2 2 See Alternative Reference Rates Committee, Second Report, March 2018 3 3 See remarks by William C. Dudley, Restoring Confidence in Reference Rates, October 2, 2014 4 4 See remarks by William C. Dudley, The Importance of Incentives in Ensuring a Resilient and Robust Financial  System, March 26, 2018 5 5 See, for example: 6 William C. Dudley, Enhancing Financial Stability by Improving Culture in the Financial Services Industry, October  20, 2014 7 William C. Dudley, Opening Remarks at Reforming Culture and Behavior in the Financial Services Industry:  Expanding the Dialogue, October 20, 2016 8 William C. Dudley, Remarks at the Culture Imperative – An Interbank Symposium, January 11, 2017 9 William C. Dudley, Reforming Culture for the Long Term, March 21, 2017 10 Michael Held, Reforming Culture and Conduct in the Financial Services Industry: How Can Lawyers Help?,  March 8, 2017 11 Kevin J. Stiroh, Misconduct Risk, Culture and Supervision, December 7, 2017 12 6 See remarks by William C. Dudley, Lessons from the Financial Crisis, November 6, 2017 13 7 See Alternative Reference Rates Committee, Second Report, March 2018 14 8 The U.K. Wheatley Review led to changes in many areas of LIBOR, including statutory regulation of LIBOR,  selection of a new administrator, new governance and oversight regimes, and a code of conduct for submitters.
Financial crises typically result when we fail to identify vulnerabilities, and then unexpected triggers turn those vulnerabilities into points of weakness that can lead to catastrophic failure. The discontinuation of LIBOR, however, is different. We can see it coming, and we know the impact of a disorderly transition would be huge. Therefore, a half-hearted effort or a failure to act would be inexcusable, especially after all we have learned from the experience of the financial crisis. Moving this core piece of the global financial system to a firm and durable foundation is essential and worth the cost. This task is admittedly hard, but I am optimistic given our past successes. We have demonstrated that effective collective action can provide solutions to longstanding structural vulnerabilities in the financial system. A key lesson from the crisis is that structural vulnerabilities must be addressed continually. If they are ignored, larger problems eventually will result. For example, through collective action over the past decade, we have successfully addressed structural weaknesses in the tri-party repo market, the over-the-counter derivatives market, and money market mutual funds. Each of these challenges required a tailored solution that relied on different tools—including a diverse mix of market, regulatory and supervisory measures—to get the job done. Everything isn’t a nail, and the best tool is not always a hammer. You have to identify the problem that needs fixing and select the right tool for the job. This is likely to require both official sector engagement and private sector initiative.