ben s bernanke : opening remarks speech by mr ben s bernanke, chairman of the board of governors of the federal reserve system, at the federal reserve conference on “ central banking : before, during, and after the crisis ”, washington dc, 23 march 2012. more information about the conference, held at the madison hotel, washington, dc, march 23 – 24, 2012, is available on the board ’ s website. * * * distinguished guests, colleagues, and friends : it is my privilege to welcome you to this conference on “ central banking : before, during, and after the crisis, ” which is jointly sponsored by the federal reserve board and the international journal of central banking. we hope that the conference will foster discussion among policymakers and researchers about the evolving challenges facing central banks around the world. to help get that discussion started, the conference will feature original research on monetary policy, macroprudential regulation, and the provision of liquidity, topics that are obviously highly relevant to the public policy missions of the federal reserve and other central banks. the proceedings from this conference will be published in a special issue of the journal and disseminated to researchers in central banks and academic institutions worldwide. needless to say, the events of the past few years pose serious challenges to the conventional, pre - crisis views and approaches of central banks and other financial supervisors. the crisis, the recession it sparked, and the subsequent slow recovery, especially in the advanced economies, have demonstrated that we have much to learn about the workings and vulnerabilities of our modern, globalized financial system and its interactions with the broader economy. in responding to these stressful financial and economic developments, the federal reserve and other central banks have had to deploy a variety of new tools and approaches to carry out their responsibilities regarding monetary policy and the provision of liquidity, tools about which we still have more to learn. finally, in the wake of the crisis, the federal reserve and other regulatory agencies have been charged with challenging new responsibilities in the area of macroprudential supervision, with the objective of promoting financial stability and reducing the likelihood and the costs of a future financial crisis. although much progress has been made, we are still at an early stage in understanding how best to meet these new macroprudential responsibilities. all of these developments have spurred a great deal of research within central banks, in academia, and elsewhere. this outpouring of research will help shape future central bank doctrine and policy

capital ) recognize that basel ii does not take into consideration some forms of unexpected losses, for example, higher charge - offs that occur when new products are introduced, information technology systems change, merger integrations occur, and internal control processes occasionally prove ineffective. implementation efforts in the united states the u. s. banking agencies'reaction to the results of the fourth quantitative impact study - known as qis4 - shows how seriously we are taking basel ii implementation. in a statement issued on april 29, the u. s. banking agencies indicated that the minimum regulatory capital changes resulting from qis4 were more variable across institutions and capital dropped more in the aggregate than the agencies had expected. this was the impetus for deciding to delay issuance of our next round of proposals for basel ii. these unexpected results show the continued benefit of conducting periodic quantitative impact studies. they serve as a milestone to help us calibrate the progress of the framework and the bankers as we move to basel ii. we now must determine the reasons for the unexpected results from qis4. do they reflect actual differences in risk among respondents when prior supervisory information suggested more similarity in credit quality? none of the participating banks has completed their databases and models for all of their risk areas. in some cases, this created results that would not be reliable for implementing basel ii. for example, for some portfolios, expected losses reflected only the last year or two of results. thus, the strong credit performance of recent experience was not balanced by higher losses at other points of the credit cycle. were there limits of the qis4 exercise itself? is there a possible need for adjustments to the basel framework itself? analyzing the data used in qis4 is vitally important, because ultimately the success of basel ii will depend on the quantity and quality of data that banks have to use as inputs to the framework. i am sure that those of you working on basel ii - particularly the advanced approaches - are facing the same types of issues in your own countries. for those of you who will be conducting qis5 or similar exercises, i strongly suggest that you include qualitative responses from the participants as well as quantitative data. we are finding this very useful as we review the results and have follow - on discussions with bankers. u. s. regulators expect to provide additional information on the lessons we learn from the qis4 review in the near future. the notice of proposed rulemaking for basel ii will incorporate what we learn from this exercise.