are in the process of creating an enhanced quantitative surveillance program for large, complex organizations that will use supervisory information, firm - specific data analysis, and marketbased indicators to identify emerging risks to specific firms as well as to the industry as a whole. this work will be performed by a multidisciplinary group composed of our economic and market researchers, supervisors, market operations specialists, and other experts within the federal reserve system. periodic scenario analysis will be used to enhance our understanding of the consequences of changes in the economic environment for both individual firms and for the broader system. finally, to support and complement these initiatives, we are working with the other federal banking agencies to develop more comprehensive information - reporting requirements for the largest firms. systemic risk oversight for purposes of both effectiveness and accountability, the consolidated supervision of an individual firm, whether or not it is systemically important, is best vested with a single agency. however, the broader task of monitoring and addressing systemic risks that might arise from the interaction of different types of financial institutions and markets – both regulated and unregulated – may exceed the capacity of any individual supervisor. instead, we should seek to marshal the collective expertise and information of all financial supervisors to identify and respond to developments that threaten the stability of the system as a whole. this objective can be accomplished by modifying the regulatory architecture in two important ways. first, an oversight council – composed of representatives of the agencies and departments involved in the oversight of the financial sector – should be established to monitor and identify emerging systemic risks across the full range of financial institutions and markets. examples of such potential risks include rising and correlated risk exposures across firms and markets ; significant increases in leverage that could result in systemic fragility ; and gaps in regulatory coverage that arise in the course of financial change and innovation, including the development of new practices, products, and institutions. a council could also play useful roles in coordinating responses by member agencies to mitigate emerging systemic risks, in recommending actions to reduce procyclicality in regulatory and supervisory practices, and in identifying financial firms that may deserve designation as systemically important. to fulfill its responsibilities, a council would need access to a broad range of information from its member agencies regarding the institutions and markets they supervise and, when the necessary information is not available through that source, the authority to collect such information directly from financial institutions and markets. second, the congress should support a reorientation of individual agency mandates to include not only the responsibility to oversee

the federal reserve looks forward to working with the congress and the administration to enact meaningful regulatory reform that will strengthen the financial system and reduce both the probability and severity of future crises.