While notional values and amounts securitized say almost nothing about the level of underlying risk to individual banks, they speak strongly to the increased volume and complexity of large bank activities and of the somewhat hidden risks they face. For these organizations, balance sheets and traditional lending have much different meanings from a decade ago.
Last year, the Federal Reserve responded to this trend by sharpening its supervisory focus on a smaller number of large complex banking organizations, both domestic and foreign. We now give increased attention to roughly twenty U.S.-owned and another ten foreign-owned banks.