Bernanke Says Fed Actively Ramping Up Bank Supervision

There’s been a lot of talk on Capitol Hill about who should be given the power to oversee the country’s largest financial companies. Based on Federal Reserve Chairman Ben Bernanke’s testimony to the House Financial Services Committee on Wednesday, it sounds like Fed officials aren’t waiting around for Congress to act.

Here are some quick takeaways from Mr. Bernanke’s testimony, directly related to bank supervision.

1) The Fed is conducting “an intensive self-examination of our regulatory and supervisory responsibilities” and is “actively implementing improvements.”

2) The Fed is “overhauling supervisory framework and procedures to improve coordination within our own supervisory staff” and with other agencies.

3) The Fed is developing an “enhanced quantitative surveillance program for large bank holding companies.” Mr. Bernanke said supervisory information will be “combined with firm-level, market-based indicators and aggregate economic data to provide a more complete picture of the risks facing these institutions and the broader financial system.”

4) Mr. Bernanke argues in favor of retaining key supervisory powers at the Fed. “The recent crisis has also underscored the extent to which direct involvement in the oversight of banks and bank holding companies contributes to the Federal Reserve’s effectiveness in carrying out its responsibilities as a central bank, including the making of monetary policy and the management of the discount window. Most important, as the crisis has once again demonstrated, the Federal Reserve’s ability to identify and address diverse and hard-to-predict threats to financial stability depends critically on the information, expertise, and powers that it has by virtue of being both a bank supervisor and a central bank.”