for banking regulation around the world. u. s. banks have increased their capital substantially since the financial crisis began, and the vast majority already have tier 1 common risk - based ratios greater than the basel iii 7 percent requirements. the new requirements, while big improvements, are not as high as i would have liked, and the agreement contains some provisions i would have omitted or simplified. in coming years we may well seek changes. indeed, i continue to be a strong advocate of establishing simpler, standardized risk - based capital requirements and am encouraged at the initial work being done on the topic of simplification in the basel committee. and we will certainly simplify the final capital rules here in the united states so as to respond to the concerns expressed by smaller banks. but opposing, or seeking delay in, basel iii would simply give an excuse to banks that do not meet basel iii standards to seek delay from their own governments. it would be ironic indeed if those who favor higher or simpler capital requirements were unintentionally to lend assistance to banks that want to avoid strengthening their capital positions. turning to specific policies to address too - big - to - fail, the first task is to implement fully the capital surcharge for systemically important institutions, the lcr, resolution plans, and other relevant proposed regulations. but, completion of this agenda, significant as it is, would leave more too - big - to - fail risk than i think is prudent. what more, then, should be done? as i have said before, proposals to impose across - the - board size caps or structural limitations on banks – whatever their merits and demerits – embody basic policy decisions that are properly the province of congress. 7 however, that does not mean there is no role for regulators. on the contrary, section 165 of the dodd - frank act gives the federal reserve the authority, and the obligation, to apply regulations of increasing stringency to large banking organizations in order to mitigate risks to financial stability. in any event, it is unlikely that the problems associated with too - big - tofail institutions can be efficiently ameliorated using a single regulatory tool. the explicit expectation in section 165 that there will be a variety of enhanced standards seems welladvised. we should be considering ways to use this authority in pursuit of three complementary ends : ( 1 ) ensuring the loss absorbency needed for a credible and effective resolution process, ( 2 ) augmenting the going -

would actually choose to bail out debt holders in the event of a failure. bis central bankers ’ speeches form, existing and planned liquidity requirements produced by the basel committee aim mostly to encourage maturity - matched books. while maturity mismatch by core intermediaries is a key financial stability risk in wholesale funding markets, it is not the only one. even if an intermediary ’ s book of securities financing transactions is perfectly matched, a reduction in its access to funding can force the firm to engage in asset fire sales or to abruptly withdraw credit from customers. the intermediary ’ s customers are likely to be highly leveraged and maturity transforming financial firms as well, and, therefore, may then have to engage in fire sales themselves. the direct and indirect contagion risks are high. thus, the long - term and short - term liquidity ratios might be refashioned so as to address directly the risks of large sft books. similarly, existing bank and broker - dealer risk - based capital rules do not reflect fully the financial stability risks associated with sfts. accordingly, higher, generally applicable capital charge applied to sfts might be a useful piece of a complementary set of macroprudential measures, though an indirect measure like a capital charge might have to be quite large to create adequate incentive to temper the use of short - term wholesale funding. by definition, both liquidity and capital requirements would be limited to banking entities already within the perimeter of prudential regulation. the obvious questions are whether these firms at present occupy enough of the wholesale funding markets that standards applicable only to them would be reasonably effective in addressing systemic risk and, even if that question is answered affirmatively, whether the imposition of such standards would soon lead to significant arbitrage through increased participation by those outside the regulatory circle. in part for these reasons, a second possibility that has received considerable attention is a universal minimum margining requirement applicable directly to sfts. the financial stability board has already issued a consultative paper, and received public comment, on the idea. under such a regime, all repo lenders, for example, could be required to take a minimum amount of over - collateralization as determined by regulators ( the amount varying with the nature of the securities collateral ), regardless of whether the repo lender or repo borrower were otherwise prudentially regulated. this kind of requirement could be an effective tool to limit procyclicality in securities financing and, thereby, to