about the solvency of other banks and impairing the functioning of markets. this experience highlighted the interconnectedness within markets and how the failure of one institution can pose a systemic risk that threatens the entire financial system. under the g - 20 reforms aimed at reducing systemic risk, countries have agreed to report all transactions to trade repositories and to centrally clear all standardized contracts. again, much progress has been made on improving the reporting and central clearing of transactions. 15 the challenge ahead is to ensure that the rules for on - the - ground implementation of some of these reforms are consistent across jurisdictions. to understand how complicated this is, it is useful to compare the processes for the basel iii framework with that for otc derivatives. because the basel committee already had granular rules for bank regulation, a process was established to achieve a multilateral consensus on the next set of bank standards. for otc derivatives, no such process existed because they had previously been largely unregulated. the united states — the jurisdiction most affected by the crisis — was the first to respond, with the dodd - frank act. other countries were slower off the mark, and this has led to differences for well over a century, major canadian banks have safely raised funding and managed liquidity through branch operations in u. s. money markets. see, for example, c. a. e. goodhart, the new york money market and the finance of trade, 1900 - 1913 ( cambridge : harvard university press, 1969 ). in c. w. calomiris and s. h. haber, fragile by design : the political origins of banking crises and scarce credit ( princeton : princeton university press, 2014 ), the authors remark that “ the extraordinary stability of the canadian banking system has been one of its most visible and oft - noted characteristics for nearly two centuries. ” the third otc derivatives reform priority, expanding the use of trading platforms, is being implemented more gradually. bis central bankers ’ speeches in implementation, especially among major jurisdictions. 16 these differences are slowly being resolved. 17 in the meantime, market participants are trying to cope with these regulatory inconsistencies. as a consequence, the costs of cross - border trade are rising and markets are starting to fragment. canada and other jurisdictions are caught in the middle. one of the ways countries are managing these inconsistencies is by recognizing each other ’ s regulatory approaches when they achieve similar prudential outcomes. in this regard, the

central bank governors, 18 september 2014, at www. financialstabilityboard. org / wpcontent / uploads / r _ 140918. pdf. bis central bankers ’ speeches for instance, canada and the united states should consider the option of a bilateral agreement on the resolution of banks with cross - border operations in order to clarify responsibilities and enhance co - operation. 24 we have a long history of stable financial and economic integration, and u. s. financial institutions and legal frameworks are similar to ours. if any two jurisdictions could achieve such an agreement, it is canada and the united states. we could set an example for other countries. in this regard, the 1988 free trade agreement between canada and the united states offers a useful precedent. it served as a template for other regional agreements at a time when multilateral trade negotiations were making little headway. on cross - border payments, we should come to terms on more efficient arrangements, including harmonizing standards, reducing processing times and establishing direct links between our respective systems. we could, for instance, explore opportunities to enhance the existing fedglobal program for cross - border payments, which is currently limited to northbound transactions. 25 conclusion let me conclude with a few words of wisdom from a great american poet. in his poem “ mending wall, ” robert frost questions his neighbour ’ s belief in the old adage that “ good walls make good neighbors. ” instead, frost writes, before we build a wall we should first consider what we are “ walling in or walling out. ” the message i take from his words is that good neighbours should work together to build trust, not walls. canada and the united states have long - established economic and financial ties built on trust that have served both countries well. today, we have a unique opportunity to advance the global financial reform agenda in the critical, but thorny, areas of bank resolution, otc derivatives and payments. we both have much to gain by strengthening financial integration between our countries. more efficient cross - border financial services will facilitate more trade. and more trade will contribute to stronger economic growth in both countries. the canada deposit insurance corporation and the federal deposit insurance corporation have a memorandum of understanding in place to consult, co - operate and share with each other information on the resolution of cross - border banks. nonetheless, a more comprehensive bilateral resolution agreement — which builds on the fsb ’ s ongoing work on cross - border resolution issues, including total loss absorb