jurisdictions to ensure that national authorities can exert all necessary powers. recovery and resolution plans must be developed and, finally, financial institutions may need to change their structure and operations to ensure their resolvability. looking ahead, the fsb framework will be extended from global to other sifis. in cannes, the g20 called on the fsb to deliver, by april 2012, possible ways to broaden the framework to include banks that are systemically important at national rather than international level. furthermore, there are concrete plans to include, in the medium term, other financial market players such as insurers, financial market infrastructures and non - bank financial institutions. illuminating the shadow banking system the next challenge i would like to address is the need to look beyond the banking system and to illuminate what is known as the shadow banking system. we should bear in mind that the shadow banking system is not a new, autonomous part of the financial system. most entities and activities ascribed to it are already subject to some kind of monitoring and regulation. yet the crisis has made it painfully clear that the shadow banking system can become a source of systemic risks and endanger the entire financial system. to reduce these risks, gaps and loopholes in the existing regulatory framework need to be closed. undoubtedly, we have to act fast, as the stricter rules imposed on banks via basel iii and the rules for sifis see financial stability board, key attributes of effective resolution regimes for financial institutions, october 2011. bis central bankers ’ speeches clearly pose the risk of activities being shifted to less regulated areas. we must not allow risky behaviour previously taken on by banks to be pushed into the dark. much work has already been done in this respect. in cannes, the g20 endorsed a comprehensive set of recommendations put forward by the fsb. these recommendations call for both an effective monitoring of the shadow banking system and, where necessary, regulatory measures. 2 to improve monitoring, the fsb has set out high - level principles for the relevant authorities and a stylised monitoring process. the fsb will conduct annual monitoring exercises to assess global trends and risks in the future. the results of these global assessments will be reported to the g20. getting back again to national authorities : their main task is now to implement the fsb ’ s recommendations for effective monitoring in a timely and internationally consistent manner. in order to gain a comprehensive picture of the shadow banking system and the risks it poses, authorities must put in

place an appropriate system - wide oversight framework. ensuring that national authorities have sufficient powers to collect all necessary data at an adequate frequency is of utmost importance in this context. yet improving data availability will require substantial efforts. for instance, in order to obtain a picture of the shadow banking system ’ s scale, national authorities must be able to draw on high quality, consistent data on financial sectors ’ assets and liabilities – this is known as flow of funds data. unfortunately, in many countries a number of limitations in the flow of funds statistics have come to light. aggregating or comparing these data across jurisdictions has proven to be especially difficult. furthermore, better monitoring of the shadow banking system will not be enough ; better regulation will be needed too. this could be achieved either by regulating banks ’ interactions with the shadow banking system or by regulating activities and participants in the shadow banking system themselves. the fsb has already initiated work to assess the potential case for regulatory actions. it has set out general principles for designing and implementing regulatory measures in order to strengthen international consistency and to reduce opportunities for regulatory arbitrage. over the coming months, the fsb, together with competent standard setting bodies, will issue a series of studies and recommendations for regulatory actions which will deal with identified gaps and with inconsistencies in national regulatory approaches. these recommendations will then, once again, have to be implemented at regional and national level, calling for further substantial changes in laws and regulations. we should keep in mind that, when designing new monitoring and regulatory measures, our actions must be forward - looking and we must be mindful of unintended consequences. given the fluid, evolutionary nature of the shadow banking system, we should not focus solely on risks which have come to light during the current crisis. we have to be sufficiently flexible to capture future developments as well. in this respect, exchanging information across jurisdictions on a regular basis is crucial. implementing basel iii i would like to finish with a few words about the new capital and liquidity standards for the banking sector, commonly known as basel iii. the new rules represent one of the key pillars of financial sector reform as they will significantly strengthen banks ’ resilience by raising quality, quantity and international consistency of bank capital and introducing global liquidity see financial stability board, shadow banking : strengthening oversight and regulation, recommendations of the financial stability board, october 2011. bis central bankers ’ speeches standards. last year, at their summit in seoul, the g20 committed themselves to implementing the