recent events in crypto markets, while mostly occurring outside the banking sector, have highlighted the risks to investors and consumers associated with new and novel asset classes and activities when not accompanied by strong guardrails. 1 / 4 bis - central bankers'speeches in addition, despite the data depicting a generally healthy u. s. banking system, the domestic economic outlook has weakened amid tighter financial conditions and increased uncertainty. a weaker economy could put stress on households and businesses and, thus, on the banking system as a whole. uncertainty has led to increased financial market volatility and may also reveal pockets of excess leverage and liquidity risk in the non - bank financial sector, which risks spillovers to the banking system and the real economy. we saw a host of such risks with the disruptions in the united kingdom's gilt markets. the federal reserve will be heightening its focus on liquidity, credit, and interest - rate risks as supervised institutions manage the changing financial conditions. in the wake of the pandemic, the global recovery is uneven, inflation is far too high, and geopolitical events pose downside risks to the u. s. and other economies around the world. russia's war of aggression is devastating for the people of ukraine, and is also disrupting commodities, energy, and food markets, and pushing up inflation around the world. and these factors - along with china's economic slowing, associated with its inward turn, pandemic shutdowns, and contraction in its real estate sector - are weighing on global economic growth. we remain attentive to these and other developments and are closely supervising our regulated institutions to assess potential risks and implications for the stability of the u. s. and global financial systems. supervisory and regulatory priorities capital review turning to a number of our priorities at the federal reserve, i am taking a holistic look at the fed's capital framework to assess whether it is functioning as intended and supports a resilient financial system. robust capital and liquidity requirements make it more likely that banks are able to absorb losses and continue their vital role supporting households and businesses. this is especially important for the largest and most complex banks, which pose the greatest risk to u. s. financial stability. we are taking a look at the g - sib surcharge, the enhanced supplementary leverage ratio, stress testing, the countercyclical capital buffer, and other measures. within this context, i am committed to working with my colleagues

time of the turmoil ’ s outbreak ( and still is ) underestimated banks ’ exposures by not capturing the bulk of the risks related to off - balance - sheet vehicles as well as liquidity and reputational risks. supervisors and regulators should also have paid more attention to the challenge of regulatory arbitrage. in fact, some financial innovation processes were triggered – among other considerations – in order to circumvent the existing regulation, particularly on capital requirements. this aspect is even more pressing in the current environment, with large and complex financial institutions operating across borders, under different national regulatory and supervisory regimes. as i will mention below, an improved and closer cooperation and information sharing among central banks, regulators and supervisors at both national and international levels seems, therefore, essential. to sum up, we have seen that the causes of the current crisis can be traced back to macroeconomic imbalances and, at the micro level, to incentive problems and that regulatory and supervisory deficiencies have also played a role. nonetheless, the crisis has once again shown the importance of system - wide externalities in propagating and exacerbating the crisis. problems of individual banks may have wide and serious implications for both the financial system itself and the economy as a whole. overall, banks must ultimately respond to losses on risky assets by raising new capital. new equity, however, may be difficult to be issued in sufficient amount in the short run. as a consequence, banks ’ first responses have been both asset “ fire sales ” and the scaling back of their lending activity. these two effects affect the banking system widely. widespread liquidation of assets in the current market conditions pushes prices down. through mark - to - market accounting, declining asset prices lead to unwarranted contagion to other banks with similar assets. those banks may be forced to adjust their positions by selling assets themselves, thus leading to further asset price declines. similarly, when deciding to cut lending, banks may not internalise the repercussions of their decisions on the real economy in terms of foregone profitable investment opportunities, output and employment. 2. policy responses let me now turn to the public policy responses to the crisis, with a special emphasis on the common elements of the responses of the major players in the global economy. liquidity policies central banks have established the first line of policy defence against the adverse dynamics set in motion by the financial crisis, particularly through the massive provision of liquidity. although the specific responses have varied