Effective risk management remains sturdy and durable only if supported by strong and independent risk functions that produce unbiased information. Empowering independent risk managers results in clear, dispassionate thinking about the entire firm's risk profile, with no favoritism toward any business unit.
Today, I will describe some of the surveillance practices that the Federal Reserve has put in place to monitor risks to financial stability, particularly risks stemming from potential interactions between a run-up in asset prices and leverage, and I will offer our perspective on the current financial situation.