jerome h powell : introductory comments – roundtable on the interim report of the alternative reference rates committee introductory comments by mr jerome h powell, member of the board of governors of the federal reserve system, at the roundtable on the interim report of the alternative reference rates committee, sponsored by the federal reserve board and the federal reserve bank of new york, new york city, 21 june 2016. * * * i want to thank you all for coming today, and i also want to thank the alternative reference rates committee ( arrc ) for all its work in developing its interim report. this report marks a new stage in reference rate reform. 1 reference benchmarks are a key part of the financial infrastructure. about $ 300 trillion dollars in contracts reference libor alone. but benchmarks were not given much consideration prior to the recent scandals involving attempts to manipulate them. since then, the official sector has thought seriously about financial benchmarks, conducting a number of investigations into charges of manipulation, publishing the international organization of securities commission ’ s ( iosco ) principles for financial benchmarks and, through the financial stability board ( fsb ), sponsoring major reform efforts of both interest rate and foreign exchange benchmarks. 2 the institutions represented on the arrc have also had to think seriously about these issues as they have developed this interim report. now, we need end users to begin to think more seriously about how they use benchmarks and the risks they are taking on by relying so heavily on a reference rate – in this case u. s. dollar libor – that is less resilient than it needs to be. in saying this, i want to make it clear that libor has been significantly improved. ice benchmark administration is in the process of making important changes to its methodology, and submissions to libor are now regulated by the united kingdom ’ s financial conduct authority. however, the term money market borrowing by banks that underlies u. s. dollar libor has experienced a secular decline. as a result, the majority of u. s. dollar libor submissions must still rely on expert judgement, and even those submissions that are transaction - based may be based on relatively few actual trades. this calls into question whether libor can ultimately satisfy iosco principle 7 regarding data sufficiency, which requires that a benchmark be based on an active market. that principle is a particularly important one, as it is difficult to ask banks to submit rates at which they believe they could borrow on a daily basis if

we share with germany : vigorous and fair competition and a stable financial system. indeed, in some sense it follows the lead of the european union and its member states in ensuring that all large subsidiaries of globally active banks meet basel capital rules. we believe that our foreign bank proposal, which would increase the strength and resiliency of the u. s. operations of these firms, would meaningfully reduce the likelihood of disruptive ring - fencing at the moment of crisis that could undermine an spoe resolution of a large foreign bank. we are fully committed to the international efforts to address crossborder resolution issues and to maintaining strong cooperation between home and host supervisors during normal and crisis periods. i will close by observing that the international effort to strengthen financial regulation cannot succeed unless each nation understands the goals and challenges faced by its partners. the federal reserve and the bundesbank have a long history. i believe there is a trust between us that is the basis for collaboration. i look forward to working with you to make the financial system safer and stronger. thank you. board of governors of the federal reserve system ( 2011 ), “ federal reserve board proposes steps to strengthen regulation and supervision of large bank holding companies and systemically important nonbank financial firms ”, press release, december 20. bis central bankers ’ speeches