risk, and poor risk management. each of these can be addressed effectively and efficiently through targeted improvements to the supervisory process. supplementary leverage ratio our current narrow approach to rulemaking - focusing on a specific reform, without considering the broader framework or context within which these rules exist - has created a corresponding narrowness when we think about the consequences of regulatory reform. an efficient regulatory system can build resilience both for bank safety and soundness and financial stability. take for example missed opportunities in capital reform. the current set of capital reform proposals does not address or propose changes to leverage requirements, including the 5 percent leverage ratio that applies to u. s. global systemically important banks, commonly referred to as the enhanced supplementary leverage ratio ( or eslr ). treasury market intermediation can be disrupted by constraints imposed by the eslr, as occurred during the early days of market stress during the pandemic. it seems prudent to address this known leverage rule constraint before future stresses emerge that would likely disrupt market functioning. this narrow focus ignores that many requirements are intended to operate in a complementary way, and that these requirements in the aggregate may overlap or conflict, generating unintended consequences. the federal reserve has expressly acknowledged the complementary nature of these requirements, for example in noting that some leverage ratio requirements operate as a backstop to risk - based capital requirements. 7 and yet, the discussions of costs and benefits of reform tend to disregard the aggregate impact across rules, even when related reforms are proposed at the same time and the aggregate impacts can be identified and assessed. 8 when policymakers publicly discuss changes to liquidity and capital, industry participants will modify their behavior in part to meet anticipated regulatory requirements, despite the regulatory uncertainty that accompanies reform efforts. while this response by banks is unfortunate, it is also predictable. regulatory process my remarks this evening have primarily focused on the substance of reforms and the 7 / 9 bis - central bankers'speeches importance of demonstrating a case to support the changes. but it is also necessary to pause and reflect on the importance of following established process and procedure. this is especially important as we think about the choice between making policy reforms through supervision or regulation. passing regulations under the administrative procedure act requires agencies to follow specific notice - and - comment rulemaking procedures. i think we should approach this process through the most stringent and conservative lens, particularly when it comes to some of the most consequential rulemakings of the

of stress, and if not, how could they be improved? my hope is that in discussing these issues we can develop a better and deeper understanding about sources of bank funding, financial stability, and the future of the banking system. this complex set of issues can be open to interpretation, and as a result, can lead policymakers to different policy prescriptions for how to make the banking system more resilient, and the regulatory response to financial stress more effective. 1 / 9 bis - central bankers'speeches conversations like those that we are having today and tomorrow can help us find consensus both in identifying the risks to the financial system and coming to agreement on policy reforms to address them, if needed. as the discussions continue following this conference, it is essential that we include the experience and perspective of state bank commissioners. i look forward to the opportunity to engage with them more fully on these issues. as a former bank commissioner, i greatly value this perspective. i am hopeful that all of these conversations can help us to understand differing perspectives and enable us to examine the full extent of the underlying issues before we implement reforms that do not address identified problems or do not adequately consider the underlying risks and unintended consequences. when i think about regulatory reform and the future of the banking system, i begin with the foundational elements that promote accountability in banking regulation : a deep understanding of the banking system ; a thorough analysis of the underlying facts ; a careful identification of how elements of the banking system interact and perform over time, especially during stress ; and a commitment to take ownership of identified problems with targeted reforms that are commensurate with the underlying risks. these same elements should be the foundational elements of any reform agenda. they should apply not just to changes that i will call " responsive " changes - those designed to mitigate the risks exposed during the spring 2023 banking stress - but also to any other contemplated reforms of the bank regulatory framework. if we approach this task with humility and with full accountability of unintended consequences, i expect that we will find opportunities in a number of areas. these involve not only imposing new requirements and expectations on individual banks, but also opportunities to remediate deficiencies and overlapping requirements within the regulatory framework. both approaches may be equally effective in enhancing the resilience of the banking system and promoting u. s. financial stability. in my remarks this evening, i will reflect on these elements, as i share my views on the fed's lender of