is important for how we operate together in crisis. the efforts of the basel banking supervisors are particularly important in this context. while their efforts have long emphasized the value of international supervisory cooperation, the improved basel ii framework raises the bar even further, putting the need for supervisory coordination squarely on the table if basel ii is to be implemented effectively for a global bank. conclusion let me conclude by emphasizing the obvious importance of the quality of macroeconomic policy management to the stability of the financial system. it probably is possible for a country with an exceptionally virtuous fiscal and monetary policy framework to experience a systemic financial crisis. but most financial crises involve a shock whose origins lie in the realm of macroeconomic policy error, often magnified by the toxic combination of poorly designed financial deregulation and an overly generous financial safety net. probably the most important contribution policy makers can make to financial stability is to avoid large monetary policy mistakes or sustained fiscal and external imbalances that increase the risk of large macroeconomic shocks, and to try to ensure that policy reacts with sufficient speed and force in the face of those shocks we are unable to avoid.

for risk transfer mean that more risk may end up in parts of the financial system where supervision and disclosure is weaker and in parts of the economy less well able to manage it. and finally, we have seen substantial growth in the integration of national financial systems. indeed, a number of foreign and foreign - owned banking organizations are among the largest financial institutions in the u. s., with operations here that run into the hundreds of billions of dollars, and in some cases representing the majority of their global assets. the major u. s. banks and investment banks are more global in the scope of their operations, and their affiliates are a major presence in many of the countries in which they operate, in some cases with a larger share of financial activity than they have in the u. s. market. payments and clearing arrangements are increasingly transnational in scope. but, the legal and supervisory frameworks for financial activity are still national, and are likely to remain so for the foreseeable future. and despite the development of a much more intensive and extensive network of cooperation among supervisory and regulatory and enforcement authorities, and movement toward an ever - higher standard of convergence in key elements of the regulatory structure across jurisdictions, the regime is inevitably uneven, with different standards across jurisdictions and therefore continuing opportunities for regulatory arbitrage. implications these broad developments alter the hierarchy of systemic concerns for the u. s. authorities. the greater systemic importance of a smaller number of large bank - centered financial institutions, the greater role played by non - bank financial institutions, the growth in the gses, the greater operational demands on the more concentrated core of the clearance and settlement infrastructure, the dramatic increase in the complexity of the risk management and compliance challenge, and the extent of global financial integration - these developments change the nature of the potential sources of stress to the financial system. they change how stress is transmitted. and they change the impact of tools we use to mitigate risk ex ante and to contain the broader financial and macroeconomic fall - out of financial distress. these developments can have both positive and negative impacts. in many respects, they help to reduce risk. in some ways, they increase risk. on balance the positive aspects dominate the less positive. shocks may act more quickly, but they can be more easily diffused and absorbed. institutions and markets seem better positioned to handle a substantial degree of stress. shocks may be less likely to result in the type of trend amplifying, self - reinforcing dynamic for sustained periods