on improved data standards should not be interpreted solely as a requirement to determine regulatory capital standards, but rather as a foundation for more advanced risk - management practices that would strengthen the value of the banking franchise. but while the new framework would, in our view, provide useful incentives for institutions to accelerate the improvement of risk management, we believe that in most areas of risk management institutions would continue to have the choice among which methods they employ. thus, from a safety and soundness regulatory perspective, for these large, complex financial organizations, regulators and market participants need the information provided by the advanced framework of basel ii. recent developments with basel ii the federal reserve considers the agencies'september 30 announcement relating to basel ii a good outcome and an example of successful interagency cooperation. as you may recall, in april of this 2 / 6 year the agencies announced jointly their reaction to initial results of a fourth quantitative impact study pertaining to basel ii, known as qis4. as the april statement indicated, we were concerned about results from qis4 that showed a wider dispersion and a larger overall drop in minimum regulatory capital requirements for the qis4 population of institutions than the agencies had initially expected. the initial qis4 results prompted the agencies to delay issuance of a notice of proposed rulemaking ( npr ) for basel ii in order to conduct further analysis of those results and their potential impact. the agencies'reaction to the initial qis4 results, deciding to take additional time to understand more fully the information provided by the qis4 institutions, is an indicator of how seriously we are taking basel ii implementation. during the summer, the u. s. agencies conducted additional analysis of the information reported in qis4. that analysis is for the most part complete. based on the new knowledge gained from the additional qis4 analysis, the u. s. agencies collectively decided to move ahead with an npr but adjust the plan for u. s. implementation of basel ii. adjustments to the plan include extending the timeline for implementation and augmenting the transitional floors, which should provide bankers and regulators with more experience with basel ii before it is fully implemented in the united states. in addition, the agencies stated specifically in our joint press release that after completing a final rule for basel ii, we intend to revisit that rule prior to the termination of the transitional floors. that is, we expect to perform additional in - depth analyses of the basel ii minimum capital calculations produced by institutions during the parallel

if evidence emerges of employee misconduct, error, failure of risk management or unexpectedly poor financial performance by the individual, their team or company. we are continuing to refine our approach. the bank has just completed a consultation on a requirement for variable remuneration to be clawed back after payment and will consult later in the year on new standards for bonus deferrals. these provisions will apply not only to employees who are judged culpable directly, but also to others who could reasonably have been expected to identify and manage risks or misconduct but did not take steps to do so, and senior executives who could reasonably be deemed responsible by establishing the culture and strategy of the organisation. where problems of performance or risk management are pervasive, bonuses should be adjusted for whole groups of employees. of course, no compensation package can fully internalise the impact of individual actions on systemic risks, including on trust in the system. 19 to do so, market participants need to become true stakeholders. that is, they must recognise that their actions do not merely affect their personal rewards, but also the legitimacy of the system in which they operate. more fundamentally, to think that compensation arrangements can ensure virtue is to miss the point entirely. integrity cannot be legislated, and it certainly cannot be bought. it must come from within. see carney ( 2013 ). bis central bankers ’ speeches fourth, building a sense of vocation and responsibility to build this sense of the systemic, business ultimately needs to be seen as a vocation, an activity with high ethical standards, which in turn conveys certain responsibilities. it can begin by asking the right questions. who does finance serve? itself? the real economy? society? and to whom is the financier responsible? herself? his business? their system? the answers start from recognising that financial capitalism is not an end in itself, but a means to promote investment, innovation, growth and prosperity. banking is fundamentally about intermediation – connecting borrowers and savers in the real economy. in the run - up to the crisis, banking became about banks not businesses ; transactions not relations ; counterparties not clients. new instruments originally designed to meet the credit and hedging needs of businesses quickly morphed into ways to amplify bets on financial outcomes. when bankers become detached from end - users, their only reward becomes money. purely financial compensation ignores the non - pecuniary rewards to employment, such as the satisfaction from helping