. bis central bankers ’ speeches systemically important for that country, even if the parent foreign bank has already been designated a global systemically important bank ( g - sib ). 6 the idea informing the newly created concept of a d - sib is that an entity whose stress or failure could destabilize a domestic financial system might thereby indirectly destabilize the international financial system. thus, the d - sib category carries along with it higher loss - absorbency requirements than are generally applicable to domestic banks, although perhaps not as high as requirements for g - sibs. of course, our regulation for foreign banking organizations ( fbos ) does not entail d - sib designation or require higher than generally applicable loss absorbency. but i cite this feature of the d - sib framework that permits designation of the domestic operations of foreign g - sibs because it reflects rather clearly the principle that the specific characteristics of domestic markets may call for regulation of foreign banks in the host country, not just at a consolidated level. in short, the work of the basel committee over the years has not been directed at restraining host - country authorities from supervising and regulating foreign banking operations in their country. on the contrary, the committee has repeatedly asserted the complementary responsibilities of both home and host countries to oversee large, internationally active banking groups, in the interests of both national and international financial stability. and the committee has frequently returned to this set of issues in responding to developments that pose a threat to the safety and soundness of the international financial system. the shift in foreign bank activities unfortunately, neither the basel committee nor national regulators responded in a timely fashion to the magnitude of the expansion in scale and scope of the world ’ s largest banking organizations in the roughly 15 years before the financial crisis. as illustrated in figure 1, at the end of 1974, just before the basel committee was created, the assets of the world ’ s 10 largest banking organizations together equaled about 8 percent of global gdp. the three largest were all american – bankamerica, citicorp, and chase manhattan. but their combined assets were equal to less than 3 – 1 / 2 percent of world gdp and, as illustrated in figure 2, about 10 percent of the gdp of their home country, the united states. by 1988 the combined assets of the world ’ s 10 largest banking organizations as a proportion of world gdp had nearly doubled to about 15 percent, a ratio that held constant during the succeeding decade, at the

4 ). bis central bankers ’ speeches most senior levels of the agencies that actually supervise globally active banks, our interactions with our counterparts from other countries have become almost exclusively focused on developing international standards or reviewing compliance with existing ones. these discussions are usually conducted with numerous colleagues who are not themselves responsible for banking regulation in their own jurisdictions. as important as these efforts have been, and continue to be, following the crisis, there is a risk that by not having opportunities for senior officials of the various national agencies that have direct supervisory responsibility for banking organizations to meet and discuss shared challenges, we give short shrift to the collective interest of bank regulators in effective supervision of all globally active firms. proposals to include prudential requirements or, more precisely, to include limitations on prudential requirements in trade agreements would lead us farther away from the aforementioned goal of emphasizing shared financial stability interests, in favor of an approach to prudential matters informed principally by considerations of commercial advantage. conclusion the job of regulating and supervising large, globally active banking organizations is a tough one. issues of moral hazard, negative externalities, and asymmetric information are, if not pervasive, then at least significant and recurring. the job is made only harder by the fact that these firms cross borders in ways their regulators do not. but we cannot ignore this fact and pretend that we have global oversight. international standards for prudential regulation are not the same as global regulations, and consolidated supervision is not the same as comprehensive supervision. the jurisdictions represented on the basel committee not only have the right to regulate their financial markets – including large fbos participating in those markets – they have a responsibility to their home jurisdictions, and to the rest of the world, to do so. the most important contribution the united states can make to global financial stability is to ensure the stability of our own financial system. there must be some assurance beyond mere words from parent banks or home - country supervisors that a large fbo will remain strong or supported in periods of stress. after all, as we saw in the crisis, while a parent bank or home - country authorities may have offered those words with total good faith in calm times, they may be unable to carry through on them in more financially turbulent periods. none of this means that we need be at odds with one another. on the contrary, these very circumstances call not only for more tangible safeguards in host countries, but also for more genuine cooperation among supervisory authorities. indeed, as i hope will