It's a pleasure to be with you today and to be part of this discussion on how central banks can support the effective functioning of financial markets.1 Financial stability is essential for a well-functioning economy. A financial system is considered stable when its markets and institutions are resilient and able to function even following a severe shock.
The Federal Reserve monitors risks to financial stability and uses its supervisory and regulatory tools to mitigate the risks and consequences of financial instability. During periods of financial system stress, the Federal Reserve can use additional tools, such as lending facilities and open market operations, to directly support the effective functioning of key financial markets and the flow of credit throughout the economy.