randall s kroszner : protecting consumers in the credit marketplace speech by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the federal reserve bank of cleveland community development policy summit, cleveland, ohio, 11 june 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * i am delighted to be here today to help open this important conference. i thank my hosts, president pianalto and her staff at the federal reserve bank of cleveland, for the invitation. this year's conference explores a confluence of consumer - related finance issues in the context of the current difficulties in the mortgage markets. in my remarks today, i would like to discuss the key role of consumer credit in our economy and describe how information disclosure and protecting consumers can work to facilitate and promote the efficient functioning of markets for such credit. 1 good information is essential to achieving well - functioning markets. consumers, equipped with the right information at the right time, can make the choices most appropriate to their individual circumstances and desires. for consumers to make the most meaningful use of the relevant information, such information should be accessible and understandable. in turn, businesses rely on consumers through their choices to signal their desires and preferences in order to produce the products that consumers want. if consumers are not well informed, it is difficult for them to be effective in conveying to businesses what they most want and in rewarding those businesses that do produce such products. good information in a marketplace thus not only empowers consumers to make better choices but also helps competition work more effectively to provide the products consumers most desire. there are challenges in ensuring that the appropriate information is provided to help markets function efficiently. product suppliers may not always provide needed information or present it in a format that enables meaningful comparison across competing products. consumers must also have the financial skills to evaluate the information effectively. however, even in the presence of good information, practices can emerge that offer little benefit to consumers and, in some cases, may cause harm. in such cases, improved disclosure alone may be insufficient to address these issues. rules can establish standards that promote increased certainty and restrain abusive practices. at the same time, such rules need to be implemented in a careful and informed manner so that the potential benefits of such rules are not offset by unintended consequences or the imposition of unnecessary costs. the challenge to policymakers is to

reforms and the european commission will review the eu money market fund regulation in 2022. 2 / 3 bis central bankers'speeches the next steps should include enhancing policies for open - ended investment funds and margining practices as well as tackling risks from non - bank leverage. policies for the broader investment fund sector should address liquidity mismatches as a key priority. improvements to margining practices should focus on increasing transparency, reducing excessive margin procyclicality and ensuring that non - banks are better prepared for margin calls. 8 and it is important to understand and tackle the risks associated with leverage in the non - bank financial sector. to monitor and address vulnerabilities arising from the use of leverage, globally consistent leverage metrics are needed. conclusion let me conclude. the non - bank sector ’ s role in financing the euro area economy has increased significantly over time. in terms of strengthening european capital markets, this is a welcome development. looking ahead, a more comprehensive macroprudential framework will support this role even further : it will help ensure that non - banks are more resilient and, in turn, a more stable source of funding for the real economy in both good times and bad. it should also reduce the need for extraordinary central bank interventions in the future, thereby helping to alleviate concerns related to excessive risk - taking and moral hazard. 1 ecb ( 2021 ), financial stability review, november. 2 work stream on non - bank financial intermediation ( 2021 ), “ non - bank financial intermediation in the euro area : implications for monetary policy transmission and key vulnerabilities ”, occasional paper series, no 270, ecb, september. 3 ecb ( 2021 ), “ the role of financial stability in the ecb ’ s new monetary policy strategy ”, financial stability review, november. 4 financial stability board ( 2020 ), “ holistic review of the march market turmoil ”, 17 november. 5 see, for example, ecb ( 2019 ), “ euro area bond funds continue to expand and increase liquidity risk ”, financial stability review, chapter 4, november ; and esrb ( 2019 ), “ eu non - bank financial intermediation risk monitor 2019 ”, july. 6 boucinha, m. et al. ( 2020 ), “ recent stress in money market funds has exposed potential risks for the wider financial system ”, financial stability review, ecb, may. 7 financial stability board ( 2021 ),