Jerome Powell Quotes

Among other objectives, liquidity guidelines must take into account the risks that inadequate liquidity planning by major financial firms pose for the broader financial system, and they must ensure that these firms do not become excessively reliant on liquidity support from the central bank.

What I think about derivatives is if every institution that owns or trades them is properly margined and marked to market, including end-users, including every institution, including sovereigns and multilateral institutions, then the system would be safe - if people were margined the way customers of investment banks are margined.

Without a doubt, we do support a robust framework for aggregate capital and liquidity and stress-testing.

The financial crisis was linked to the fact that banks had excessive leverage and too many risky assets. The solution is not to try to dictate to banks what they can do or not do, but to require them to strengthen their capital to absorb potential losses and hold less risky assets.

Loss-absorbing capacity among banks is substantially higher as a result of both regulatory requirements and stress testing exercises.

A bank needs models to measure risk. The problem, however, is that any one bank can measure its risk, but it also has to know what the risk taken by other banks in the system happens to be at any particular moment.

The Federal Reserve has a responsibility to ensure the safety and soundness of financial institutions and to contain systemic risks in financial markets.

It is no wonder that bank capital is regulated. When borrowing and lending is profitable, it is tempting for banks to scale up their operations and to borrow and lend too much in relation to their capital, in effect reducing the effectiveness of the potential capital cushion.

You shouldn't be trying to create a system where no bank fails, but you should be creating one that catches a bank and allows it to fail without impacting the financial markets.

Most of the time, your risk management works. With a systemic event such as the recent shocks following the collapse of Lehman Brothers, obviously the risk-management system of any one bank appears, after the fact, to be incomplete. We ended up where banks couldn't liquidate their risk, and the system tended to freeze up.

We think it would be safer if the Bank of England had responsibility for solvency regulation of UK-based banks, as well as having an overall duty to keep the system solvent. Otherwise, there could be dangerous delays if a banking crisis did hit.

Looking past the immediate crisis, a more resilient system must be built on stronger and better designed shock absorbers, both in the major institutions and in the infrastructure of the financial system.

In the financial system we have today, with less risk concentrated in banks, the probability of systemic financial crises may be lower than in traditional bank-centered financial systems.

Operational risk is the risk of loss resulting from bank operational failures, such as rogue traders, fraudulent sales practices, and cyber risks. Operational risk capital is money or assets that banks have to hold to shield the economy from the consequences of these kinds of failures.

Unfortunately, tools that transfer risk can also increase systemic risk if major counterparties fail to manage their own risk exposures properly.

Divestment measures would improve overall banking sector health.

We need a resilient, well-capitalized, well-regulated financial system that is strong enough to withstand even severe shocks and support economic growth by lending through the economic cycle.

I mean, everyone agrees with stress tests for banks. I mean that's clear. But banks should do that on their own. And they should worry about their own capital functioning. That's what they should do. It shouldn't be a government function.

I've been telling anyone willing to listen that banks have a tendency to sit on time bombs while convincing themselves that they are conservative and nonvolatile.

Raising minimum capital requirements [for banks] is expensive. But it is safe.

Fannie Mae may have conformed to the rules but the rules didn’t conform to reality. A major bank or financial institution could meet every single regulatory requirement yet still be at the risk of collapse.

Our system must remain solvent as we attempt a solution to this great problem of security. Else we have lost the battle from within that we are trying to win from without.

We have institutions that have been allowed to become too big to fail because we had all kinds of flaws in our financial infrastructure, in the whole way over-the-counter derivatives work.

We have put in place policies through supervision and regulation that has greatly enhanced the safety and soundness of the banking system.

Why do we have financial crises? Why do banks lose money? If history is any guide, it hasn't often been the result of speculative bets. It has been the result of banks making loans to individuals and businesses who can't pay them back.