So regulators worldwide set about replacing the “straws and sticks”, to rebuild the system with “bricks”, so that it is better able to withstand the next financial stress. In keeping with the popular adage, there was a global consensus on “not letting a serious crisis go to waste”. 4. Indeed, much have been done by financial authorities around the world. The foundations of the global financial system have been strengthened, such as in the capital and liquidity standards that underpin the viability of our financial institutions. Global Systemically Important Financial Institutions (or G-SIFIs) and Financial Market Infrastructures (FMIs), as key pillars of the global financial system, have to meet higher regulatory standards as well as adopt new requirements on fail-safes through recovery and resolution plans. Coming back to my analogy, global regulators have gone beyond strengthening the “house” but also delved into the previously overlooked “garden” of OTC derivatives – and how this can be better landscaped around central infrastructure. In addition, market monitoring and surveillance tools have been augmented to spotlight on market-based finance (or shadow banking), allowing better visibility on hitherto darker corridors of the global finance house. 5. There are many more examples of regulatory reforms and initiatives. Now, after years of effort, the obvious questions will be whether we have done enough, will all the features and installations in the enhanced house of global finance come together in an effective and coherent manner, or have we overdone the repairs at a high cost to the occupants?

However, for those banks with large client clearing volumes, disallowing client initial margins to compensate for potential future exposure may inevitably create constraints on their leverage ratios. This can dis-incentivise the provision of such client clearing services. This may have created an unintended impact on the market’s incentives and overall ability to centrally clear, which will be inconsistent with the objectives of the central clearing. Therefore, in the next phase of our work on the reforms, sector regulators will have to work closely towards greater consistency and coherence with the inputs of all market participants. Balancing between domestic market concerns and international market access 13. As each jurisdiction embarks and complete rebuilding its part of the global house, it is also important to consider how domestic rules would operate and interact across borders and against the global standards. 2/3  BIS central bankers' speeches  14. The recent comparability determination between the CFTC and the European Commission on platform trading and margins for un-cleared derivatives serves as an excellent example of how authorities have worked together to reach a common agreement and approach, bridging the requirements of two major regulatory regimes. Asia-Pacific authorities are working closely with one another as well, and also with the CFTC and EC, to address cross-border issues. Japan’s FSA (Financial Services Agency) and Australia’s APRA (Australian Prudential Regulation Authority) had also announced their recognition of various jurisdictions’ margin requirements for un-cleared derivatives, including Singapore and Hong Kong. 15.