We must allow innovation and the adoption of new technologies – to harness their benefits while managing their risks. We must step up our efforts and cooperation to combat the growing threat of cyber risk. A common theme emerges when we look back as well as look forward. The choice is not between light regulation and hard regulation, or between less regulation and more regulation. What we must collectively seek is smart regulation – regulation that achieves resilience with efficiency, stability with growth, safety with innovation. We will then have a financial industry that is systemically sound and also serves the needs of the economy and society. It is a vision worth working for, together. Thank you. 1 Ollivaud & Turner, “The effect of the global financial crisis on OECD potential output”, OECD Journal of  Economic Studies, 2014. 2 8/9  BIS central bankers' speeches  2 See for instance, David Luttrell, Tyler Atkinson, and Harvey Rosenblum, “Assessing the costs and  consequences of the 2007–09 financial crisis and its aftermath”, Dallas Federal Reserve, September 2013; and US Government Accountability Office “Financial regulatory reform: financial crisis losses and potential impact of the Dodd-Frank Act”, January 2013. 3 FSB, “Report on implementation and effects of G20 reforms”, August 2016. 4 Thomson Reuters, “Cost of Compliance 2016” 5 Daniel Tarullo, “Departing Thoughts”, 4 April 2017. 6 William Dudley, “Principles for Financial Regulatory Reform”, 7 April 2017. 7 Christopher Giancarlo, “CFTC: A New Direction Forward”, 15 March 2017.
Small banks are trimming product lines and pulling back from certain customer segments. Emerging market and developing economies (EMDEs) have expressed concerns that global banks have been reducing their activities in these markets as they review their business models in light of the new regulatory environment. The FSB is keeping a close watch on this. We have rightly focused our regulatory efforts to minimise the risk of another financial crisis. But we must continually ensure that we do so without minimising economic growth and opportunity. Fine-tuning regulation We must be careful to avoid “pendulum swings” in regulation that could undermine the gains in financial stability that we have achieved, not to mention prolong and add to the uncertainties facing the financial industry. That regulations have imposed costs on the economy is in itself not sufficient reason to unwind them. 3/9  BIS central bankers' speeches  These costs have to be weighed against the benefits of a more stable financial system to support sustainable economic growth. De-regulation has its own costs. Having said that, some fine-tuning may be necessary to reduce the unintended effects of reforms while preserving their benefits. Regulatory policy must continually seek the fine line between discouraging excessive risktaking and encouraging innovation. We should not be afraid to adjust and fine-tune where necessary. As Dan Tarullo, former governor of the Federal Reserve Board, says with respect to the Dodd-Frank Act and other regulations in the US, “some recalibrations and reconsiderations will be warranted on the basis of experience."