There is a residual question about how much of that activity should go via exchanges or via other trading platforms. That’s something which I doubt will be completely resolved this year. I think it will remain part of the G20 and the FSB agenda going into next year. But it is a very important part. Another key element of changing capital markets is much greater transparency around, and much reduced reliance on, credit rating agency ratings. One of the problems in global capital markets has been that too many investors and banks have given up on reaching their own view on borrowers and on instruments, but have effectively subordinated their own judgment to the judgment of credit rating agencies. The FSB is sponsoring and leading work in order to reduce the extent to which credit rating agency ratings are inscribed into, or embedded in the regulatory fabric of our capital markets. 6. Incentives  The sixth thing is incentives. The issue that gets most attention here is compensation or pay, on which the FSB issued a code. The essence of that is that more pay should be deferred. I would add that perhaps part of deferred compensation should be in the form of a debt contract, so that the managers and workers in large firms eventually become creditors of the firm and so they themselves have the same risks as other debt holders. That works only if we can develop resolution regimes leaving debt holders taking risks in our largest firms.
But no one acted to make the financial system more resilient to those vulnerabilities. This was not just an intellectual failure, as is widely discussed and recognized now. It was also partly a failure of machinery. The FSB has been encouraging new machinery to survey and head off risks. The FSB itself has created a vulnerabilities group. It is probably the least prominent part of the Financial Stability Board’s effort to date, but it could have enduring significance over the years and decades. It is paralleled in various regions. Europe is setting up a Systemic Risk Board, which will be supported by the ECB but involve all of the EU. The USA is setting up a Systemic Oversight Council; and in the UK, the government is establishing a macroprudential Financial Policy Committee in the Bank of England. Maybe something is needed in Asia, too. Martin [Wolf] talked about complacency; for the machinery I have described to make any difference, people will have to stick to it year in and year out. 2. Supervision of individual firms  One of the things that should not be neglected is that the severity of this crisis was as great as it was partly because a large handful of individual massive firms failed due to poor management and weak balance sheets. Part of the solution lies, therefore, in much better microprudential supervision and regulation of individual firms. The Basel Committee has had Core Principles for Effective Banking Supervision for some considerable time now.