management processes continue to evolve may make them less effective in describing the risk profile of a specific organization. but if bankers do not voluntarily improve disclosures, rules will be written. proposed changes to federal reserve discount window operations as you probably know, the board of governors recently requested public comment on a proposal to revise the federal reserve ’ s discount window programs. before i get into details, i ’ d like to emphasize that implementation of the proposal would not entail a change in the stance of monetary policy. there is nothing in the proposal that would necessitate a change in the target for the federal funds rate or the level of interest rates more generally. the board is proposing the establishment of a new type of discount window credit, to be called primary credit, which would replace adjustment credit, currently the federal reserve ’ s main lending program. primary credit would be available for very short terms as a backup source of liquidity to depository institutions that are in generally sound financial condition. there would be no prohibition on lending the proceeds of a primary credit loan to other depository institutions. unlike adjustment credit, which currently is extended at a below - market rate, primary credit would be extended at a rate that would be above the usual level of short - term market interest rates, including the federal funds rate. by restricting eligibility to generally sound institutions and by eliminating the incentive for institutions to borrow to exploit the below - market discount rate, the primary credit program should considerably reduce the need for federal reserve discount officers to review the funding situations of borrowers. and since only sound institutions will be using primary credit, banks should be less concerned that their use of the window would signal incorrectly that they were experiencing significant funding difficulties. as a result, the federal reserve expects that institutions will be more willing to use the window. this increased willingness, and the ability of institutions to resell the proceeds of discount window loans, should improve the functioning of the window as a safety valve for the reserve market and for individual institutions. the interest rate for primary credit would be set through a procedure identical to that currently used for the basic discount rate. that is, the boards of directors at reserve banks would set the rate, subject to review and determination by the board of governors. in the proposal, it is envisioned that the interest rate on primary credit would initially be set 100 basis points above the target federal funds rate. if adopted, this program would align our lending practices to those of other major central banks. the board also is requesting comment

##mble in responding to incoming data and the evolving outlook. maintaining the trust and confidence of the public is essential to our work. last month, the federal reserve finalized a comprehensive set of new ethics rules to substantially strengthen the investment restrictions for senior federal reserve officials. these new rules will guard against even the appearance of any conflict of interest. they are tough and best in class in government, here and around the world. we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. we at the federal reserve will do everything we can to achieve our maximum - employment and price - stability goals. thank you. i am happy to take your questions. 2 / 2 bis central bankers'speeches