Supervisors on Supervision

“When public expectations go unmet, the result is not confusion — it’s disillusionment. And disillusionment corrodes legitimacy.”

“If we’re going to talk about culture in the financial sector, we can’t ignore the culture of supervision and regulation itself. There’s no reason why regulators and agencies shouldn’t take a hard look at their own cultural predispositions, just as they expect financial institutions to do.”

“One of the significant issues we see today is that supervision has become so prescriptive that, in some ways, it feels as if regulators are actually running the institutions themselves. 

That’s not how it should work. The role of supervision should be to establish guardrails — not to dictate operations to the extent that firms no longer have the flexibility to make their own risk based decisions. When oversight becomes overly rigid or bureaucratic, it can stifle the very innovation and dynamism that financial firms need to operate effectively and serve their customers.”

“We need a return to common sense. And that starts with taking responsibility. Finger-pointing doesn’t fix problems. Regulators, supervisors, policymakers, everyone involved in the process — must own the outcomes of their decisions.

If something fails, the response shouldn’t be to pass the blame. It should be, ‘This is my responsibility, and it’s on me to fix it.’ That kind of accountability is critical because we are dealing with major issues that impact financial stability, economic opportunity, and ultimately, the health of our society. 

I believe we can solve these problems, but we have to be willing to put in the work. Frankly, I think we’ve all gotten a little lazy. Society is demanding more of us now than it did in the past, and that’s not a bad thing. It should demand more. 

Our responsibilities are greater and, if we don’t step up to meet them, we won’t be able to maintain the kind of healthy, functioning financial system — and broader society — that we need.”

“Regulatory modernization is not the same as deregulation. Some argue we should just wipe the slate clean. That’s deregulation. And while I understand the frustration behind that instinct, I don’t think it’s the right approach. You can’t have a safe, stable financial system without meaningful oversight. But at the same time the system can’t be so weighed down by outdated, redundant, or overly complex rules that it becomes dysfunctional. 

Modernization means doing the hard work — going rule by rule, process by process, and asking: ‘Is this regulation achieving its intended purpose? Is it still relevant in today’s financial landscape? Is it creating unintended consequences that outweigh its benefits?’ That’s the kind of rigorous review we don’t do enough of.”