banks. 6 in preparation for the pittsburgh summit, as well as for the previous g - 20 summits in london and washington, the federal reserve has also collaborated with other u. s. financial regulatory agencies in considering the financial regulatory issues on the agendas for these meetings. challenges for international financial cooperation the testimony that my colleagues and i have offered this afternoon reflects the breadth and depth of the tasks associated with improved regulation and supervision of financial markets, activities, and firms. an ambitious agenda has been developed through the interactions of the g - 20, the fsb, and international standard - setting bodies, and much work toward completing that agenda is already under way. at the same time, there will inevitably be challenges as we all intensify and reorient the work of these groups. i will now discuss four of those challenges. first, for all the virtues of the consensus - based approach involving the relevant national authorities, some subjects will simply be very difficult to handle fully in this fashion. crossborder resolution may prove to be one such issue. although there is undoubtedly potential for achieving improvement in the current situation through the international processes i have described, the complexities involved because of the existence of differing national bankruptcy and bank resolution laws may limit what can be achieved. second, there will likely be a period of working out the relationships among the various international bodies, particularly in light of the increased role of the fsb. we will need to determine how extensively the fsb and its newly constituted committees should themselves develop standards, particularly where an existing international standards - setting body has the expertise and mandate to address the topic. similarly, while simultaneous consideration of the same issue in multiple international bodies can sometimes be a useful way to develop alternative proposals, there may also be potential for initiatives that are at odds with one another. third, the significant expansion in membership of many of the more important of these bodies may require some innovation in organizational approaches in order to maintain the combination of flexibility and effectiveness that the fsb and some of the other groups have, at their best, possessed in the past. the substitution of the g - 20 for the g - 8 at the level of heads of government is the most visible manifestation of the salutary trend toward involving a number of emerging market economies in key international financial regulatory arrangements. as i mentioned earlier, the fsb and the basel committee have recently expanded their membership to the entire g - 20. important as this expansion is for the goal of global financial stability, the

greater number of participants does have an impact upon the operation of those groups, and we will need to adapt accordingly. i hasten to add that this is not at all a comment on the capacities of the new members. on the contrary, i have been impressed with the quality of the participation from the new emerging market members. finally, the financial crisis has understandably concentrated the attention and energies of many of these international regulatory groups on the new standards that will be necessary to the fsb prepared three documents that were presented to g - 20 leaders at the summit : " fsb principles for sound compensation practices, " " improving financial regulation, " and " overview of progress in implementing the london summit recommendations for strengthening financial stability. " protect financial stability in the future. combined with the enlarged memberships of these groups, however, this focus on negotiating standards may unintentionally displace some of the traditional attention to fostering cooperative supervisory practices by the national regulators who participate in these international bodies. it is important that, even as we represent our national interests in these bodies, we also promote the shared interests we have in effective financial supervision. conclusion participating in international regulatory groups has helped the federal reserve and other u. s. agencies begin to shape an effective global regulatory response to the financial crisis. we look forward to continuing our collaboration in pursuit of effective, efficient financial regulation. thank you for inviting me to present the board's views on this very important subject. i look forward to continuing dialogue with the subcommittee on these issues. i would be pleased to answer any questions you may have.