now has its own local advisory council comprising representatives from banks, thrift institutions, and credit unions ; one member from each local council serves on the national council that will meet with the board twice a year in washington. local meetings have already begun, and the first meeting of the national council with the board will take place soon. personally, i am looking forward to hearing more from community bankers about issues ranging from their local economies to regulatory reform. community banks and regulatory reform as you know, a key challenge for community banks in the years ahead will be to adapt to the changing regulatory environment, particularly the regulatory reforms contained in the dodd - frank act, as well as the changes that will be associated with the basel iii reforms. we are certainly aware of and appreciate the concerns that community banks have about these regulatory changes, and, as i have just described, we have stepped up our efforts to understand those concerns and to respond to them as appropriate. i think it is worth emphasizing that the changes we will be seeing in the financial regulatory architecture are principally directed at our largest and most complex financial firms, including nonbanks. consequently, one benefit of the reforms should be the creation of a more level playing field for financial institutions of all sizes. focusing reform on our largest, most complex financial firms makes sense. the recent financial crisis highlighted the fact that some financial firms had grown so large, leveraged, and interconnected that their failure could pose a threat to overall financial stability. the sudden collapses of major financial firms were among the most destabilizing events of the crisis. the crisis also demonstrated the inadequacy of the existing framework for supervising, regulating, and otherwise constraining the risks of major financial firms as well as of the toolkit the government had at the time to manage their failure. as i discussed with you at last year ’ s meeting, a major thrust of the dodd - frank act is addressing the too - big - to - fail problem and mitigating the threat to financial stability posed by systemically important financial firms. the too - big - to - fail problem is a pernicious one that has a number of substantial harmful effects. critically, it reduces the incentives of shareholders, creditors, and counterparties of such firms to discipline excessive risk - taking. and it produces competitive distortions by enabling firms with large systemic footprints to fund themselves more cheaply than other firms because of the implicit subsidy of too - big - to - fail status. this competitive distortion is not

. accordingly, we must promote financial education, and having been an educator for many years, i am very pleased that the board is actively involved in this area. the board is keenly aware, however, that disclosures and financial education may not always be sufficient to combat abusive practices. indeed, the consumer financial services laws implemented by the board contain a number of substantive protections, reflecting carefully considered legislative judgments that certain practices should be restricted or prohibited. the board also has the responsibility to prohibit other practices by issuing rules, for example, if the board finds they meet the legal standard for " unfair or deceptive " practices under the federal trade commission act ( ftc act ) or the home ownership and equity protection act ( hoepa ). we must be mindful, however, of unintended consequences. crafting effective rules under the " unfair or deceptive " standard presents significant challenges. whether a practice is unfair or deceptive depends heavily on the particular facts and circumstances. to be effective, rules must have broad enough coverage to encompass a wide variety of circumstances so they are not easily circumvented. at the same time, rules with broad prohibitions could limit consumers'financing options in legitimate cases that do not meet the required legal standard. this has led the federal reserve to focus primarily on addressing potentially unfair or deceptive practices by using its supervisory powers on a case - by - case basis rather than through rulemaking. the ftc, which has authority to prohibit unfair or deceptive practices for financial services firms that are not depository institutions, has taken a similar approach. because the prohibition on unfair or deceptive acts or practices applies to all depository institutions as a matter of law, the banking and thrift agencies can and do enforce this prohibition using their supervisory enforcement powers. the board also addresses concerns about some practices under other statutes, such as the truth in lending act ( tila ) or truth in savings act ( tisa ). for example, the board used its hoepa authority to address the " flipping " of high - cost mortgage loans. under tila, we recently proposed a rule prohibiting credit card issuers'from describing their rates as " fixed " unless they specify a period where the rate is not subject to change for any reason. the board also revised its tisa rules to address concerns about overdraft protection programs. the board is committed to addressing abusive practices and will consider how it might use its authority to prohibit specific practices consistent with the legal