. however, i think this approach has broader relevance for how regulation can more effectively support and promote innovation, including internationally. the implications of our regulatory approach go beyond just the banking system. a reflexive " no " from regulators can encourage activity to migrate out of the banking system. the result could be decreased transparency, lower regulatory standards, and increased risks to financial stability. we tend to think that the " stakes " are confined to a particular technology or innovation, but this is a misleading approach. instead, we should adopt a broader approach that considers financial system stability. to implement 1 / 8 bis - central bankers'speeches a successful " same activity, same risk, same regulation " approach requires either broadbased legislation to coordinate these standards or an effective interagency approach that incorporates regulators beyond traditional banking regulators. benefits of innovation in my experience, regulators love innovation - in the abstract. the idea of innovation is an alluring one. among other things, innovation can help develop a faster and more efficient banking and payments system, it can lower the cost and expand the availability of products and services to consumers and businesses, it can improve the speed and reduce counterparty risk of securities transactions, and it can promote market competition. and we see evidence all around in the banking system where innovation has had transformative effects : we have automated teller machines ( atms ) that allow ready access to cash and basic account services, we have the ability to make electronic payments at merchants both in - person and online, and almost every bank customer can access their bank account or transfer money to a friend by using only their mobile phone. when innovation becomes commonplace, and with the passage of time, we lose sight of the long and sometimes tortured road these innovators traveled to introduce and embed them into customer expectations for banking services. i see a common theme between innovation as an abstract idea and " established " innovation that has become the new norm in the financial landscape - namely, that neither of these versions force us to confront the risks of the unknown. the abstract version does not force us to confront its practical implications, including : how does it work? what benefits could it bring? what risks does it present, and how will those risks be managed? similarly, by the point at which the innovation becomes widely adopted and accepted, hopefully we have done the difficult work. we have come to understand the challenges it presents and have accepted the tradeoffs between the benefits, and the associated risks and costs, of allowing the new technology

investors began to view investing in emerging markets as not much more risky than investing in their own more familiar industrial country markets. capital flowed freely to finance projects in emerging market countries with lenders demanding only slightly higher interest rates than they would have required to lend at home. but the downside of interdependence is that when something goes wrong, the impact also spreads quickly from one country to another, through trade channels, prices and asset markets. asian countries in trouble quickly cut their imports from each other and from the industrial world. the reduced asian demand for food, oil and raw materials was felt by farmers in the us and canada, australia and new zealand ; by producers of oil in mexico and venezuela, nigeria and russia and the middle east ; by copper producers in chile and exporters of industrial raw materials in africa and elsewhere. companies in rochester and buffalo found their sales falling. as the contagion spread, investments in many emerging market countries began to look less promising. investors became generally more cautious and began looking for safe places to put their money - like buying us government bonds - even at low rates of return. as they saw us companies affected, they became less eager to finance them as well. we ’ ve learned a lot in the last few months about the power of contagious loss of confidence in an interlinked world. the meltdown in russia was the clearest case. russia is not an important economic and trading power in itself. losses to major money center banks, here and in europe, though magnified by unexpected interrelations with hedge funds and other operations, were not in themselves destabilizing. but what apparently mattered was the surprise, both of the suddenness and unpleasantness of the russian default and of the fact that the western “ powers ” were so powerless. no one thought the us and its allies would take the political risk of letting russia fall apart. in the end, there was nothing they could do to stop it. the russian collapse led investors to pull back just about everywhere. some who had borrowed to invest in russia had to sell assets in other markets to cover losses. others simply said to themselves, “ if it can happen in russia, it can happen anywhere ; i had better get my money to a safe place. ” the result was plummeting markets in latin america, south africa, asia and elsewhere, more difficulties for the countries struggling to recover. it is now clear that the asian crisis that started in thailand in the summer