That broader theme is as follows: One of the most difficult jobs that central banks face is in dealing with episodes of credit market overheating that pose a potential threat to financial stability. As compared with inflation or unemployment, measurement is much harder, so even recognizing the extent of the problem in real time is a major challenge.
Because many regional banking organizations concentrate their assets and activities in banking subsidiaries that are supervised by other federal banking agencies, we coordinate supervisory activities closely with our regulatory colleagues and rely significantly on the results of their examinations, focusing our own inspections on the parent company and its ability to serve as a source of strength to the banks.