More recently, in some jurisdictions the use of leverage ratios based on period-end reporting of assets—as compared to period averages in the United States—has encouraged window-dressing behavior by some banks at quarter-end. So, while the reforms have mostly had the intended effect of encouraging safer institutions, authorities and financial institutions should also be mindful of potential unintended consequences. Conclusion To sum up, we have made considerable progress toward a more resilient and robust financial system. While we should do more to make the regulatory regime more efficient, transparent, and simple, there are outstanding issues that still require additional work—such as the crossborder resolution of large global banks. We should also focus more on incentives, which can help ensure that regulations are dynamic and work well, and that banks are incentivized to take action early to steer away from trouble. Finally, regulation and supervision are necessary but not sufficient—they must be supplemented by bank cultures that encourage ethical behavior, the early identification of problems, and a willingness to address those problems proactively. Thank you for your kind attention. I would be happy to take a few questions. 1  Won Chai, Gerard Dages, James Hennessy, Beverly Hirtle, Thomas Noone, Kevin Stiroh, Katherine Tilghman Hill, and Emily Yang assisted in preparing these remarks. 2 See Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report (January 2011). 3 For further discussion, see remarks by Kevin J. Stiroh, A Perspective on Supervisory Objectives and Trade-offs,  February 23, 2017.
William C Dudley: The importance of incentives in ensuring a resilient and robust financial system Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the US Chamber of Commerce, Washington DC, 26 March 2018. * * * It is a pleasure to have this opportunity to speak to you. In my remarks today, I will discuss financial regulation and the ways in which proper incentives help ensure resiliency in the financial system. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.1 We have come a long way since the global financial crisis in building a more resilient financial system—one that can better support the provision of financial services to American households and businesses such as those represented here, both in good times and in bad. But, there is still unfinished business. On the regulatory side, for example, there is more work to be done to ensure that a systemically important bank can be resolved effectively on a cross-border basis in the event of failure. Additionally, the efficiency, transparency, and simplicity of the regulatory system could be improved without weakening the core reforms to capital, liquidity, and resolution that have made the financial system much stronger. Most importantly, we need to recognize that an effective regulatory regime and comprehensive supervision are not sufficient. We also need to focus on the incentives facing banks and their employees.