Michael S Barr: The case for strong, effective banking supervision
Speech by Mr Michael S Barr, Member of the Board of Governors of the Federal Reserve System, at the Alan Meltzer Speaker Series, Kogod School of Business, American University, Washington DC, 18 November 2025.
The views expressed in this speech are those of the speaker and not the view of the BIS.
I am pleased to be here today to discuss a core part of the Federal Reserve's mission: banking supervision. Much of what the Fed does to conduct monetary policy, promote a stable financial system, provide a safe and efficient payments system, and support consumers and community development depends on a healthy banking system. Lending fuels entrepreneurship, helps families buy homes, and enables communities to thrive-all critical aspects of a healthy economy. Ensuring banks operate in a safe and sound manner is essential because the banking system sits at the center of the economy. That is why banks' risk-taking must always be guided by clear guardrails, underpinned by effective banking supervision.
We need these guardrails because experience shows that market discipline alone does not prevent excessive risk-taking by banks. As I've noted before, time and again, periods of relative financial calm have led to efforts to weaken regulation and supervision. This has often had dire consequences, as we saw prominently during the Global Financial Crisis.
In the midst of that crisis, I saw first-hand in my own community in Michigan what weak regulation and supervision could mean: foreclosed homes, shuttered businesses, and lost jobs. According to the Federal Reserve Bank of Chicago, Michigan's unemployment rate was 14.9 percent in 2009, meaning one in seven workers were out of jobs. Nationwide, the consequences were immense: nearly 9 million jobs lost, 8 million homes foreclosed upon, and a $17 trillion loss in household wealth.