daniel k tarullo : dodd - frank implementation testimony by mr daniel k tarullo, member of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington, dc, 11 july 2013. * * * chairman johnson, ranking member crapo, and other members of the committee, thank you for the opportunity to testify on the federal reserve ’ s activities in mitigating systemic risk and implementing the dodd - frank wall street reform and consumer protection act of 2010 ( dodd - frank act ). with the third anniversary of the dodd - frank act upon us, it is a good time to reflect on what has been accomplished, what still needs to be done, and how the work on the dodd - frank act fits with other regulatory reform projects. indeed, the deliberate pace and multi - pronged nature of the implementation of the act – occasioned as it is by complicated issues and decisionmaking processes – may be obscuring what will be far - reaching changes in the regulation of financial firms and markets. indeed, the federal reserve and other banking supervisors have already created a very different supervisory environment than what was prevalent just a few years ago. today, i will review recent progress in key areas of financial regulatory reform, with special – though not exclusive – attention to implementation of the dodd - frank act, including how that law affects the regulation of community banks. i will also highlight areas in which proposals are still outstanding and, in a few cases, in which we intend to make new proposals in the relatively near future. implementation of basel iii capital rules let me begin by noting the completion of our major rulemakings on capital regulation. although most of the provisions in these rules do not directly implement provisions of the dodd - frank act, implementation of that law is occurring against the backdrop of implementation of the basel iii framework. this month, the federal reserve, the office of the comptroller of the currency, and the federal deposit insurance corporation ( fdic ) approved final rules implementing the basel iii capital framework, as well as certain related changes required by the dodd - frank act. 1 the rules establish an integrated regulatory capital framework designed to ensure that u. s. banking organizations maintain strong capital positions, enabling them to absorb substantial losses on a going - concern basis and to continue lending to creditworthy households and businesses even during economic downturns. the rules increase the quantity and improve the quality of regulatory capital of the u. s

inflation is projected to average 6. 5 per cent this year, reflecting particularly high energy price inflation. 2 the effects of inflation will be felt across the irish economy, although more strongly for some households than others. 3 cost of living increases from higher food and energy prices tend to be proportionally larger for lower income, older and rural households, who typically spend more of their weekly outgoings on these products. i will return to this important issue, and the monetary policy response, in a few moments. in line with the wider economic recovery, the adjustment of the labour market has been striking, with numbers employed now exceeding 2019 levels and the standard monthly unemployment rate at 4. 8 per cent in april. last week, my colleague, sharon donnery, outlined some particularly interesting results from forthcoming central bank research on some specific elements of the labour market recovery. 4 the data shows that the overall recovery in employment growth is being driven by higher labour force participation, particularly for female and younger workers. 5 importantly, this increased participation does not seem to be driven, in recent quarters at least, by any structural changes arising from the pandemic. instead, for younger workers, the strength of the economic recovery has driven increased participation, while for women, increased participation is part of a longer - term trend driven by a “ cohort effect ”, due to women aged 35 - 59 being far more likely to participate in the labour market than women of a similar age in previous decades. of course, it is still early in the recovery from the pandemic and the effects on the labour market in the longer - term remain to be seen. despite the uncertainties around the economic outlook, we do expect to see the labour market tighten. this should result in stronger and broader - based wage growth than we have observed in recent years. this is a good thing, particularly as real incomes are likely to fall this year due to relatively high inflation. however, where growth in wages or profits respond entirely to the currently high rates of inflation, or are detached from underlying productivity growth, the likelihood increases that harmful higher inflation becomes embedded. inflation and monetary policy let me turn to our response to inflation. for the avoidance of doubt, the current level of inflation is concerning. it affects households ’ purchasing power and it affects business investment decisions. it affects the whole community – as i said earlier, some more than others – whether households or businesses, and whether small or large. the ecb ’ s objective is for inflation to be