WASHINGTON — As regulators around the world look to prevent the next financial crisis, Kansas City Federal Reserve Bank President Esther George Friday said they should strengthen macroprudential oversight, while increasing simplicity and cooperation.
"Lapses in our supervisory framework contributed to the tremendous and devastating costs to the global economy and demand that we look for new ways to oversee a complex financial system," George said in remarks prepared for delivery at a Bank of France conference in Paris.
"Yet, even as we deploy new tools and methods, we must commit to strengthen microprudential supervision, market discipline and cooperation among regulators," she said.
George, who is a voter on the Federal Open Market Committee, did not address current monetary policy or economic conditions in her prepared remarks.
Instead, she told the group of regulators they "should work toward implementing standards that also provide useful and accurate information to stockholders and creditors."
One way to do this, she said, "is to construct simple regulatory rules that can be easily understood by the public and readily enforced by examiners."
She added that "regulators may also be able to promote transparency and enhance market discipline by highlighting industry information in ways that inform the public," pointing to the such as the Federal Deposit Insurance Corporation's Global Capital Index and disclosures of examination findings.
George said she is reluctant to give any country advice on regulatory matters, when the U.S. system of joint oversight by a multitude of state and federal regulators has been called "structurally flawed," but said she thinks "a complicated regulatory structure can work."
"A benefit of our structure is that state and federal chartering authorities can oversee their respective institutions, while the FDIC can use its supervisory experience to gain better insight into its deposit insurance responsibilities," she said.
As for the Federal Reserve, which saw its regulatory powers enhanced in 2010 Dodd-Frank Act, its role in supervision "provides important knowledge for carrying out its discount window responsibilities, monetary policy formulation and its macroprudential supervisory role," George said.
To be successful, though, "this means sharing supervisory data, joint participation in examinations and cooperative rule-writing," she said.
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