reducing information asymmetries where practical, and by reducing systemic risk. but to further our goal of improving efficiency, it is also important that our regulatory framework be effective. what makes a framework effective? i would highlight three factors. first, our regulations should provide incentives that encourage markets to reinforce and reward the right behaviour. these incentives should be sufficient to motivate market participants without the constant intervention of regulators or the imposition of detailed rules that dictate to firms not just what must be done, but how it must be done. the right incentives can help regulators achieve their goals without imposing process costs that outweigh the benefits of the regulation. second, to achieve an effective regulatory framework, we need to take international developments into account. countries can gain a comparative advantage by developing a superior regulatory framework. for our financial markets and institutions to be internationally competitive, our regulatory framework needs to be — and needs to be seen to be — as good as, if not better, than that of other countries. but at the same time, canadian rules and their application should be tailored to our domestic needs and should reflect domestic realities. this tension between domestic and international considerations leads to some challenges for canadian policy - makers. a case in point is the sarbanes - oxley law. canadian policy - makers embrace the general principles behind this legislation in terms of promoting good governance and financial practices. but the extreme level of detail in the application of its rules, as well as its focus on process instead of outcomes, creates costs for many of our firms that likely exceed the benefits to the system. large canadian corporations that want access to u. s. capital markets have no choice — they must follow both the spirit and the letter of sarbanes - oxley. but canadian regulators are right to take a made - in - canada approach that accommodates the needs of canadian issuers and investors. let me be clear. the goal is not to mimic u. s. regulations, despite that market's size and proximity. the principles behind our regulations must be as good as, or better than, those of other countries. but we must apply those principles in a way that develops a comparative advantage for our firms and our markets. finally, and very importantly, an effective regulatory framework is one where the rules are enforced and are perceived to be enforced. even the most coherent and efficient regulatory framework won't be effective unless it is followed. participants must be appropriately monitored. and when the rules are broken

years, and their balance sheets are strong. the reports on first - quarter earnings have been quite positive, and available measures of credit quality, such as credit ratings and loan defaults, show few signs of stress. financing costs have moved up since last fall, but the federal reserve ’ s most recent survey of bank lending practices, which was conducted in april, indicates that domestic banks are noticing increases in requests for business loans. they also indicated an increased willingness to supply business loans in an environment of brisk competition from other lenders, a liquid secondary market for business loans, and an increased tolerance for risk. in that regard, research conducted by federal reserve economists notes that more banks are offering loans to businesses in markets where the banks do not have branch offices ; the research suggests that new technology has spurred competition for some types of small business lending in recent years. more broadly, businesses currently have access to plentiful debt and equity financing from a variety of sources in addition to banks. the challenge that community development practitioners face in working with businesses looking for new investment opportunities is to demonstrate through careful analysis that promising inner - city neighborhoods can be good investments. that the current overall conditions for business investment are positive is thus good news for the work of social compact and its partners. the importance of data to investment decisions community development has come a long way since i first began following it as a young congressional staffer thirty - five years ago. whereas government programs once funded the bulk of inner - city development, public - private partnerships now dominate. in many places, community - based organizations have been able to " jump start " markets by facilitating private investment. the focus of neighborhood revitalization has shifted increasingly toward market - based approaches. in that regard, organizations that seek to promote neighborhood revitalization must focus on what makes their projects competitive. social compact is perhaps best known for its focus on one important input into the investment process - - information. timely and accurate information is what project planners need to bring entrepreneurs, investors, and lenders together to objectively assess the proposed undertaking. having been a banker, i know very well how much more efficient the process can be when decisionmakers are presented with a clear assessment of the projected returns and a balanced analysis of risk. another related feature of market - based investment decisions is the importance of built - in measures of accountability. hard data on results are important in establishing the credibility of projects. with data, and results, such investments can also serve as catalysts for additional private