sector has performed very well. insurers entered the pandemic with strong capital levels, and the industry has not seen any large defaults. insurance risk managers and regulators should be proud of this performance. the covid event has also affected financial markets. the fed continues to monitor these effects, including the impact on life insurers of sustained low interest rates. the long duration of some insurance products, paired with embedded policyholder options, can make it difficult to match cash flows and can create interest rate risk. additionally, some savings products can be difficult for insurers to market when only returns of near 0 percent can be profitably guaranteed. and the covid event has posed some challenges for supervisors. social distancing has changed how financial products are distributed, how we supervise financial institutions, and how we collaborate in the regulatory community. for example, though both the iais and fsb have worked intensively at a distance — there is an fsb meeting of one sort or another every day of every week — it has been over a year since the iais or fsb has met in person. 1 / 4 bis central bankers'speeches capital currently the board ’ s most significant project with respect to insurance and our role in supervision is the development of a capital rule for insurance depository institution holding companies, as required by the dodd - frank act. we have engaged in a thorough and deliberative process in developing an appropriate capital rule, which has included both an advance notice of proposed rulemaking and a more recent proposal that we invited comment on. this deliberative approach is working well. most of the comments we received on the proposal, which we ’ re calling the building block approach, or bba, were supportive of both our process and the overall regulatory framework we proposed. and we are currently reviewing these comments and intend to publish a final rule soon. as we near the completion of this journey, i ’ d like to recap why we chose to propose the building block approach, which adjusts and aggregates existing legal - entity capital requirements to produce an enterprise - wide capital requirement. the bba is meant to address one of our biggest challenges in supervising companies that engage in both banking and insurance operations, which is how different these businesses are. no single, uniform approach to capital regulation is appropriate for companies in both sectors. the banking capital framework would not appropriately assess the capitalization of insurers. it is primarily based on risk - weighted assets. this framework

in response to these changes, and that we offer insights and clear expectations to help banks manage associated challenges. broad innovation considerations community banks continue to play a vital role in supporting local communities. their ability to thrive in an increasingly digital landscape is critical to the economic well - being of those communities. through my regular engagement with community bank leaders, i do see innovation thriving. when banks can be agile in developing relationships with third - party providers to meet unique customer needs, they can find their own paths to innovation. for example, community banks approach the evolving payment needs of tech savvy customers from many different angles. their solutions include partnering with financial technology ( or fintech ) companies, developing peer - to - peer payment solutions with their core providers, and even hiring outside developers to create their own apps that will best serve customers ’ needs. while positive trends in community bank innovation are encouraging, i am also attuned to the challenges community banks face when seeking to innovate. i have heard from many community 1 / 4 bis central bankers'speeches bankers about the constraints they face in taking advantage of new technologies — both in terms of the resources and the expertise required to adopt innovative technologies in a responsible manner. the cost of conducting due diligence on prospective partners can be high for community banks already facing capacity constraints. seeking a partnership with a newly established fintech company may introduce additional complications. for example, a less experienced partner may be able to offer a product that fits a community bank ’ s needs but may not understand the bank ’ s regulatory obligations or have fully developed operational or compliance frameworks. gaps in the ability to demonstrate or guarantee compliance can introduce risk that a community bank will need to fully understand and ultimately to manage. in december 2020, i spoke about several initiatives being pursued by the federal reserve targeted at promoting access to innovation for community banks and overcoming related challenges. today i am happy to provide updates and announcements about those initiatives. i hope that each provides additional clarity and serves as a valuable resource to community banks as they pursue their own innovation strategies. community bank / fintech partnership paper the first initiative is the publication of a paper highlighting some of the promising ways that community banks are partnering with fintech companies. it lays out some important issues that banks must consider to maximize the effectiveness of the partnership. this paper is the product of an extensive outreach effort with community banks, fintechs, and industry stakeholders. it involved discussions focused on the strategic and tactical decisions that support effective partnerships in