WASHINGTON - As the institutions they oversee become increasingly complex, regulators will require more participation by bank management in the supervision process, Federal Reserve Bank of New York president William J. McDonough said Wednesday.
Speaking at the International Conference of Banking Supervisors in Basel, Switzerland, he said, "It is my firm conviction that to successfully meet the challenges of the 21st century, our very notion of supervision, broadly speaking, must evolve to include financial institutions themselves and the discipline applied by the marketplace."
Mr. McDonough said that boards ought to include directors with specific expertise in areas where their institutions' greatest risks lie. Effective management, he said, must have capable and experienced executives, a coherent strategy and business plan, and clear lines of responsibility and accountability.
He also said there is an urgent need for more disclosure of banks' financial information to enhance market discipline.