a cooperative approach in which each side foregoes the chance for highest potential payoff in exchange for the payoff that maximizes returns jointly. but effective cooperation that leads to higher joint returns is difficult in this game because of the complexity of the inter - linkages and the political and institutional constraints that constrain the scope for action at the national level. in macroeconomic terms, the prospects for achieving a more cooperative solution can be enhanced by policy transparency so that the policy goals and reaction function of each authority can be well understood by others. this again applies both within and across countries. for example, the federal reserve is making efforts to provide greater clarity about its inflation objective in the context of the dual mandate. in doing so, the fed is also continuing to underscore that actions such as our purchase of u. s. government securities are driven exclusively by our monetary policy goals, and that these policy actions will not continue beyond the moment they become inconsistent with our dual mandate objectives. in general, policymakers should strive to ensure that we have both fiscal and monetary policy frameworks that are transparent and viewed as credible and durable. interconnectedness means that events – be it the tragedy of a japanese earthquake and tsunami, a revolution in libya, or a financial crisis sparked by a housing boom and bust in the united states – can be transmitted to domestic economies located far away from the initial source of shock, often at market - speed measured in milliseconds. this interconnectedness underscores our common interest in cooperating not just to facilitate needed economic adjustments, but also to address fragilities in our interconnected global financial system. i think coordination on regulatory matters differs from on macroeconomic issues in two important respects. first, the benefits to cooperation and coordination on certain aspects of regulation seem easier to identify up front. second, while policy coordination on regulatory issues is also very challenging, it may not be quite as difficult as in the macroeconomic realm. the stakeholders are not typically as numerous or diffuse, the problems are generally easier to identify, the gains from a cooperative solution are more obvious, and the cooperative solutions themselves may be easier to implement. on the regulatory side, i ’ ll start with a few broad observations. first, it is essential that regulations be harmonized internationally to a much greater degree than in the past. this will ensure there is a common minimum level of standards, which in turn will help discourage regulatory arbitrage and a “ race to the bottom ”.

be further developed and adopted more broadly across a wider range of important global financial market infrastructures. how we proceed from here will be critical to our success in building a global financial system that is both stable and efficient. by facilitating the greatest netting down of risk, global ccps through which all standardized otc derivatives trades would be cleared, hold out the potential for the greatest amount of risk reduction and, thus, improvement in financial stability. but, for that outcome to occur, there needs to be a global oversight framework that ensures that the ccps are held to global standards – not just in theory, but also in practice. there are other areas where we face significant challenges in effective global information exchange and regulatory cooperation. we have much more to do to develop resolution regimes for globally systemic financial institutions, including establishing the rules of the game for the exchange of supervisory data for such firms, in clearly identifying ex ante the responsibilities of home and host countries in terms of potential liquidity support, and in overseeing the orderly wind - downs of such firms when they encounter difficulties. the exchange of supervisory information is important both for understanding the consolidated condition of a bank that operates in a host country, and for gaining insights into broader financial stability issues. for example, giving supervisors in host countries improved access to consolidated balance sheet information for foreign firms operating in their jurisdiction would allow for a more accurate assessment of a firm ’ s liquidity position and funding plans. bis central bankers ’ speeches another area where there needs to be greater international cooperation is in defining the roles of home and host countries especially during times of stress. what is the responsibility, for example, of the host country to provide lender - of – last - resort liquidity to foreign firms operating in their jurisdiction? at what stage, if any, does that responsibility shift to home country? should these responsibilities change depending on the degree of information exchange or the degree or duration of stress? on the resolution front, we know that the benefits of a harmonized global regime would be substantial. by providing greater transparency to investors and depositors about the rules of the game in the event of distress, such a regime would likely reduce the likelihood of runs and financial panics while also allowing financial intermediation to occur on a global basis. however, it is proving challenging for some jurisdictions to provide clarity around how an orderly resolution would be implemented in practice. at the same time, this lack of clarity within jurisdictions is contributing to and exacerbated by the lack of a