As I’ve briefly discussed today, we need to have a supervisory system that focuses appropriate attention on the traditional risks that are inherent to the business of banking: credit, liquidity, concentration, and interest rate risk. Historically, supervision has been an effective tool to address these traditional risks.
The difference that is relevant in this context is that the empirical fit of FRB/US is allowed to show through more explicitly because the modeling structure of the model is less restrictive than with a DSGE model.