risk, to investors and others who are willing to bear that risk. thus, intermediaries help allocate resources and risks throughout the economy, thereby improving efficiency and productivity. at times, however, financial intermediation can result in risks becoming concentrated in ways that increase rather than reduce the fragility of the financial system more broadly. this is what many people mean when they refer to systemic risk. while today i will use the term in this fashion, i would note that the concept is quite vague. one of the major difficulties we face in managing systemic risk is defining what it is and how to measure it. ideally, one important goal of financial supervision and regulation is to monitor risk in the financial system bis central bankers ’ speeches and reduce the chances that it inadvertently leads to financial fragility or instability. regulation, however, should seek to do so without impeding the healthy functioning of financial markets and institutions. in response to the financial crisis, congress passed the dodd - frank wall street reform and consumer protection act in 2010, which included enhanced capital and liquidity standards and risk - management requirements for large financial institutions thought to be systemically important. in addition to new regulations, the crisis brought about important changes in supervision. supervisors are taking a macroprudential approach to their responsibilities. rather than focusing on the risk in a single institution, supervisors are spending more time analyzing risks across firms. large financial firms are now required to have stronger data and information systems so they can better monitor and manage their own risks. and these firms are required to report higher quality data to supervisors. the federal reserve now utilizes these data as well as other information it receives to conduct more in - depth and timely assessments of emerging risks. access to better data has also enabled supervisors to conduct the supervisory stress tests required by dodd - frank, which assess the ability of these large institutions to withstand a severe economic downturn. this conference will address the efficacy of many of these individual elements of dodd - frank and of supervisory reforms, which are still evolving nearly four years after the legislation was first enacted. for the remainder of my remarks, i wish to explore three broad principles that i believe we need to consider as we search for ways to improve the stability of our financial system. the first is simplicity. our regulatory framework is becoming increasingly complex, which has led to rising compliance costs as well as enforcement costs. the second principle is transparency. financial markets and instruments have also become increasingly complex and in some cases occasionally opaque. ensuring

charles i plosser : systematic policy and forward guidance remarks by mr charles i plosser, president and chief executive officer of the federal reserve bank of philadelphia, at the money marketeers of new york university, inc., down town association, new york, 25 march 2014. * * * the views expressed are my own and not necessarily those of the federal reserve system or the fomc. highlights • president plosser highlights the relationship between systematic monetary policy and forward guidance. his goal is to help underscore how a systematic approach to monetary policy can improve the effectiveness of monetary policy in both normal times and in more unusual or extreme circumstances, such as when policy is constrained by the zero lower bound on nominal interest rates. • president plosser ’ s preference for dealing with forward guidance is for the fomc to articulate a reaction function as best it can. this entails describing a systematic approach to policymaking, where policy decisions are based on available information in a consistent and predictable way. • president plosser believes the most recent fomc statement took a step in this direction when it moved to a qualitative form of forward guidance by stating that the committee will be assessing progress – both realized and expected – toward its policy objectives. introduction i want to thank william kanto and the money marketeers for inviting me to speak again this evening. your series of guest speakers over the years has been quite illustrious, and it has included many federal reserve governors and presidents, not to mention distinguished economists and a wide array of others. so, before i share some thoughts on monetary policy with you tonight, i will begin with the usual disclaimer that my views are my own and do not necessarily reflect those of the federal reserve system or my colleagues on the federal open market committee ( fomc ). of course, that disclaimer is a two - way street, and you should not necessarily associate the views of my colleagues with my views. i believe that this diversity of views among fomc participants does more than assure variety among your guest speakers. it is one of the great strengths of our decentralized central bank. open dialogue and diversity of views leads to better policy decisions and is the primary means by which new ideas are gradually incorporated into our monetary policy framework. thus, i believe diversity of thought is a sign of thoughtful progress. as i noted in 2009 when i last spoke to you, the famous american journalist walter lippmann once said,