. beyond capital and liquidity, the federal reserve has increased its focus on risk management practices at the largest and most systemically important financial institutions. we learned from the crisis that risk management in the financial services industry had not always kept pace with changing market practices. we have responded in several ways. for example, we have paid greater supervisory attention to corporate governance. we significantly increased the depth and frequency of interaction between senior supervisors from the federal reserve and directors and executives at banks. this supplements our ongoing assessment of management ’ s oversight of risk. our review entails a critical analysis not only of firm policies, procedures and limits, but also of the quality of the risk reports escalated to senior management, the capabilities of the firm ’ s risk monitoring program, and the adequacy of control functions. we have also increased our enforcement activity for violations of law or unsafe or unsound conduct. since 2009 the federal reserve has taken 36 public enforcement actions against institutions supervised by the new york fed, which included $ 1. 2 billion in fines. on top of this, five firms supervised by the new york fed paid $ 1. 3 billion into a qualified settlement fund for mortgage borrowers, and the same five institutions were required to provide over $ 2 billion in other foreclosure prevention assistance. these statistics do not include nonpublic enforcement actions, including restrictions on the further growth of banks that do not have satisfactory risk management regimes. and, earlier this year, we assisted in consigning the concept of “ too big to jail ” to history when credit suisse and bnp paribas pleaded guilty to criminal charges. i am gratified that the attorney general and the united states attorney for the southern district of new york have acknowledged the work of the federal reserve in supporting our law enforcement partners. 10 the new york fed has also devoted significant resources and attention to the reform of bank culture and conduct. increased capital and liquidity are important tools to promote financial stability, but in the end a bank is only as trustworthy as the people who work within it. i have personally delivered a strong message that the culture of wall street is unacceptable. 11 bad conduct by bankers damages the public trust placed in banks. in my view, this loss of trust is so severe that it has become a financial stability concern. if bad behavior persists, it would not be unreasonable – and may even be inevitable – for one to conclude that large firms are too big and complex to manage effectively

for monetary policy to sustain the domestic conditions for price stability. financial systems are substantially stronger. bank capital ratios now provide a significantly larger cushion against potential losses – though capital ratios in asian banking sectors are still generally lower than those in other emerging economies. the quality of bank assets has improved. nonperforming loans, estimated to have peaked at between one - quarter and three - quarters of total loans in the crisis countries, are now under 10 percent of total loans. financial institutions that required government intervention have largely been restored to private ownership. domestic capital markets are an increasingly important channel of intermediation in financial systems that had historically been dominated by banks. these are impressive achievements by any measure. and the changes that have taken place provide a strong foundation for future growth and they make it much less likely that these economies will be vulnerable to the type of crises of a decade ago. this progress is reflected in a broad range of financial market indicators of risk. risk premia in domestic interest rates markets are low. spreads on remaining dollar - denominated debt have fallen to levels that reflect little concern about future financial stress. it is important to bear in mind that some of the most dramatic changes in the performance of asian and other emerging market economies have taken place in an unusually benign economic environment. the past four years have marked the strongest sustained period of growth for several decades. global interest rates have been relatively low. asset prices in many markets have been rising for a sustained period of time. volatility in equity, interest rate and foreign exchange markets has fallen to unusually low levels, and although we ’ ve seen the occasional sharp correction in some markets, recovery has typically been quick. these favorable conditions make everything look somewhat better than it otherwise would. but the improvements in asia are real, and they will make the region more resilient in the face of future challenges. the challenges ahead even with the relative prosperity of the recent past, policy in much of the region reflects substantial ambivalence about the risks that come with financial openness. the memory of the trauma of the crisis explains much of this ambivalence. the difficulties in managing this more recent period of substantial capital inflows provides an additional source of unease. policy regimes across the region are to a significant degree directed at providing some insulation for the domestic economy from what is considered a volatile global financial environment. this impulse reflects itself in many different ways. it is manifested in exchange rate regimes that still permit relatively limited variability against the dollar