clear. this complexity makes it virtually impossible to fully comprehend the drivers of culture or predict its behavioral consequences. an implication is the need for a long - term, sustained commitment to addressing conduct and culture reform using a wide range of tools that are suitable for a complex problem. evolution of new york fed ’ s effort in the ten years that followed the financial crisis, we have continued to see a stream of misconduct scandals and cultural failures, and a corresponding increase in significant litigation and enforcement activity, with costs estimated at an aggregate of $ 320 billion worldwide. 3 at the new york fed, our work in advocating culture and behavior reform in the financial sector 1 / 5 bis central bankers'speeches started in late 2013 when our former president, bill dudley, delivered a speech on the “ too - big - tofail ” problem. in that speech, he argued that “ there is evidence of deep - seated culture and ethical failures at many financial institutions. ” 4 more recently, our current president john williams concluded that “ we have not yet fully addressed the root causes of many of the problems that have plagued the financial sector ” and that there was still a “ sense of urgency in addressing banking culture. ” 5 over the past five years, the new york fed has focused on shining a spotlight on culture, behavior and conduct concerns, and pushed the industry to address these issues through a range of activities : engaging with diverse thinkers on governance, culture and organizational behavior to better understand the complexity of culture reform ; convening academic experts, and leaders in finance and the official sector through conferences and workshops on culture and behavior reform ; 6 facilitating discussions among the supervisory community on assessing and influencing industry culture - related efforts ; building a platform for a partnership between business schools and industry representatives to influence culture reform through training of future leaders in finance ; and publishing a white paper on “ misconduct risk, culture and supervision ” that discussed a range of market failures that provide a conceptual rationale for intervention by bank supervisors. 7 our white paper also summarizes work of supervisors from multiple jurisdictions around the world who are increasingly focused on the risks posed by poor culture and misconduct, and have developed a broad assortment of new tools and practices for identifying and supervising for misconduct risk. international efforts range from the creation of specialized units of behavioral risk experts to risk culture assessment frameworks to supervisory guidance that directs supervised institutions to develop and promote a sound corporate culture. i view this variation in approach as a feature and not a bug of the official sector focus on culture

##ration and validation. in general, the availability of sufficiently granular and historical data series for the non - bank financial sector is still lagging behind the situation on the banking side. these concerns notwithstanding, it should be acknowledged that data availability is improving in some areas following some important initiatives of financial regulators and overseers. in europe, trade repository reporting under emir is one example that can shed light on interconnectedness via derivative markets. 5 another european initiative to improve information about sft should go live in q1 2019 with the securities financing transactions regulation ( sftr ) transaction reporting obligation. furthermore, ad hoc, targeted data collections can help improve the calibration of stress testing models and inform further required changes to the regular financial reporting. if properly constructed, such ad hoc data collections can provide deep insights into potential shock transmission channels. 6 i would like to stress that the research community can offer useful advice on relevant data dimensions in this regard and therefore should be actively involved in designing such data collection templates. as far as the second enhancement is concerned, existing non - bank stress test approaches need to better account for interactions between agents. we know from experience that the impact of a stress test event hitting a financial institution is often amplified via its interactions with the rest of the financial system. therefore, failing to account for such interactions may risk overestimating the resilience of single institutions and the system as a whole. some extensions to the traditional stress testing have already been operationalised, at least for the banking system. i would like to emphasise the inclusion of strategic behaviour ( e. g. balance sheet portfolio optimisation in stamp€ analytical framework of the ecb 7 ), game theoretical approaches to handle strategic responses to shocks and activity of other market participants ( e. g. in the mfraf stress testing framework of bank of canada ), network effects capturing interlinkages ( e. g. in the ramsi framework of bank of england or the ecb top - down stress test model8 ) or feedback loops with the real economy ( e. g. dsge models in stamp€ ). 2 / 5 bis central bankers'speeches third, as their business models and behaviour differ from traditional banks, specificities of nonbank financial institutions have to be considered carefully when designing tools to stress them. both the policy and academic communities are looking into ways to enhance stress testing models for macroprudential policy. stamp€ is one example. let me mention a few others focusing on integrating