“Hard” infrastructure refers to the physical equipment, software and networks supporting those markets. See “Open Forum: Building real markets for the good of the people”, http://www.bankofengland.co.uk/ markets/Documents/openforum.pdf. 2  http://www.bankofengland.co.uk/publications/Pages/news/2016/071.aspx. 2  BIS central bankers’ speeches  independent CREST research project later in the day, which has reached very similar conclusions 3. Table 1 Key lessons for success from the crest project  All successful projects need a clear platform for change – and CREST had a burning one! The collapse of TAURUS on 11 March 1993, followed by the resignation of Peter Rawlings, the Chief Executive of the Stock Exchange, was front page news. The huge rancour, reputational damage and cost (estimated by the FT at £ all-in, in mid-1990s money) cast a pall over the UK financial system, already reeling from the failed attempts to defend  3  “From Paper to Automation – Streamlining UK Securities Settlement”, at http://www.globalservices.bt.com/ static/assets/pdf/products/financial_markets_settlenet/CREST-BISS-Industry-Report-final-for-publication.pdf. BIS central bankers’ speeches  3  sterling on “Black Wednesday” and the publication of the BCCI Report in 1992, and facing renewed competition from financial centres in continental Europe and elsewhere. Without TAURUS, the UK was left with what one leading fund manager gloomily described as a “Third World settlement system in a first-rank financial centre”. Equity settlement relied entirely on paper certificates, passing through an average of 25 pairs of hands for each trade, each time running the risk of getting lost, misfiled or stolen. Settlement occurred only once a fortnight, and on a fixed rather than a rolling timetable.

In addition to being unfair, it creates greater risks to financial stability by encouraging greater size and complexity. We have made considerable progress toward ending TBTF – raising capital and liquidity requirements for the largest, most systemic banks – but there is a ways to go. In particular, to paraphrase former New York Fed President Tim Geithner, while the single point of entry concept “beats no plan”, significant barriers to achieving a cross border resolution remain, and there are still insufficient incentives in place for firms to take corrective actions early on to prevent their failure in the first place. The third challenge for the Federal Reserve is to put financial stability on par with monetary policy. As our experience from 2007 to 2009 has demonstrated, monetary policy cannot work properly when there is financial instability. When financial instability occurs, it disturbs market functioning and can impair bank balance sheets in a way that disrupts their financial intermediation function, constraining the availability of credit for households and businesses. This, in turn, can lead to further reductions in aggregate demand that put additional stress on  2  BIS central bankers’ speeches  the weakened financial system. Financial stability cannot be subordinated to any other priority. The fourth challenge is to sustain and enhance the capabilities of the New York Fed. This starts most obviously in continuing to attract, develop and retain the best people.