This work not only has improved our understanding of banks’ individual risk profiles, it also has helped us better evaluate the potential effects of financial disruptions in Europe on credit flows and economic activity in the United States. Macroprudential considerations are being incorporated into the development of new regulations as well as into supervision.
For example, in December, the Federal Reserve issued a package of proposed rules to implement sections 165 and 166 of the Dodd-Frank Act. The rules would establish prudential standards for the largest bank holding companies and systemically important nonbank financial firms, standards that become more stringent as the systemic footprint of the firm increases.