addressed by cls bank must also be managed. 3. improved transparency we must also do much more to encourage improved transparency and disclosure, particularly for complex financial instruments. the opacity of many highly structured products contributed importantly to the turmoil. progress has been made in encouraging greater transparency. the fsf has provided a template for the disclosure of banks'exposures to these products. closer to home, the bank of canada has set out disclosure requirements, available to all investors, for asset - backed commercial paper that it would be prepared to accept as collateral. but those steps must be taken further. investors require relevant and digestible information tailored to their particular level of sophistication. here, credit - rating agencies have a very important role. so do institutions that distribute financial products – they have a responsibility to know their clients and to supply them with products and advice consistent with their clients'investment goals, risk appetite, and investment knowledge. the international organization of securities commissions ( iosco ) has launched a task force to address gaps highlighted during the crisis, by developing new standards designed to strengthen financial markets and protect investors. domestically, the investment industry regulatory organization of canada ( iiroc ) has made several recommendations related to product due diligence, focusing on product transparency, management of conflicts of interest, and dealer use and disclosure of credit ratings. 4. work with global partners at the international level, the bank of canada is working with its global partners to strengthen financial stability. it is contributing to fsf work on procyclicality issues related to bank capital, loan - loss provisioning, and margin requirements. canada is also actively engaged with its g - 20 counterparts and is directly involved in several working groups considering potential regulatory improvements in a broad range of areas. these include : strengthening transparency and disclosure ; reinforcing international co - operation in the management and resolution of cross - border crises ; promoting integrity in financial markets ; assessing measures to mitigate procyclicality ; and improving risk - management practices. the activities of the working groups will culminate in action plans for the next summit of g - 20 leaders in april. at the outset of these remarks, i discussed the importance of sound risk management for financial system stability. many lessons have been learned from the current crisis, and we can foster a more robust and more stable financial system through improvements in the critical areas that i have just outlined. the benefits of such stability would be felt throughout the canadian economy. the canadian economy

increased emphasis on identifying risks and vulnerabilities to the canadian financial system and on developing a better early warning system. the bank's financial system review was recently revamped with that objective in mind. in terms of regulation, the bank is drawing attention to the need to mitigate procyclical tendencies within the financial system, to improve transparency, and to keep core financial markets open. in this regard, the central bank has the power to see to it that core markets have continuous access to liquidity by acting as a counterparty to major market participants, if needed, in times of crisis. the principles guiding the bank's use of that power were discussed in the june 2008 issue of the financial system review. 2. continuously open markets and risk - proofed infrastructure other measures can contribute to continuously open and resilient markets. for example, efforts outside canada to create a clearing house for credit default swaps ( cds ) have the m. carney, " from hindsight to foresight " ( speech to women in capital markets, toronto, ontario, 17 december 2008 ). potential to reduce counterparty risk and to help keep this market open in stressful times. a clearing house offers the advantages of robust operational arrangements and clear workout procedures in the event of a default. without underestimating the complexities that this would involve, policy - makers could look for other markets that could benefit from being moved onto exchanges or into clearing houses. they could encourage such moves by establishing higher capital requirements for securities that trade outside of continuously open markets and by working to further risk - proof custodial banks. recent events have demonstrated the value of well risk - proofed clearing and settlement systems. for example, the use of cls bank to settle foreign exchange transactions was a stabilizing factor, especially during the working out of the lehman brothers bankruptcy. by providing simultaneous settlement of both transaction legs ( payment - versus - payment ), cls bank virtually eliminates the credit - risk component of foreign exchange transactions. yet canadian institutions use cls bank relatively less than their international counterparts. this is partly because cls bank doesn't currently allow for settlement of same - day, bilateral canadian - u. s. dollar transactions. nonetheless, there would be benefits from a greater use of cls bank by canadian institutions. the bank of canada encourages them to consider using cls bank for managing their foreign exchange settlement risk, while bearing in mind that other risks associated with foreign exchange transactions not