Integrating across these businesses to develop a firm-wide, portfolio risk perspective is an important challenge, one that has many guises within a large, complex firm. For example, managing the complex pattern of risk exposures that derive from membership in multiple payment and security settlement systems, each of which has loss-sharing arrangements that generate contingent exposures among and between their members, is just one small facet of the broader challenge facing such firms today. The difficulty of managing the conflicts in dealings with customers is also significantly enhanced for these large, diversified institutions, given the multiple roles that they play. More generally, it is increasingly challenging for many large, diverse financial institutions to get an accurate picture of their aggregate exposure to individual creditors when their business contacts can come through so many different sources within the firm. This difficulty is compounded when different types of exposures that are functionally equivalent are managed in different ways in different parts of the firm. Different units within a single firm frequently trade with and transfer risk to one another, adding a further layer of difficulty in assessing the aggregate exposure to a given creditor or counterparty. The increased scale and scope of operations of the institutions that are the core of our system and the rapid growth in complex transactions place an extraordinary burden on the internal control, compliance, and risk management infrastructure. This is the “arms race” in finance.
However, much as New York City took time to recover, so too will it take time for Puerto Rico to recover from its crisis of the last decade. The future of Puerto Rico is yet to be determined. However, the experience of New York City suggests that a turnaround is possible even when underlying conditions appear dire. New York City is a compelling example of what is possible when you leverage your citizens’ ingenuity and capacity for reinvention. It shows what can be achieved with the appropriate discipline and effort. Thank you for your kind attention. 1 Jason Bram, Andrew Haughwout, Joseph Tracy and Luis Uranga assisted in preparing these remarks. 2 Raj Chetty, Nathaniel Hendren, Patrick Kline and Emmanuel Saez. “Where is the Land of Opportunity? The  Geography of Intergenerational Mobility in the United States.” Quarterly Journal of Economics, Vol. 129, No. 4, 2014. 5/5  BIS central bankers' speeches