turn now to the volcker rule. not to put too fine a point on it, but i believe the regulation implementing the volcker rule is an example of a complex regulation that is not working well. the fundamental premise of the volcker rule is simple : banks with access to the federal safety net — federal deposit insurance corporation insurance and the federal reserve discount window — should not engage in risky, speculative trading for their own account. whatever one ’ s view of this basic premise, it is the law of the land. taking that premise as a given, we have to ask how to improve the framework of the implementing regulation to make it more workable and less burdensome in practice from both a compliance and supervisory perspective. i think we all can agree that the implementing regulation is exceedingly complex. as one example of specifics, among many, the statute and implementing regulation ’ s approach to defining “ market making - related activities ” rests on a number of complex requirements that are difficult or impossible to verify objectively in real time. as a result, banks spend far too much time and energy contemplating whether particular transactions or positions are consistent with the volcker rule. some of you may quite sensibly be asking, “ if the deficiencies of the regulation are so apparent, how did we get here? ” despite the best of intentions in crafting the regulations, no one seems to be happy with the complex rule we wound up with. this has a very positive consequence : i have heard nothing but support from all of my regulatory colleagues for the proposition that the regulation is overly complex and would benefit from streamlining and simplifying to improve its workability in practice. 3 / 6 bis central bankers'speeches we are actively working with our fellow regulators in seeking ways to further tailor and to reduce burden, particularly for firms that do not have large trading operations and do not engage in the sorts of activities that may give rise to proprietary trading. we also appreciate the broad extraterritorial impact of the rule in its current form for foreign banks ’ operations outside of the united states. to that end, we have, with the full cooperation of all five volcker regulatory agencies, picked back up the process that was begun last fall to engage in a rulemaking process subject to the administrative procedures act and develop a proposal for public comment that would make material changes to the volcker rule regulations. in that process we will take account of our own experience with the regulations since implementation, and we also want to take

my federal reserve colleagues and i have termed these the core post - crisis regulatory reforms : capital, liquidity, stress testing, and resolution planning. 1 of course, the obvious and most prominent difference for foreign firms — as attendees of this conference certainly know — was the introduction of the intermediate holding company ( ihc ) structure, to which the post - crisis regulatory reforms apply. in my estimation, these reforms have gone a long way toward meeting our goal of a more resilient financial system. that said, we are now at a point — with ten years of experience in setting up and living with the body of post - crisis regulation — where it is both relevant and timely to examine the post - crisis reforms and identify what is working well and what can be improved. if none of the regulatory measures implemented up to now were capable of improvement, this would be the first project of this scale and complexity conducted that had been done exactly right the first pass through. if there was still work to be done after hammurabi, there is probably still some work to be done now after dodd and frank. in particular, as i have said elsewhere, we should be looking to see where we can achieve our regulatory objectives in ways that maintain our measures ’ effectiveness, but improve their efficiency, transparency, and simplicity. as part of 1 / 6 bis central bankers'speeches that effort, we will consider additional tailoring and flexibility of our regulations in light of their impact on foreign banking organizations ( fbos ) based on lessons learned over the past several years. to illustrate how i am thinking about these issues, i want to focus in my remarks today on two specific regulatory examples. these are, of course, not an exhaustive list of work to be done in the regulation of fbos, but they tend to be near the top of the feedback list from both the industry and supervisors. first, i will discuss the application of enhanced prudential standards to fbos, including our flexibility in implementing certain aspects of these standards. i will also offer some initial thoughts on opportunities for further tailoring that regime for fbos. second is the volcker rule. i will provide some of my initial thinking on how we might be able to improve the volcker rule, both generally and in its application to fbos in particular. enhanced prudential standards in implementing enhanced prudential standards for foreign banks with a large u. s. presence, we sought to ensure that firms hold sufficient local capital and liquidity —