banking and financial system. a strong and healthy financial system is critical for the growth and development of any country. throughout the long history of financial markets, there have been a number of banking and financial crises that have severely disrupted economies. there is no reason for us to believe that there will be an end to these disruptions in an era of continuing technological change and innovation. what is therefore important is that we continually seek to prevent and mitigate future crises. this we can do with a blend of sharp analysis, keen judgment, practical experience and a rigorous understanding of the workings of financial markets in both normal and abnormal times. i believe that this is what defines effective banking supervision. it is also this rigorous understanding of the operations of financial markets that is of critical importance to the development of macroeconomic policy inclusive of monetary policy. mr. chairman, over two and a half centuries ago, in the 18th century to be exact, adam smith wrote of the free - market system as the “ invisible ” hand that guides the market to achieve the public good. while that concept has today still not lost its resonance, the increase in the complexity of economic and financial affairs and the potential for instability that this has fostered, has placed us in a new arena. an arena, whose sphere of influence is constantly changing and one that therefore requires close and integrated monitoring in order for us to understand and manage the risks that abound. the banking crises of the last quarter of a century and particularly those of the last ten years have had a damaging impact on economic activity and the repercussions have been devastating for a number of economies. there is therefore no room for countries in our region to be less than aggressive in ensuring a more careful, integrated and direct oversight of the financial system to complement at least, that “ invisible hand ” of which adam smith wrote. this is of course, what asba is trying to achieve. i use the word integrated because in some of our jurisdictions, jamaica for example, supervision is divided among institutions. in the jamaican case we have over the years reduced the number of supervisory authorities in the financial sector to two. this has achieved positive results in terms of the efficiency of supervision. it is my view that we could achieve an even greater level of effectiveness by going one step further with the establishment of a single supervisory authority for the financial system as a whole. i also believe that there are significant advantages to be derived from the integrated interplay between the roles of supervision and the effort to achieve financial

for release on delivery 12 : 15 p. m. edt september 10, 2024 the future of stress testing and the stress capital buffer framework remarks by michelle w. bowman member board of governors of the federal reserve system at executive council of the banking law section of the federal bar association washington, d. c. september 10, 2024 thank you for the invitation to join you. 1 given the recent conclusion of the board ’ s stress test, it seems timely to share my thoughts on the stress testing program. in the past, i have noted reservations about the stress testing process, so today i ’ d like to discuss in greater detail the benefits, challenges, and issues i would like to see resolved as the stress testing program evolves in the future. 2 earlier this summer, the board announced the results of the supervisory stress tests. at a high level, all 31 banks subject to the test remained above their minimum common equity tier one ( cet1 ) capital requirements from the hypothetical recession scenario. 3 under this scenario, banks would have absorbed projected hypothetical losses of nearly $ 685 billion, and would have experienced an aggregate cet1 capital decline of 2. 8 percent. 4 the hypothetical scenario included a 40 percent decline in commercial real estate prices, a substantial increase in office vacancies, a 36 percent decline in house prices, a spike in unemployment to a peak of 10 percent, and related declines in economic output. 5 this year also saw the introduction of “ exploratory ” stress scenarios, which included two different funding stress scenarios, and for a subset of banks, these remarks represent my own views and are not necessarily those of my colleagues on the federal reserve board or the federal open market committee. michelle w. bowman, “ large bank supervision and regulation ” ( remarks at the institute of international finance, washington, d. c., september 30, 2022 ), https : / / www. federalreserve. gov / newsevents / speech / files / bowman20220930a. pdf ; and statement by governor michelle w. bowman on the basel iii endgame proposal ( july 27, 2023 ) https : / / www. federalreserve. gov / newsevents / pressreleases / bowman - statement - 20230727. htm, ( “ today ’ s proposal is intended to improve risk capture, but in some circumstances, leaves in place and even introduces new regulatory redundancies, as with changes