. as required by the dodd - frank act, the final rule defines a “ qualified residential mortgage ” ( qrm ) and exempts securitizations of qrms from the risk retention requirement. the final rule aligns the qrm definition with that of a qualified mortgage as defined by the consumer financial protection bureau. the final rule also does not require any retention for securitizations of commercial loans, commercial mortgages, or automobile loans that meet specific standards for high quality underwriting. for more information, see the press release on the board ’ s website. bis central bankers ’ speeches cleared through central counterparties. these developments may ultimately prove to be stability enhancing, but as the system evolves, we must remain attentive to the possibility of changes that may be destabilizing. more needs to be done to say that the nonbank sector today appears less vulnerable than it did during the global financial crisis, is not to say that authorities in the united states have tamed the nonbank sector. indeed, while progress has been substantial, areas for continued work remain, and i will briefly highlight three of them. let me start with short - term wholesale funding markets. while there have been some improvements in the plumbing of money markets, many nonbank financial firms, including hedge funds and broker - dealers, continue to rely on secured short - term funding to finance their activities, many of which involve longer - term and illiquid assets. this maturity transformation remains a key vulnerability. further, many of the firms that rely on this maturity transformation are highly levered and thus more vulnerable to threats to their solvency. the proposed international framework being developed by the financial stability board for margins on securities financing transactions may be an important tool for limiting the pro - cyclicality and sharp deleveraging that can occur in these markets. second, and more generally, we need to be alert to changes and trends in the financial system that may pose risks to financial stability, particularly those stemming from areas of the nonbank sector that are not subject to prudential supervision. for example, the asset management industry has both grown and evolved in recent years. mutual funds and exchange - traded funds that track the returns of indexes of relatively illiquid assets have mushroomed in size. examples include funds tracking the return on leveraged loans, credit default swaps, and other less liquid assets. these funds offer daily or even intraday liquidity to investors while holding assets that are hard

the financial system. in response to this need, the dodd frank act created the there appear to be two meanings of the word “ macroprudential. ” at first, it referred to a focus on systemic interactions within the financial system. it is in that sense that we are talking at this point. the second meaning is almost the opposite : it relates to regulatory but not monetary policy measures focused on some aspect of the financial system whose behavior is giving cause for concern. the large firms whose supervision is coordinated by the large institution supervision coordinating committee ( liscc ) are american international group, inc. ; bank of america corporation ; the bank of new york mellon corporation ; barclays plc ; citigroup inc. ; credit suisse group ag ; deutsche bank ag ; general electric capital corporation ; the goldman sachs group, inc. ; jp morgan chase & co. ; metlife, inc. ; morgan stanley ; prudential financial, inc. ; state street corporation ; ubs ag ; and wells fargo & company. for more information, see the liscc webpage on the board ’ s website. bis central bankers ’ speeches financial stability oversight council ( fsoc ) to help identify emerging risks and vulnerabilities to financial stability. the council ’ s annual report on financial stability highlights risks and vulnerabilities for the entire financial system and reflects the council ’ s own diverse nature : only 3 of the 10 voting members of the council are banking sector supervisors, with the remainder supervising or having regulatory authority related to credit unions, brokerdealers, asset managers, and derivative market participants. among its decisions, the fsoc has designated four u. s. nonbank financial institutions as systemically important financial institutions, which makes them subject to consolidated supervision by the federal reserve board. 7 in addition, the dodd frank act mandated the establishment of the office of financial research in order to help promote financial stability through the measurement and analysis of risks, the conduct of essential research, and the collection and standardization of financial data. a second nonbank reform has been the securities and exchange commission ’ s ( sec ) adoption of new rules for money market mutual funds. specifically, the sec will require prime money market funds sold to institutional investors to publish a floating net asset value and to restrict withdrawals through a system of gates and fees. these rules, while as yet untested, are designed to reduce the likelihood of runs on prime money market funds. the third nonbank reform i