in policy making is a key part of the democratic process, as well as being helpful in fostering efficient decision making in the private sector. becoming more transparent has been a goal of the central bank in recent years, keeping in mind that we must balance the need to be open and accountable with the need to maintain an effective process of decision making by the federal open market committee. transparency requires that we periodically review our procedures, as we did in 1999, to ensure that they appropriately balance these considerations. i do not know what future changes, if any, might be called for in how we communicate, but i am confident that the federal reserve will continue to look for ways to communicate clearly our policies and our supporting rationales. while macroeconomic conditions are of overriding importance, the role of the federal reserve is broader than monetary policy. financial stability is an essential precondition for maintaining a strong economy, and the federal reserve has important supervisory and regulatory responsibilities for our nation's banking system. the federal reserve, and other regulators, must continue to foster a competitive environment that will benefit the users of financial services, while also promoting safety and soundness. i believe that we must achieve these goals with a minimum of regulatory burden and without leaving the impression that any institution is too big to fail. to minimize regulatory burden and achieve our other objectives, we should encourage what to my mind are the best regulators, namely market discipline and management accountability. of late, our challenge has been to meet these goals as we implement the financial modernization law. in my opinion, congress wisely removed several antiquated barriers to a modern financial structure in the united states, and now we need to design regulatory and supervisory policies that reflect the will of congress and deal effectively with a changing financial services industry. technology and deregulation, forces for change that i have just mentioned, have encouraged consolidation in the financial sector. with central bank and treasury officials from twelve other major industrial economies, i have reviewed the likely effect of the global trend toward consolidation and its implication for central banks and regulators. because financial systems will continue to consolidate, as the forces that motivate that evolution are unabated, the regulatory community needs to monitor developments closely. but our study also found that existing policies appear adequate to allow regulators to maintain safe and sound financial industries now and in the intermediate term and for monetary policy to work through many of the same mechanisms as in the past. more than the structure of the financial services industry has changed of late.

periods. more clarity regarding the legal ownership of surpluses is needed, so that the sponsor that owns the risks also owns the benefits from taking those risks. in addition, we should examine the rules governing the tax treatment of contributions when plans are in actuarial surplus. second, we should accept the fact that some defined - benefit plans run by creditworthy sponsors will have substantial solvency deficits from time to time, and make these easier to handle. in this area, i would note that there has been real progress in some jurisdictions, since sponsors are now allowed greater use of letters of credit to cover temporary solvency deficits. third, we should ensure that our accounting rules – and most importantly, how we make use of these rules – are appropriate for defined - benefit plans. what we are interested in is not today's values, but expected values far into the future. fourth, we should strengthen incentives to share group - longevity risk between plan sponsors and members. fifth, the costs of plan improvements should be made clear to shareholders and workers at the time they are promised. finally, we could examine mechanisms that facilitate the formation of multi - employer plans so that risks can be pooled across a number of plan sponsors. after all, municipalities in ontario pooled together to form omers, and we should examine ways to construct similar pension arrangements for private sector employers. as i said, an effective defined - benefit pension system is a tremendous asset for individuals, for employers, and for our society as a whole. putting these plans on a sustainable footing involves strengthening the legal, regulatory, accounting, actuarial, and economic frameworks that determine how these plans operate. if we get it right, these changes would give sponsors the appropriate degree of flexibility needed to manage risk effectively. and, ultimately, canada can have a better - managed pension system that is good for members, good for employers, good for the economy, and good for canadian society.