committee, which i mentioned earlier. the liscc brings together experts from around the federal reserve system in the areas of supervision, research, legal, financial markets, and payment systems in a centralized body led by the federal reserve board. the liscc program enhances supervision in several ways. first, by looking at firms both individually and collectively, it helps ensure supervisors are well positioned to identify issues at individual firms as well as trends across and interconnections among firms that may pose risks to financial stability. the liscc also promotes high standards and consistency in the supervision of large firms through a centralized yet systemwide approach. by bringing together staff members from across the federal reserve system, the liscc is designed to ensure that diverse views and perspectives are brought to bear on important decisions about the supervision of systemically important firms. lastly, the diversity of skills among the fed experts involved in the liscc allows it to consider financial stability risks from the broader economy, financial markets, and other sources. the liscc also builds on the comprehensive analysis of financial stability by the board ’ s office of financial stability policy and research, which was established after the financial crisis. the federal reserve has significant responsibilities for supervising large financial institutions, but we cannot guarantee their stability on our own. it is important that we communicate and coordinate with other u. s. financial regulatory agencies with responsibilities that affect the safety and soundness of large institutions. we also need to cooperate with supervisors in other countries where these firms operate. this cooperation helps us understand developments in a complex and global financial system that have implications for individual firms or for large institutions generally. it can also provide for more information about the comprehensive capital analysis and review exercise and interagency doddfrank act stress - testing requirements, see the webpage “ stress tests and capital planning “ on the board ’ s website. this federal reserve assessment is known as the comprehensive liquidity analysis and review. bis central bankers ’ speeches information and perspective about firms whose supervision we may share with other agencies or governments. in addition, it facilitates a coordinated approach to ensuring that large firms are operating in a safe and sound manner. to be effective, regulation and supervision must be independent of the entities subject to oversight. you may know or have heard the term “ regulatory capture. ” regulatory capture is when a regulatory agency advances the interests of the industry it is supposed to oversee rather than the broader public interest it should represent. 11 regulatory capture, which may occur in the

, “ good compliance, not mere compliance, ” speech delivered at “ reforming culture and behavior in the financial services industry, ” a conference sponsored by the federal reserve bank of new york, new york, n. y., october 20. bis central bankers ’ speeches use an apt metaphor, we looked closely at the trees and not as intently as we should have at the forest. one of the most fundamental changes in the fed ’ s oversight of large institutions since the crisis, a principle that undergirds everything i will discuss today, is elevating the importance of financial stability in that oversight. the fed oversees financial institutions through regulation and supervision. while they are often closely related, these are two distinct activities. on the one hand, regulation refers primarily to the rules that firms must follow. regulation starts with laws passed by congress which are the basis for specific and detailed rules written by the fed and other agencies. supervision, on the other hand, involves monitoring and examining the day - to - day operations of these firms, including their financial condition, how they manage risks, and their corporate governance, to make sure they are complying with laws and regulations and operating in a safe and sound manner. the federal reserve board writes the regulations firms must follow, establishes supervisory policies and, in close collaboration with the 12 regional reserve banks, is deeply engaged in the supervision of large financial institutions. much of the day - to - day work of supervision, particularly for smaller banks, occurs locally through the reserve banks. for systemically important firms, the board several years ago established the large institution supervision coordinating committee ( liscc ) in order to assure well - coordinated supervision. i consider the effective supervision of large institutions, to ensure their safety and soundness and the stability of the financial system, to be one of the federal reserve board ’ s most important responsibilities, and one of my most important responsibilities as chair. in improving the oversight of large firms, the federal reserve has made it a top priority to ensure that we appropriately tailor our regulation and supervision of banks to their size, complexity, and risks. 5 we will use statutory authorities to ensure that we avoid a one - sizefits - all approach as we promulgate rules and regulations. as we continue this work, we will communicate to the congress should we identify discrete issues that may benefit from further clarification or technical changes without undermining safety and soundness, such as those addressed by congress last year related to capital requirements for insurance companies