in the banking system. we have also taken steps to reduce risks posed by the use of short - term wholesale funding by actors outside the banking system. these include leading an effort to reduce reliance by borrowers in the tri - party repo market on intraday credit from clearing banks and increasing the regulatory charges on key forms of credit and liquidity support that banks provide to shadow banks. in part because of these actions and in part because of market adjustments, there is less risk embedded in short - term wholesale funding markets today than in the period immediately preceding the financial crisis. the short - term wholesale funding markets are generally smaller, the average maturity of short - term funding arrangements is moderately greater, and collateral haircuts are more conservative. in addition, the banking organizations that are the major intermediaries in short - term wholesale funding markets are much more resilient based on the measures i discussed earlier. nevertheless, we believe that more needs to be done to guard against short - term wholesale funding risks. while the total amount of short - term wholesale funding is lower today than immediately before the crisis, volumes are still large relative to the size of the financial system. furthermore, some of the factors that account for the reduction in short - term wholesale funding volumes, such as the unusually flat yield curve environment and lingering risk aversion from the crisis, are likely to prove transitory. federal reserve staff is currently working on three sets of initiatives to address residual short - term wholesale funding risks. as discussed above, the first is a proposal to incorporate the use of short - term wholesale funding into the risk - based capital surcharge applicable to u. s. gsibs. the second involves proposed modifications to the bcbs ’ s net stable funding ratio ( nsfr ) standard to strengthen liquidity requirements that apply when a bank acts as a provider of short - term funding to other market participants. the third is numerical floors for collateral haircuts in securities financing transactions ( sfts ) – including repos and reverse repos, securities lending and borrowing, and securities margin lending. modifications to the nsfr could be designed to help address the types of concerns described in my previous testimony regarding sft matched book activity. in the classic fact pattern, a matched book dealer uses sfts to borrow on a short - term basis from a cash investor, such as a money market mutual fund, to finance a short - term sft loan to a client, such as a leveraged investment fund. the

all financial companies. under the proposal, financial companies subject to the concentration limit would include insured depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and nonbank financial companies designated by the fsoc for federal reserve supervision. consistent with section 622, the proposal generally defines liabilities of a financial company as the difference between its risk - weighted assets, as adjusted to reflect exposures deducted from regulatory capital, and its total regulatory capital. firms not subject to consolidated risk - based capital rules would measure liabilities using generally accepted accounting standards. we anticipate finalizing this rule in the near term. credit risk retention section 941 of the dodd - frank act requires firms generally to retain credit risk in securitization transactions they sponsor. retaining credit risk creates incentives for securitizers to monitor closely the quality of the assets underlying a securitization transaction and discourages unsafe and unsound underwriting practices by originators. in august 2013, the federal reserve, along with several other agencies, revised a proposal from 2011 to implement section 941. the federal reserve is working with the other agencies charged by the dodd - frank act with implementing this rule to complete it in the coming months. rationalizing the regulatory framework for community banks before closing, i would like to discuss the federal reserve ’ s ongoing efforts to minimize regulatory burden consistent with the effective implementation of our statutory responsibilities for community banks, given the important role they play within our communities. over the past few decades, community banks have substantially reduced their presence in lines of businesses such as consumer lending in the face of competition from larger banks benefiting from economies of scale. today, as a group, their most important forms of lending are to small - and medium - sized businesses. smaller community banks – those with less than $ 1 billion in assets – account for nearly one - fourth of commercial and industrial lending, and nearly 40 percent of commercial real estate lending, to small - and medium - sized businesses, despite their having less than 10 percent of total commercial banking assets. these figures reveal the importance of community banks to local economies and the damage that could result if these banks were unable to continue operating within their communities. banking regulators have taken many steps to try to avoid unnecessary regulatory costs for community banks, such as fashioning more basic supervisory expectations for smaller, less complex banks and identifying which provisions of new regulations are relevant to smaller banks. in