role of the federal reserve system, and their help in publicizing and building participation for our annual economic essay contest. and each april we are honored – and honestly, get a huge kick out of – hosting teams from across minnesota in the final rounds of the mcee ’ s two state high school quiz - bowl - like championships, the economics challenge and the personal finance decathlon. so, on behalf of the federal reserve bank of minneapolis, let me thank all of those who teach economics and personal finance as well as all those who support, prepare and train them, with a special nod to our long - term partner, the minnesota council on economic education, on the occasion of its 50th anniversary celebration this october. let ’ s keep working together to prepare students to be thoughtful individuals, good citizens, intelligent workers and, sometimes, teachers and economists. walstad, william b., ken rebeck and rich macdonald. 2010. “ the effects of financial education on the financial knowledge of high school students. ” journal of consumer affairs 44 ( 2 ). bis central bankers ’ speeches

cannot simply be done by observing market indicators. for example, we cannot easily use the public ratings of holding company debt. the ratings, after all, are achieved given the existence of the safety net. the ratings are biased, therefore, from the perspective of achieving our stated goal - - to impose prudential limits on banks as if there were no net. in addition, i am sure that there would be disagreement between market participants and regulators over what should be acceptable debt ratings. the solution may be for the regulators to use the analytical tools developed by the market participants themselves for risk and performance assessment. regulators already have begun to move in this direction. for example, beginning in january 1998, qualifying large multinational banks will be able to use their internal value - at - risk models to help set capital requirements for the market risk inherent in their trading activities. the federal reserve is also conducting a pilot test of the pre - commitment approach to capital for market risk. in this approach, banks can choose their own capital allocations, but would be sanctioned heavily if cumulative trading losses during a quarter were to exceed their chosen capital allocations. these new and innovative methods for treating the age - old problem of capital adequacy are likely to be followed by an unending, evolutionary flow of improvements in the prudential supervisory process. as the industry makes technological advances in risk measurement, these advances will become imbedded in the supervisory process. for example, the banking agencies have announced programs to place an increased emphasis on banks ’ internal risk measurement and management processes within the assessment of overall management quality - - that is, how well a bank employs modern technology to manage risk will be reflected in the “ m ” portion of the bank ’ s camel rating. in a similar vein, now that var models are being used to assess regulatory capital for market risk, it is easy to envision that, down the road, banks ’ internal credit risk models and associated internal capital allocations will also be used to help set regulatory capital requirements. regulation and supervision, like industry practices themselves, are continually evolving processes. as supervisors, our goal must be to stay abreast of best practices, incorporate these practices into our own procedures where appropriate, and do so in a way that allows banks to remain sufficiently flexible and competitive. in conducting prudential regulation we should always remember that the optimal number of bank failures is not zero. indeed, “ market - based ” performance means that some institutions, either through poor management choices,