##er and more resilient as a result, in a number of ways. first, systemically important banks are much safer. 3 they have much bigger liquidity and capital buffers, and the quality of capital is much improved. moreover, the capital regime now has a forward - looking element in which annual stress tests examine banks ’ ability to withstand losses under severely adverse economic conditions and constrain the amount of capital that can be returned to shareholders via dividends and share repurchases. strengthened liquidity standards have given the market greater confidence that banks possess adequate resources to weather temporary storms that arise. at the global level, basel iii has helped to level the competitive playing field in a number of ways — including, most recently, by imposing constraints on banks ’ use of internal models to meet their capital requirements, and by introducing a leverage buffer for 1 / 8 bis central bankers'speeches systemically important firms, similar to what we already have in place in the united states. new regulatory standards have been complemented by a supervisory framework for the largest banks that explicitly acknowledges the impact that distress at such firms could have on financial markets and the economy. 4 these efforts have led to considerable improvement in risk management at banks, which should help better sustain the flow of credit to the real economy throughout the business cycle. second, considerable progress has been made in terms of resolution. systemically important banks now have living wills that provide a roadmap for how these firms would be resolved in the event of imminent failure. moreover, there is now a well - defined mechanism under title ii of the dodd - frank act for recapitalization of a failed systemically important firm. the fdic now has the authority to initiate a “ single point of entry ” resolution, which places the parent holding company into fdic receivership and transfers its subsidiaries to a new parent company. total lossabsorbing capacity, or tlac, of the old parent company would be available to absorb losses and could be used to recapitalize the new parent company. but, the task of operationalizing resolution for large, global banks — including achieving full clarity on the roles of the home and host supervisors — is still not complete. it is key that work continues on this front to ensure that a systemically important firm can fail without threatening to topple the rest of the financial system — an important step toward ending “ too big to fail. ” third, some of the obvious systemic vulnerabilities exposed by

the fomc has taken a number of steps in recent years to increase transparency and improve communications. this includes press conferences by the fed chair following fomc meetings ; the publishing of growth and inflation forecasts of fomc participants ; participants ’ projections of the federal funds rate at various horizons ; and a concerted attempt to lay out the guideposts that the fomc will look at to assess progress toward its mandate. these steps are aimed at reducing the risk that fed policy adjustment might be associated with undue market volatility. the stance of fed policy will be far from the only thing affecting the global landscape facing emes. as the fomc considers the appropriate timing and pace of moving to a less accommodative policy stance, central banks in the euro area and japan are in the process of implementing additional easing measures. other important factors affecting the global terrain include china ’ s slowing of credit growth without derailing economic growth, the behavior of oil and other commodity prices, and emes ’ own domestic fundamentals and growth dynamics. fed policy will be only one factor. eme fundamentals are likely to be an important determinant of how eme financial conditions respond to fed policy normalization. this was one of the key lessons from the taper tantrum. at first, market pressure was somewhat indiscriminant and then later became more discerning with respect to eme fundamentals. financial conditions tightened, especially for countries with fundamental vulnerabilities including : large current account deficits, a heavy reliance on portfolio inflows, and high and above - target inflation rates. markets then responded favorably as eme authorities shifted toward clear, more consistent policies focused on inflation objectives and external sustainability, and away from policies with multiple and sometimes competing objectives. let me now add a few thoughts about ongoing financial reform efforts. the complexity, severity and speed of the global financial crisis required a forceful and wide - ranging international regulatory response. this has included higher capital and liquidity standards, stronger recovery and resolution regimes for supervised institutions, and greater transparency and standardization in derivatives markets. these efforts will have a number of positive effects, although they may lead to some changes in bank business models and strategy in the u. s. and internationally. in the u. s., these efforts have made the banking system much stronger today than before the crisis. in aggregate, tier 1 risk - based capital ratios among u. s. bank holding companies have increased