including those that are deemed systemically important. while the objective is to end too big to fail, i have argued that the reforms as currently envisioned are unlikely to do so. the expansive discretionary power given to the fdic under title ii could make it vulnerable to political pressure regarding the bailout of individual institutions or creditors. keep in mind that title ii resolution is triggered only when there are concerns about systemic risks. the discretionary aspect of title ii could cause creditors to perceive that their payoffs would be determined through a regulatory resolution process, in which political pressure can be brought to bear, independent of the rule of law. some have suggested that there be a tax on the financial industry to provide support for the resolution scheme proposed by the fdic. while this may get the taxpayer off the hook, it does not solve the too - big - to - fail problem. on a number of occasions, i have advocated a new bankruptcy mechanism suitable for all financial firms, whether systemically important or not, to alleviate most of the potential problems caused by the discretionary and targeted nature of title ii. 1 a bankruptcy process tailored for financial institutions would restore the incentives of market participants and creditors, in particular, to monitor risk taking by these institutions. i find this a more appealing and effective path to ending too big to fail. conclusion to conclude, simplicity and transparency are important principles to enhance prudential standards in financial regulations and financial stability. simple, transparent regulatory mechanisms make it easier for market participants to predict how regulators are likely to behave. this, in turn, makes it easier for regulators to credibly commit to implementing the regulations in a consistent manner, thereby increasing the effectiveness of the regulatory regime. an increased role for simple regulatory mechanisms that are harder to evade – and even better, mechanisms that utilize market forces to discipline firm behavior – is superior to an ever - expanding list of complex rules that seeks to cover every possible outcome. in many circumstances, simpler and more transparent regulatory approaches, that also enhance the effectiveness of market discipline, can better achieve financial stability while maintaining a dynamic financial system that meets the needs of our economy. see charles plosser, “ reducing financial fragility by ending too big to fail ”, speech before the eighth annual finance conference, boston college carroll school of management, boston, ma, june 6, 2013. bis central bankers ’ speeches

##ocus on the issue of “ compliance ” in banks. let me, therefore, begin by highlighting some of these recent instances of misdemeanors by banks in compliance - related matters which have had debilitating consequences in the form of massive penalties. global episodes 3. i ) in 2012, jp morgan chase & co was involved in the so - called “ london whale ” trades in the bank ’ s “ synthetic credit portfolio ” comprising of credit default swaps and related instruments. the bank ’ s trading strategy, which intended to serve as a hedge against credit risk, was unscrupulously used by its traders to build risky positions, thereby raising doubts about the efficacy of the internal compliance process. in a scathing indictment of the internal control and compliance machinery, jaime dimon, the ceo of j. p. morgan remarked, “ chief investment office, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management, and i include myself in that, and the firm - wide risk control function. … make sure that people on risk committees are always asking questions, sharing information, and that you have very, very granular limits when you ’ re taking risk. …. in the rest of the company we have those disciplines in place. we bis central bankers ’ speeches didn ’ t have it here. ” 1 the bank eventually lost more than us $ 6 billion and ended up paying us $ 920 million in penalties for settling probes by the uk and us investigators. as the losses piled up, the bank also misled investors and public through incorrect disclosures and withheld information from the regulators. ii ) also in 2012, hsbc holdings was hauled up by regulators of three jurisdictions for antimoney laundering ( aml ) / combating financial terrorism ( cft ) violations in transferring money illegally through its subsidiaries. several lapses were identified in hsbc ’ s aml compliance which included ignoring internal warnings on inadequacy of internal monitoring systems, mis - categorization of mexico as a “ low risk ” country leading to transactions being exempt from detailed monitoring, etc. a fine of us $ 1. 9 billion was imposed on hsbc holdings. iii ) another gross misdemeanour that surfaced in 2012 involved long term manipulation of the libor rate by multiple banks. the investigations revealed that the rate contributions made by banks to determine the sacrosanct benchmark rate, which is used to settle trillions of dollars of loans and transactions