This conference is at the heart of the present phase of the evolving debate and I would like to thank the Bank of Greece and the Hellenic Observatory at the London School of Economics and Political Science for inviting me to contribute to this discussion. The general theme of this conference highlights the cost of the financial crisis, the policies being implemented to manage and resolve it, and the plans for an exit strategy. The financial, economic and social costs are indeed staggering, and they are likely to rise. A few figures will underscore the magnitude of the costs incurred so far. With regard to financial costs, the total writedowns on the assets of global banks over the period 2007-2010 have been estimated by the IMF at USD 2.8 trillion of which about one-third, just under USD 1 trillion, have already occurred. 1 In the euro area, the writedowns of banks reported so far, until early May, had reached USD 179 billion, roughly 18% of the total losses incurred by banks globally to date. The value of net wealth has also declined substantially since the turmoil erupted. For example, the market value of equity in Europe had fallen by EUR 3.65 trillion, or 45%, from its previous peak in July 2007 until late May 2009. 2 Finally, with regard to the economic cost of the crisis, one simple but encompassing measure is the aggregate output lost due to the recession that was triggered by the financial turmoil.
And, in response to a terrorist attack or other significant national security event, is your bank proactively searching its payment activity to see if it has potentially relevant information? One question that I get asked from time to time is if law enforcement can share more information about the activity reported in SARs. I believe law enforcement is always looking for ways to enhance the effectiveness of its information sharing. I want to recognize FinCEN’s efforts to share more information via its public website and in its reports to Congress about the information it collects from the industry through SARs. The New York Fed also tries to do its part. It hosts three major conferences every year in which the FBI, FinCEN, local law enforcement, and financial firms discuss financial crime—especially terrorist financing, money laundering, and cyber-crime. We do our best to act as a liaison between banks and law enforcement officials. We’ll keep at it. Conclusion Stepping back, I’d encourage you to consider as well what your firm’s response to financial crime says about its purpose and culture. What does it say about the role of the financial services industry in society? And, to get personal for a moment, how does that response make you feel about where you work and how you make a living? From where I sit, gaps in AML and other payment system defenses make a terrible impression because of the terrible things funded through illegal payments.