comptroller brosnan will be discussing in detail the guidance issued by the federal reserve and the occ. i should also note that the new york state banking department recently released a report on banks ’ hedge fund activities that supports the observations and supervisory priorities set forth in the basle committee report. in addition, international supervisory bodies and supervisors from countries outside the u. s. are in the process of acting on many of the proposals discussed here today. actions regarding hedge funds by international groups and individual countries in february, iosco, the international organization of securities commissions, established a task force on hlis. i understand that iosco is focusing on securities firms ’ dealing with hedge funds and the ways in which risk management and market transparency can be improved, which complements the basle committee ’ s work concerning banks. because banks and securities firms are the primary counterparties of hlis, it is crucial that there be a coordinated supervisory response at the international level among securities and bank regulators. at their meeting last month, the group of seven ( g - 7 ) countries issued a statement endorsing both the basle committee and iosco efforts. the g - 7 intends to continue to review the topic of hlis, which will be of assistance as we urge countries to implement sound practices in this area. i would not want to characterize or opine upon the efforts of any one jurisdiction ; many countries ’ efforts, like ours, are underway only recently and need time to develop and take hold. there probably will be differences in the degree to which supervisors in different countries address the questions i have discussed today – if only because the intensity of hli activities varies among countries. but on the whole, i believe that supervisors in major countries will follow up on the recommendations issued by the basle committee. direct versus indirect methods of addressing hli safety and soundness many governments have considered or will consider the advantages and disadvantages of imposing direct regulation on the hli industry. the basle committee report discussed that issue and concluded that concentrating on the behavior of banks and other counterparties doing business with hlis would yield effective and more immediate results. a common element of many hlis is that they are structured in ways that minimize their exposure to supervisory oversight and costs. thus, many have chosen to organize themselves legally in jurisdictions that offer modest supervision and low taxes. am i pleased that so many hlis are organized legally in what many would characterize as tax havens? no. but i do not think

underwriting of government securities in the 1930s, when mr. takahashi was the minister of finance. this started as “ temporal ” but it soon became impossible to put a brake on the increase in the amount of underwriting and the associated expansion of currency issuance, which ultimately resulted in serious inflation. we need to reflect on this history. there are some counterarguments that, if underwriting creates such a problem, the bank could purchase government securities from the market instead. the bank currently purchases a large amount of government securities, but its purpose is to stably provide the markets with funds corresponding to increasing demand for banknotes, in association with economic growth. if the central bank ’ s purchases of government securities are considered to be conducted with the aim of facilitating government financing beyond its original purpose, this will cause the same problem as underwriting. iii. the bank of japan ’ s response lastly, let me explain the bank ’ s response following the earthquake. a guiding principle for a central bank ’ s actions after a major disaster such as we suffered is very clear. that is, to maintain the functioning of payment and settlement systems as well as ensure the stability of financial markets. in other words, to prevent financial shock from developing into economic instability. the initial task the bank worked on following the earthquake was to maintain the functioning of settlement and financial systems, which are the basis of people ’ s lives and economic activity. at the time of a crisis, the most important responsibility for a central bank is to firmly secure the financial infrastructures. specifically, the bank did its utmost to provide cash to meet the needs in the disaster areas through its branches and offices in sendai, fukushima, and morioka. in the week after the earthquake, the bank provided 310 billion yen in cash to the tohoku region, about three times more than in the same period last year. meanwhile, bis central bankers ’ speeches japan ’ s major payment and settlement systems, including the bank of japan financial network system, or boj - net, have maintained stable operations. needless to say, the bank ’ s actions alone could not secure the smooth operation of payment and settlement systems. such a level of operation became possible because many of the parties involved, including private financial institutions, have made thorough preparations for business continuity risks in normal times. despite devastating damage to their offices, financial institutions in the disaster areas have maintained or resumed business operations at teller windows through strenuous efforts, by utilizing temporary offices and also