William C Dudley: Principles for financial regulatory reform Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Princeton Club of New York, New York City, 7 April 2017. * * * It is a pleasure to have the opportunity to speak here today on the important topic of financial regulatory reform. As always, what I have to say reflects my views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.1 A robust financial system is central to our economic well-being. The financial crisis and the Great Recession wreaked havoc on millions of American households and businesses, and much of this damage was due to a flawed regulatory framework. In particular, many large banks and securities firms had inadequate capital and liquidity buffers, and the financial system had a number of important structural weaknesses that made it vulnerable to stress. In response, legislators and regulators made significant changes to strengthen our regulatory framework. Importantly, as we consider further changes, we must avoid throwing the baby out with the bathwater. As I see it, an effective regulatory regime for the financial system must do three things: Ensure that all financial institutions that are systemically important have enough capital and liquidity so that their risk of failure is very low, regardless of the economic environment.
It has served the UK well for two decades, and has led the way in many areas of innovation. But similar drivers to those behind the PSF mean it too now needs a thoroughgoing refresh to meet the next wave of challenge. Consultation on our vision recently concluded; and, although we are still processing the results of that exercise, it is already clear 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  that our proposals to boost access, resilience, interoperability and user functionality have received strong support from old and new market participants alike. So it seems likely that, in the next few years, the UK will have a new payments infrastructure for retail and wholesale payments alike. To have got this far so fast is a real achievement. But in truth the real work for the PSF has only just begun. The challenge now is to translate the high level aspirations in this document into something much more concrete. That means delivering a retail payments design that is technically feasible, secure, and aligned with the Bank of England’s settlement models. It also means identifying who will build, and pay for, the new system: no small challenge at a time when the industry faces many competing demands on its resources. Though the Bank of England has not been a formal member of the PSF, we have been an active observer of proceedings throughout the past year. And we will remain closely involved with the next stage of the Forum’s work too.