jerome h powell : welcoming remarks – " stress testing : a discussion and review " welcoming remarks ( via prerecorded video ) by mr jerome h powell, chair of the board of governors of the federal reserve system, at " stress testing : a discussion and review ", a research conference at the federal reserve bank of boston, boston, massachusetts, 9 july 2019. * * * good morning everyone and thank you to president rosengren and the boston fed for hosting this conference. the federal reserve is strongly committed to stress testing as a cornerstone of our bank supervisory and financial stability missions. stress testing is perhaps the most successful supervisory innovation of the post - crisis era. but if stress tests are to continue to serve their critical function, they will need to evolve in the years ahead to keep pace with the ever - changing financial system, as they have since the first round of tests in 2009. before looking to the future, let me recall a bit of history. a little more than 10 years ago, the united states and the world teetered on the brink of economic catastrophe. what was urgently needed was a way to restore confidence in the financial system — a daunting challenge. neither the banks, nor the regulators, nor the public had a reliable sense of the strength and resilience of our major banks. the announcement of forward - looking stress - testing results in may 2009 helped restore confidence and stabilize banks by providing a credible and independent picture of their finances. 1 these original stress tests evolved into the comprehensive capital analysis and review, or ccar, program, which has served to institutionalize capital planning by firms, and supervision by the fed, as a forward - looking endeavor. since 2009, large banks have added more than $ 800 billion in common equity capital, giving them a much thicker cushion to deal with losses. banks have gotten much better at assessing and managing their risks, effectively tracking commitments across their organizations, anticipating capital needs, and planning for different scenarios. the stress tests of the future — 5 and 10 years from now — will need to continue to ensure that banks remain able, even in a severe downturn, to provide the credit that households and businesses depend on. as financial institutions and the financial system evolve, stress testing will need to keep up. when the next episode of financial instability presents itself, it may do so in a messy and unexpected way. banks will need to be ready not just for expected risks, but for unexpected ones. thus, the tests will need to vary

whose persistent weakness has had a major impact on economic and financial conditions more broadly, and will improve the financial condition of some households by facilitating refinancing. in addition, open - market purchases should benefit credit markets by adding liquidity and balance sheet capacity to the system. support for specific institutions in addition to those programs i have just discussed, the federal reserve has provided financing directly to specific systemically important institutions. with the full support of the treasury, we used emergency lending powers to facilitate the acquisition of bear stearns by jpmorgan chase & co. and also to prevent default by aig. these extensions of credit are very different than the other liquidity programs discussed previously and were put in place to avoid major disruptions in financial markets. from a credit perspective, these support facilities carry more risk than traditional central bank liquidity support, but we nevertheless expect to be fully repaid. credit extended under these programs has varied but recently has accounted for only about 5 percent of our balance sheet. that said, these operations have been extremely uncomfortable for the federal reserve to undertake and were carried out only because no reasonable alternative was available. as noted in the joint federal reservetreasury statement i mentioned earlier, we are working with the administration and the congress to develop a formal resolution regime for systemically critical nonbank financial institutions, analogous to one already in place for banks. such a regime should spell out as precisely as possible the role that the congress expects the federal reserve to play in such resolutions. liabilities having reviewed the federal reserve's main asset accounts, let me now touch briefly on the liability side of the balance sheet. historically, the largest component of the federal reserve's liabilities has historically been federal reserve notes – that is, u. s. paper currency. currency has expanded over time in line with nominal spending in the united states and demands for u. s. currency abroad. by some estimates, a bit over one - half of u. s. currency is held outside the country. other key liabilities of the federal reserve include the deposit accounts of the u. s. government and depository institutions. the u. s. government maintains a " checking account " with the federal reserve – the so - called treasury general account – from which most federal payments are made. more recently, the treasury has established a special account at the federal reserve as part of its supplementary financing program ( sfp ). under this program, the treasury issues special treasury bills and places the proceeds