In many areas, we have identified the necessary tasks only in general terms. Progress in figuring out the details and the implementation path and how to coordinate the efforts on a cross-border basis is more limited. I would particularly highlight the cross-border coordination problem – regulatory oversight is national, but many financial firms and infrastructures operate on a global basis. Effective reform requires mutually consistent global standards – and while international cooperation to date has been good on many fronts, progress is uneven, and the devil is in the details of implementation. We need all national authorities to resist the temptation to favor domestic financial interests over the interest of achieving a true level playing field globally. And we should resist the urge to favor locally controlled infrastructures where global solutions would better advance the collective financial stability interest. Instead we should work to ensure fair access to global infrastructures. Also, it is important that national regulators have access to data and a role in the regulatory oversight of such global infrastructures when that is relevant to their own national financial stability agendas. In the United States, I think we have made more progress in bolstering the resilience of our banking institutions than we have on the other tracks. There are two elements to this. The first element is the increase in capital that has already occurred. The major U.S. banking institutions are much better capitalized today than they were in the fall of 2008.
Institutions are better able to aggregate and assess their risk exposures within short time periods and stress testing means that there is a better understanding of how these exposures might perform in adverse environments. But our task remains unfinished. While progress on reforming compensation practices is welcome, I recognize that there is still much to be done before we can truly say that incentives are lined up in a way that fully supports financial stability objectives. We have work to do on the information front too. Consider the issue of international regulatory access to data. Currently U.S. bank regulators do not have access to the consolidated global balance-sheet information of the foreign banks that operate in the United States (or vice versa for that matter). Our examiners see data associated with the foreign firms’ U.S. operations, but not how that fits in with their operations abroad. Without certain specific types of consolidated global information, it is difficult to place the U.S. operations of a foreign firm in their global context, and make informed judgments about the adequacy of such firms’ capital and liquidity buffers. For example, liquidity is often managed on a global basis, and key business lines are frequently managed globally, even if they reside in multiple legal entities located in different jurisdictions. Making progress in establishing protocols that would enable bank regulators to share more relevant confidential supervisory information on a cross-border basis would be a significant advancement.