should such action be deemed necessary. in november, the fomc judged that additional monetary policy stimulus was needed to support the economic recovery and help ensure that inflation, over time, returned to desired levels. bis central bankers ’ speeches to implement that stimulus, the committee decided to expand its holdings of securities by purchasing an additional $ 600 billion in longer - term treasury securities by the end of the second quarter of 2011. after considering the costs and benefits of the action and recognizing that taking no action would have its own risks, i believe that the expansion of securities holdings was worth implementing to support the economy and make the recovery more durable. i don ’ t want to overpromise. this action is not a panacea. while it is still premature to judge the overall efficacy of the program, i believe that by exerting downward pressure on longer - term interest rates, it has provided and will continue to provide support for a vulnerable recovery. at the same time, i believe the risks associated with this action are manageable, that we have the safeguards in place to monitor evolving conditions, and, most importantly, that we have the conviction to act when necessary. based on our own research and that of others, evidence is accumulating that purchases of longer - term assets have been successful in exerting downward pressure on longer - term rates. 1 consistent with research on the effects of asset purchases, between august, when chairman bernanke in a speech first publicly suggested the federal reserve might take additional action, and november, when the action was taken, longer - term treasury rates fell as market participants priced in additional fed purchases. 2 however, since the announcement of the decision to purchase longer - term treasury securities, longer - term rates have actually increased. it might seem that the recent increase in rates contradicts the view that fed asset purchases put downward pressure on rates. however, the logic behind this view works in both directions. if the market expects the fed to respond to weak economic conditions by buying more assets, investors bid up the assets and rates fall. conversely, if the market expects the economy to strengthen, investors ratchet back expectations for fed purchases and reduce their bid for the assets, and rates rise. i believe that the current rise in rates is due to exactly this latter circumstance – a strengthening in market participants ’ outlook for the economy and a corresponding decrease in the market ’ s expectation for future accommodation. one concern that has been raised about asset purchases is the resulting expansion of

affect multiple institutions, as well as specific firms. as in the stress tests, our staff members will conduct forward - looking scenario analyses to gauge the potential effects of adverse changes in the operating environment on individual firms and on the system as a whole. this work will allow us to more effectively connect the firm - specific information and insights gained from traditional examinations and other supervisory activities with analysis of system wide developments and emerging stresses. enhanced data collection is a key component of our supervisory restructuring, particularly for our increased emphasis on systemic surveillance. we have initiated new efforts to better measure large institutions ’ counterparty credit risk and interconnectedness, sensitivity to market risk, and funding and liquidity exposures. these efforts will help us focus not only on risks to individual firms, but also on concentrations of risk that may arise through common exposures or sensitivity to common shocks. for example, we are now collecting additional data in a manner that will allow for the more timely and consistent measurement of individual bank and systemic exposures to syndicated corporate loans. in addition, supervisors are mining detailed data from banks ’ risk - management systems and aggregating, where possible, the largest exposures to other banks, nonbank financial institutions, and corporate borrowers. that effort can reveal banks ’ common exposures to individual borrowers and help assess the effect of a failure of a large financial institution on individual banks or the system more broadly. last year ’ s stress assessment was a one - time event in the sense that circumstances may not again call for a simultaneous evaluation of institutions holding two - thirds of the banking system ’ s assets. but we are incorporating elements of the assessment into our ongoing supervision of capital adequacy. we are developing and refining the tools necessary to better gauge appropriate capital buffers for our largest firms. as a follow - on effort to last year ’ s stress assessment, we are now conducting a horizontal examination to evaluate whether these banks can effectively estimate their capital needs and identify resources to meet those needs. bankers need to conduct their own stress tests as well. two years ago at this conference, before the scap had been conceived, i discussed, among other topics, the emphasis placed on stress testing by the international senior supervisors group. 4 i noted then that stress tests are a good way to augment models and other standard quantitative techniques for risk management. and they force bankers to think through the implications of scenarios that may seem relatively unlikely but could pose serious risks if those scenarios materialized. stress tests must be an integral