Exploring the macro-prudential aspects of financial sector supervision

In a speech given at the Bank of International Settlements in Basil, Switzerland, in April, President Hoenig discussed how financial supervisors and monetary policymakers can contribute to a stable financial system that fully supports sustainable economic growth. ; Several financial crises in the United States over recent years have also coincided with and been influenced by a period of rapid and path-breaking changes in our financial markets. These changes in our financial structure in turn are altering the nature of the financial crises we experience. Increasingly, crises originate in capital markets and are characterized by asset-price volatility and disruptions in market liquidity. ; Mr. Hoenig reviewed the major changes evident in the U.S. financial sector and some of the supervisory steps already taken to address recent crises within the changing financial system. He also discussed the appropriate role for macro-prudential supervision and what could reasonably be accomplished under this framework, including shifting more attention to capital markets and the need to prevent costly financial crises there.