all sizes and represents a baseline supervisory goal. i should emphasize that resiliency is not the ultimate aim, but rather a means to broader policy objectives. a resilient firm, for example, is more likely to provide a sustainable flow of financial services — broadly defined to include credit intermediation, payments, and risk transfer — through the cycle and across a range of possible macroeconomic outcomes ; a resilient firm is less likely to harm the economy or consumers through excessive risk - taking ; and a resilient firm is less likely to put taxpayer funds at risk. that is why resilience of financial institutions is valued. 1 / 7 bis central bankers'speeches the supervisory program for the largest banks implemented since the financial crisis builds on that foundation and explicitly acknowledges the potential impact that distress at a large bank could have on financial markets or the economy. this approach to large bank supervision has been codified in supervision and regulation letter 12 – 17, or sr 12 – 17. 2 this framework expresses two complementary goals for the federal reserve ’ s program for large bank supervision : ( 1 ) enhanced resiliency of the firm to lower the probability of failure or inability to serve as an intermediary and ( 2 ) reduced impact on the financial system or economy in the event failure or material weakness does in fact occur. to analysts of credit, this will sound familiar because it is essentially a probability of default / loss given default or pd / lgd framework. the key elements of enhanced resiliency, or lower pd, in this framework include capital, liquidity, corporate governance, management of core businesses, and recovery planning. a reduced impact of distress, or lower lgd, depends on effective management of critical operations, support for banking offices, and strong resolution planning. as an aside, the implementation of enhanced standards for the largest, most systemically important financial firms reflects a core tenet of the federal reserve ’ s supervisory program, namely that supervisory expectations should be tailored to the risks that individual institutions face and the potential impact that distress might have on the broader financial markets or economy. chair yellen recently discussed this topic 3 and the recent rule that removes large, non - complex firms from the qualitative assessment of the comprehensive capital analysis and review ( ccar ) is a recent example. 4 this tailoring principle drives efforts to mitigate risks to financial stability, while minimizing the collective burden on financial institutions, particularly for community and mid - sized banks, and

industry continues to evolve in response to regulatory, technological and business factors, i expect new issues will emerge that potentially threaten individual firms, and supervisors need to be prepared to address them. conclusions effective supervision and regulation help create the environment where financial institutions provide critical intermediation services in a sustainable manner over time. a key lesson of the financial crisis and the post - crisis period is that stronger, more resilient financial firms can dampen rather than amplify shocks to the system. the greater resilience we observe today relative to the pre - crisis period suggests the u. s. financial sector is better positioned to continue to provide the critical services to households and businesses that are necessary to support the u. s. economy across a wide range of potential macroeconomic and financial conditions. it is also essential to distinguish the intended consequences of supervision and regulation where informed choices are made based on careful data analysis from the unintended consequences where outcomes are not consistent with policy objectives. this requires both a conceptual framework to identify costs and benefits to society as a whole, and empirical analysis to measure them. in my view, it is entirely appropriate to continuously evaluate and rigorously assess the impact to ensure that the observed outcomes are consistent with stated objectives such as greater resilience, efficient financial intermediation over time, and financial stability. conferences like this that bring together the official sector with financial analysts, markets participants and academic economists play an important role in developing the theory and empirical analysis needed to inform those assessments. thank you very much for your attention. data appendix the primary sample includes u. s. owned bank holding companies ( bhcs ) with assets greater than $ 50b as of 3q16. this represented approximately 80 % of all u. s. owned bhc assets. where available, estimates are adjusted for mergers since 2000 to include major banking and non - banking ( broker - dealer ) operations. the fdic sample represents all fdic - insured 6 / 7 bis central bankers'speeches depository institutions. 1 the federal reserve supervisory program described here applies to bank holding companies, and i use the term “ bank ” for ease of exposition. 2 " consolidated supervision framework for large financial institutions, ” sr 12 – 17, december 17, 2012. this framework applies to institutions that are part of the federal reserve ’ s large institution supervision coordinating committee ( liscc ) portfolio, including domestic banking organizations with consolidated assets greater than $ 50 billion, large foreign banking organizations with combined assets of