•  We continue to require that examiners rotate to another institution after three to five years. This tenure allows enough time to gain an understanding of a firm without sacrificing examiner independence. •  We have taken concrete steps to encourage examiners to speak up, which we view as a core competency. For example, we evaluate examiners on their level of engagement with colleagues and their willingness to share insights. •  We created programs to encourage peer recognition of good ideas, including funding for new supervision ideas proposed and voted on by supervisory staff. •  We increased the opportunities for feedback to senior managers, including the head of supervision, in addition to other channels already provided by the New York Fed. Among other improvements, we conduct regular town halls and provide a standing, on-line forum as a device to funnel questions to group leaders. In both settings, questions and answers are offered in an open, transparent manner. •  And we require examination teams to spend more time at New York Fed headquarters and less time “in the field.” Additional time at headquarters promotes cross-firm discussion and direct communication between senior managers and examiners. For example, we offer a seminar series at which group leaders discuss key issues in supervision with our supervision staff. Each and together, these improvements to the substance and process of supervision contribute to financial stability by providing greater insight into bank resiliency and risk. But these enhancements are not self-executing.
William C Dudley: Improving financial institution supervision – examining and addressing regulatory capture Testimony by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the Senate Committee on Banking, Housing, and Urban Affairs Financial Institutions and Consumer Protection Subcommittee, Washington DC, 21 November 2014. * I. *  *  Introduction  Chairman Brown, Ranking Member Toomey, and members of the Subcommittee, thank you for this opportunity to testify on the effectiveness of financial institution supervision and the issue of regulatory capture. In 2008 and 2009 our country faced its worst financial crisis since the Great Depression. I mention those years as a touchstone for my remarks today. Despite the passage of time and an economy that is steadily improving, the financial crisis is hardly something that happened in the remote past. For the too many people who are still unemployed or underemployed, or who otherwise continue to struggle financially, it is living history. While the causes of the crisis remain subject to debate, it is undeniable that banking supervisors could have done better in their prudential oversight of the financial system. This conclusion raises two fundamental questions: •  First, how can we improve the stability of the financial system? In other words, how can we make the financial system more resilient and productive? •  Second, how can we improve our supervision of financial institutions? The Federal Reserve is working diligently to improve both stability and supervision. The two concepts are linked.