, relative bond ratings, and the administration of sections 23a and b of the federal reserve act, all strongly suggest that the holding company structure is far more capable of containing the sovereign credit subsidy whose purpose is support of the safety net, not providing expanded competitive advantage. as new activities hopefully expand for banking organizations, we believe that it is essential that we assure they are financed at market rates, not subsidized ones. this will not always be easy. containment of subsidies is often implemented through firewalls and other devices which could also inhibit the very synergies which the expansion of activities is meant to achieve. but we have dealt with these trade - offs before and should be able to in the future as well. umbrella supervision whether new activities are authorized in bank subsidiaries, bank holding companies, or both, congress, in its review of financial modernization, must consider legal entity supervision versus umbrella supervision. the board believes that umbrella supervision is a realistic necessity for the protection of our financial system and to limit any misuse of the sovereign credit. the bank holding company organization is increasingly being managed so as to take advantage of the synergies between its component parts in order to deliver better products to the market and higher returns to stockholders. such synergies cannot occur if the model of the holding company is one in which the parent is just, in effect, a portfolio investor in its subsidiary. indeed, virtually all of the large holding companies now operate as integrated units and are managed as such. as bank holding companies began to widen their activities, and as new technologies permitted not only the development of new products but also the systems for controlling them, the banking organization was impelled to develop centralized risk control techniques that crossed legal entities. today, risk management for the entire company is increasingly centralized not only at the larger and more sophisticated banking organizations, but at other large financial services providers as well. this development reflects the demands of the marketplace, which views banks and their affiliates and other financial businesses and their affiliates as integrated organizations in terms of financial condition, management, and reputation. to understand the risk controls of the bank, we have first to come to grips with the fact that the organization is interested in risk and its control, not by instrument or legal entity, but for the entire business. this type of control is being adopted by more and more organizations each year, and can only increase as more activities are authorized by the regulators and the congress. regulatory policies and operating procedures have had to respond to these

own impressions of what is next for post - crisis 2 / 5 bis central bankers'speeches regulation. in my early days as the vice chairman for supervision, i asked our staff to conduct a comprehensive review of the regulations in the core areas of reform that i outlined earlier — capital, stress testing, liquidity, and resolution. the objective is to consider the effect of those regulatory frameworks on resiliency and resolvability of the financial system, on credit availability and economic growth, and more broadly to evaluate their costs and benefits. this is a comprehensive and serious process, and work is still underway. i should note, however, that i have already formed views on a few areas that warrant more focus, and that i will be working with my colleagues on the board to constructively consider. i will start with the issue of tailoring supervision and regulation to the size, systemic footprint, risk profile, and business model of banking firms. the federal reserve has devoted considerable energy in its post - crisis regulatory work to incorporate the tailoring concept in its regulation and supervision across the spectrum of small, medium, and large firms. a recent example of this approach is our late 2017 proposal to simplify capital requirements for small - and medium - sized banking firms. in my view, there is further work for the federal reserve and the other banking agencies to do on the tailoring front. i would emphasize that tailoring is not an objective limited in scope to a subset of the smallest firms. as my colleagues and i have said before, the character of our regulation should match the character of the risk at the institution. accordingly, we should also be looking at additional opportunities for more tailoring for larger, non - global systemically important banks, or non - gsibs. in this regard, i support congressional efforts regarding tailoring, whether by raising the current $ 50 billion statutory threshold for application of enhanced prudential standards or by articulating a so - called factors - based threshold. irrespective of where the legislative efforts land, i believe we at the federal reserve have the responsibility to ensure that we do further tailoring for the institutions that remain subject to our rules to ensure that regulation matches the risk of the firm. take for example large non - g - sibs whose failure would not individually pose a risk to u. s. financial stability. even without financial stability implications, the distress or failure of these firms still could harm the u. s. economy by, for example