Board of Governors of the Federal Reserve System (U.S.), 1935- and Kohn, Donald L. (Donald Lewis), 1942- "The Evolving Nature of the Financial System: Financial Crises and the Role of the Central Bank." Remarks at the Conference on New Directions for Understanding Systemic Risk cosponsored by the Federal Reserve Bank of New York and the National Academy of Sciences, New York, New York, May 18, 2006, https://fraser.stlouisfed.org/title/464/item/10465, accessed on March 26, 2025.

Title: The Evolving Nature of the Financial System: Financial Crises and the Role of the Central Bank : Remarks at the Conference on New Directions for Understanding Systemic Risk cosponsored by the Federal Reserve Bank of New York and the National Academy of Sciences, New York, New York

Date: May 18, 2006
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image-container-0 For release on delivery 12:30 p.m. EDT May 18, 2006 The Evolving Nature of the Financial System: Financial Crises and the Role of the Central Bank Remarks by Donald L. Kohn Member Board of Governors of the Federal Reserve System at the Conference on New Directions for Understanding Systemic Risk cosponsored by Federal Reserve Bank of New York and the National Academy of Sciences New York, New York May 18, 2006
image-container-1 I am very pleased to participate in a conference seeking new directions for understanding systemic risk. Let me begin by thanking the Federal Reserve Bank of New York for hosting the conference and for organizing, along with the National Academy of Sciences, an impressive program that will facilitate interdisciplinary discussion on a topic of intense interest to central bankers. 1 The Evolution of Institutions and Markets Maintaining the stability of the financial system and containing the systemic risk that may arise in financial markets has been central to the Federal Reserve’s mission for as long as there has been a Federal Reserve. Indeed, Congress passed the Federal Reserve Act in 1913 to provide the nation with a safer and more stable monetary and financial system. Thus, the focus of this conference--understanding systemic risk--is not new, though some of the names have changed. At the beginning of the twentieth century, banks were virtually the only financial intermediary available. Periodically, these highly leveraged institutions lost the confidence of depositors, fell into crisis, and reduced their lending to creditworthy borrowers, thereby accentuating economic downturns. The tools that were developed to prevent and to manage financial crises--lender-of-last-resort facilities, supervision and regulation aimed at bank safety and soundness, deposit insurance, and the provision of payment system services--were geared toward a bank- denominated system. 1 The views expressed are my own and do not necessarily reflect the views of other members of the Board of Governors or the Federal Reserve more generally. Diana Hancock and Wayne Passmore, of the Board’s staff, contributed to these remarks.
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Date: May 18, 2006
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