issue. further, the postcrisis recognition of systemic risk, based on inter - connectedness, makes the case for co - ordination on risk management, with clearly defined roles for different agencies. third, while addressing external stability in general terms seems to be becoming an acceptable component of a broadened central bank mandate, the nature of the response will depend significantly on both the state of the domestic economy and global conditions. also, short - term objectives may be in conflict with long - term ones, requiring some prioritization. let me conclude with a quote from a recent speech by ben bernanke : “ … the past two years have demonstrated the value of policy flexibility and openness to new approaches. during the crisis, central banks were creative and innovative, developing programmes that played a significant role in easing financial stress and supporting economic activity. as the global financial system and national economies become increasingly complex and interdependent, novel policy challenges will continue to require innovative policy responses ” ( bernanke, 2010 ). these innovative responses need to manifest on three fronts. one, broader mandates for central banks will need to be made explicit and conditional on the priority of the core mandates. this should eventually lead to definitions and quantification of conditions in which the broader mandates will kick in. two, appropriate instruments need to be dusted off or developed to ensure that broader mandates can be fulfilled. a single or a small number of traditional monetary instruments cannot be expected to do the job. finally, these broader mandates may be more effectively pursued in a collective institutional framework, which will inevitably raise co - ordination challenges, which need to be addressed. i would like to thank the organizers once again for inviting me and thank you all for listening to me. references bean, charles, matthias paustian, adrian penalver and tim taylor ( 2010 ), “ monetary policy after the fall ”, paper presented at federal reserve bank of kansas city annual conference, jackson hole, wyoming. bernanke, ben s. ( 2010 ), “ emerging from the crisis : where do we stand? ”, remarks at the 6th ecb central banking conference, frankfurt. ostry, jonathan d, atish ghosh, karl habermeier, marcos chamon, mahvash qureshi, and dennis reinhardt ( 2010 ), “ capital inflows : the role of controls ”, imf staff position note, february. poole, william ( 2010 ), “ monetary policy flexibility :

banking institutions from the volcker rule since they rarely, if ever, engage in proprietary trading. do no harm many speculate that congress will make changes to the dodd - frank act. if the scope is confined mainly to small bank relief and adjusting how the volcker rule is applied, i have no objection. but, because the dodd - frank act addresses many of the key lessons of the crisis, i think it appropriate that changes be made carefully — with a paring knife, rather than with a meat cleaver. here, i would underscore the importance of preserving higher capital and liquidity requirements for systemically important banks ; title vii, which mandates the central clearing of standardized otc derivatives ; and title viii, which gives the federal reserve an oversight role for financial market utilities that are systemically important, and which helps promote more uniform risk management standards. while title ii gives the fdic the authority to resolve a large, complex financial firm by converting its debt into equity and establishing a new holding company, i do not think this is necessarily the only way to have a viable resolution regime. however, if title ii were to be eliminated, then the bankruptcy code would need to be bolstered. there are two essential requirements : the ability to initiate an effective resolution strategy over the weekend, and a government entity — be it the federal reserve or the fdic — that can provide a credible liquidity backstop to the recapitalized entity when it opens for business on monday morning. if resolution cannot be accomplished in this timeframe, confidence would suffer and there would be contagion. without a credible liquidity backstop, clients and counterparties would run, making it much more difficult for the recapitalized firm to conduct its business. i would also preserve the authority of the fsoc to designate non - banking firms as systemically important and subject to supervision by the federal reserve. as i see it, the designations of ge capital and aig were successful in two important respects. first, federal reserve supervision resulted in improved corporate governance and risk management. second, it created incentives for the firms to alter their operations to become less systemically important in order to be dedesignated. we should also retain this designation tool because we cannot predict which firms and activities may emerge and become systemically important in the future. after all, i do not think many were focused on or worried about the activities of aig ’ s financial products group several years before the financial