For example, asset fire sales dynamics that negatively impact market prices or a loss of confidence in the industry during periods of uncertainty or distress are examples of “externalities” with far-reaching effects on the financial system.7 Moreover, those costs and benefits will be realized in the future and thus need to be assessed ex ante from a probabilistic perspective. The official sector includes all of these costs and benefits to society in assessments of policy efficacy. This makes evaluating trade-offs and assessing effectiveness difficult, and suggests that simple assessments are likely to be incomplete. Policy assessment requires a rigorous evaluation of a broad range of outcomes, and an important part of the ongoing dialogue in conferences like this one is to continue to develop the conceptual frameworks and to study the data in order to make the most meaningful assessments of policy effectiveness. A Look at Bank Performance I will now discuss two perspectives on bank performance since the financial crisis that serve as rough proxies for the resilience of the industry and the provision of financial services. This is clearly not a rigorous test of whether specific regulations are optimal, but provides some indicative results about trends in resiliency and financial services. I will focus on accounting metrics from the balance sheet and income statement, but one could also turn to market data to assess resiliency.
Kevin Stiroh: A perspective on supervisory objectives and tradeoffs Keynote remarks by Mr Kevin Stiroh, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the Columbia University’s School of International and Public Affairs and the Clearing House Association Conference on “Optimal Bank Capital Regulation,” Columbia University, New York City, 23 February 2017. * * * Accompanying charts  Introduction Good afternoon. Thank you very much for the kind introduction. Since the financial crisis, the topic of today’s conference—Optimal Bank Capital Regulation— has been of considerable interest to academics, the official sector, and market participants. Some have argued for dramatically higher capital requirements, while others have argued with equal conviction for substantially lower capital requirements. I am happy to be here today to offer some thoughts about potential trade-offs across supervisory tools and objectives, and how one might consider those trade-offs within the current supervisory framework. I conclude that the U.S. banking system has become considerably more resilient since the financial crisis, which is a necessary condition for the sustainable provision of financial services to households and businesses that supports the growth and stability of the U.S. economy. My comments today are my own and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System. Supervisory Objectives and Trade-Offs A well-functioning financial system intermediates between savers and borrowers, supports a robust payments system, and facilitates risk transfer and the efficient allocation of capital.