is much more than an effort to improve the meaningfulness of minimum regulatory capital ratios, although that clearly is an important aspect of the proposal. embodied in the proposal are some important risk management principles and sound practices that supervisors would expect all of the very largest and most complex us banks to be following or aspiring to, even those not electing to use one of the more advanced approaches. as proposed, the capital standards should provide banking organizations in the united states and abroad with strong incentives to accelerate their development and implementation of improved risk management systems in order to qualify for a more risk - sensitive regulatory capital treatment. moreover, the review necessary to ensure that bank risk measures are sound maintains the focus of supervisors on the key elements of control and risk management that govern safe and sound banking. the third pillar complements the first two by bolstering market discipline through enhanced disclosures by banks. by their very nature, many banking risks are opaque. however, innovations in recent years that have helped improve the management of risk have also led to the development of various summary statistics to meaningfully describe risks that were qualitatively described in the past. while challenges remain in making such measures comparable or differences across institutions well understood, such disclosures are a necessary complement to the other two pillars for the overall approach to retain the necessary level of rigor and integrity. disclosure of information that helps stakeholders determine risk profiles is designed, of course, to increase, when necessary, the market pressure and costs on bank lenders that they would otherwise receive as a matter of course if they were not beneficiaries of the safety net. market discipline can also provide useful signals to supervisors. significantly, the opportunity for enhanced market discipline through disclosure is substantial given that larger organizations fund about two thirds of their assets with uninsured funds. however, supplemental information will be irrelevant unless uninsured creditors believe that they are, in fact, at risk. uninsured creditors have little reason to engage in risk analysis, let alone act on such analysis, if they believe that they will always be made whole under a de facto too - big - to - fail policy. recognizing that dilemma, in 1991 the congress placed in the federal deposit insurance corporation improvement act a requirement for a least - cost resolution of financial institutions. although an exception clause exists, it does not require that all uninsured creditors be made whole. conceptually, there are rare situations where events may require that the fdic and other governmental resources be used temporarily to sustain a

in asia led me to ask how many other countries have experienced banking crises, either domestic or cross - border? the answer i found may surprise you. research done by economists of the international monetary fund indicates that 133 of the 181 countries who are members of the fund, more than two - thirds, have experienced significant banking problems at some time since 19801. thirty - six of those instances would be described as banking “ crises ” in that there were runs or other portfolio shifts, collapses of financial firms, or massive government intervention. several countries experienced multiple banking crises. banking crises have affected developed countries, such as the united states, sweden, france, see “ bank soundness and macroeconomic policy ”, c. j. lindgren, g. garcia, and m. i. saal, international monetary fund, 1996. [UNK] and norway, as well as rapidly developing or “ transitional ” countries, including now korea, indonesia and malaysia, but earlier mexico, argentina, and chile. banks fail for a number of reasons, including poor management, excessive risk taking, fraud and a poor operating environment. individual bankers too often forget the fundamental tenets of banking, which are universal and apply to internationally active banks in amsterdam as well as to community banks here in new amsterdam. these tenets include : know your customer ; understand the legal framework in which you are working ; thoroughly understand the sources of repayment and the risk of nonperformance ; and price your services accordingly. we know that in asia banks violated some of these rules. banks often engaged in directed lending, either directed by government bureaucrats or commercial enterprises under shared ownership with the bank. because of government intervention in the lending process, asian banks had not developed the necessary credit risk skills, and bank supervisors were incapable of enforcing reasonable standards of behavior on the part of local banks. in the international context, the interbank lending problem that emerged in asia arose in part because of a lack of transparency in the financial system, making it difficult for foreign bank lenders to know the quality of the ultimate credit. more importantly, however, foreign banks that funded asian banks may have assumed an implicit government guarantee of inter - bank counter - parties because a history of supporting troubled institutions may have left that impression. what is the impact of a banking crisis? first, the financial cost of fixing an insolvent banking system is high, and that cost is ultimately borne by the taxpayer. for example, in australia ’ s banking crisis of 1989 - 1992