, of course, the “ london whale ” episode allowed staff to test the procedural and substantive requirements of the proposed rule against a real - world example of what should not happen in a banking organization. the final rule has been modestly simplified from the 2011 proposal, but the agencies found that a good bit of the complexity in the proposal was hard to avoid in the final rule. much of the remaining complexity lies in the part of the rule dealing with covered funds. the part of the rule dealing with proprietary trading has been streamlined somewhat, particularly by reducing the number of metrics that will be used in the reporting and analysis of trading data. of course, as i have noted in previous testimony, a fundamental challenge of the volcker rule is to distinguish between proprietary trading, on the one hand, and either market - making or hedging, on the other hand. the difficulty in making this distinction inheres in the statutory provision that makes trades either permissible or impermissible depending on the intent of the trader and the context and circumstances within which the trades are made. while the final rule issued by the agencies articulates standards for making those distinctions, those standards will be given meaning as they are applied by banking entities and supervisors in the field. thus, implementation will be particularly important in continuing to shape the volcker rule. the see the agencies ’ joint press release, www. federalreserve. gov / newsevents / press / bcreg / 20131210a. htm. bis central bankers ’ speeches extended conformance period, during which relevant data will be collected from large banking organizations, will allow for the development of additional guidance. more generally, one would expect that a good many of the uncertainties will be reduced over time, as both banking entities and regulators gain experience with this new regulatory framework. the final rule requires banking entities with significant trading operations to report to the appropriate regulatory agency a variety of metrics. these data will be an important tool to help firms and regulators monitor and identify prohibited proprietary trading and high - risk trading strategies. in order to minimize burden and give full effect to the conformance period provisions of section 619, the reporting requirements are applied in a graduated manner, with only the firms with the largest trading books required to report metrics. these metrics will be used to trigger further scrutiny by banking entities and examiners in their evaluation of whether a banking entity is engaged in permitted or prohibited trading activities. as part of implementation, we

some of their earlier difficulties but continue to struggle. the effect on financial markets of the devastating attack on the world trade center was pronounced, as telecommunications and trading capacities were severely impaired. but the markets are mostly functioning normally now, and as in the past, the infrastructure will be rapidly restored. for a brief time, the terrorist attacks markedly disrupted payment transfers, leaving those counting on receiving payments caught short. those needs ultimately were met by the federal reserve, both through record lending at the discount window and through an extraordinary infusion of funds through open - market operations. to facilitate the channeling of dollar liquidity to foreign financial institutions operating in the united states, thirty - day currency swap lines were arranged with major central banks, again in record volumes. it was essential in such an environment to meet all appropriate demands for dollar liquidity. as repair of the financial markets and payment infrastructure proceeded apace, loans were repaid, open - market operations could be scaled back, the unusual swap lines were allowed to expire, and the temporarily bloated balance sheet of the federal reserve largely returned to normal. but even as market functioning and liquidity flows were restored, the potential for heightened uncertainty to damp household and business spending for a time persisted. to cushion these effects, we have eased the stance of monetary policy appreciably since september 11. * * * we in the united states have assumed ourselves to be fairly well - insulated from terrorism or, at most, subject to limited and sporadic episodes similar to those previously observed on a number of occasions in europe. we have been aware of the possibility for losses on a much greater scale. but i suspect that those possibilities were deemed so remote that they were never seriously incorporated into most conventional assessments of economic risk. the shock of the tragedies at the world trade center and the pentagon has reshaped those assessments of risk and required an abrupt realignment of prices in many markets to reflect the expected costs of operating in what we now recognize as a more hostile world. these circumstances pose a difficult challenge for business decisionmaking, not so much because the costs are inordinately large, but because the events, which have potentially substantial consequences, are so uncertain. insurance deals with this problem by spreading the risk and converting potential large unknown costs into a steady stream of known insurance premiums that facilitates the forward planning so essential to an effective business operation. obviously, sharp increases in insurance premiums for all forms of businesses are to be expected. some higher