bank that meets the qualifying internal infrastructure standards for risk measurement and management could choose to apply these versions of basel ii. we anticipate another ten or so large banks may opt to do so voluntarily because of the greater risk sensitivity it affords. these banks may also make this choice for prestige or competitive reasons, as counterparties look for indications of technical risk measurement skills at the large banking entities with which they deal. u. s. authorities have agreed to implement only the most advanced basel ii options and to limit the number of required participants. first and foremost, the decision reflects a balancing of costs and benefits. any change is expensive, and the advanced approaches are very costly to implement. the overwhelming majority of banks in this country are well capitalized and well managed under the current modified basel i, and smaller banks are forced by markets to hold capital considerably above the well - capitalized level, so the cost - benefit ratio of requiring more of our banks to adopt some version of basel ii is tilted, for most banks, very strongly against the desirability of change. when we then add to the equation the fact that it is primarily the megabanks whose operations seem inconsistent with the current capital regime, the decision to limit the scope of application appeared even more clear - cut. moreover, with our concern about shortfalls of the current regime focused on the complex, large, internationally active banks - - and the desirability, on grounds of safety and soundness and macroeconomic stability, to see the best practice risk - management techniques applied to these entities - - the decision to deploy only the most sophisticated version of basel ii also seemed obvious to us. you may also recall that an important objective of both basel i and basel ii is to create cross - border competitive equality, reducing in our minds the necessity of requiring basel rules to be applied to smaller banks that do not compete in international markets. although u. s. regulators have for some time signaled that basel ii would apply only to the largest banks, questions have been raised about the implication for those banks that are not a - irb candidates. let me share with you our evaluation of what the implications may be for banks that will not be required to adopt basel ii and that opt to remain under basel i. no bright line marks the separation between the groups of institutions that we refer to as large, complex, internationally active banks ( those that would be required to follow the advanced basel ii ), other large, complex banks ( some of which we

obviously, falling into financial distress is not solely the result of lack of knowledge about finance. but in many cases such knowledge could avoid or ameliorate the negative consequences of uninformed decisions. thus, in considering means by which to improve the financial status of families, education can play an important role. while data to measure the efficacy of financial education are not plentiful, the limited research available is encouraging. for example, a recent study by one of the nation's largest purchasers of home mortgages finds that homebuyers who obtain structured homeownership education have reduced rates of loan delinquency. similarly, an evaluation conducted by the national endowment for financial education on its high - school - based programs found that participation in financial - planning programs improved students'knowledge, behavior, and confidence with respect to personal finance, with nearly half of participants beginning to save more as a result of the program. another study of the relationship between financial behavior and financial outcomes revealed that comprehension of the general principles of sound financial behavior, such as budgeting and saving, is actually more beneficial in producing successful financial results over time than specific and detailed information on financial transactions. these findings underscore the importance of beginning the learning process as early as possible. indeed, in many respects, improving basic financial education at the elementary and secondary school level can provide a foundation for financial literacy, helping younger people avoid poor financial decisions that can take years to overcome. in particular, competency in mathematics - both in numerical manipulation and in understanding its conceptual foundations - enhances a person's ability to handle the more ambiguous and qualitative relationships that dominate our day - to - day decisionmaking. for example, through an understanding of compounding interest, one can appreciate the cumulative benefit of routine saving. similarly, learning how to conduct research in a library or on the internet can be instructive in where and how to look for information to evaluate decisions. educational efforts to improve fundamental mathematic and problem - solving skills can foster knowledgeable consumers who can take full advantage of the sophisticated financial services offered in an ever - changing marketplace. many of you are involved in institutions that are working hard to enhance basic education about economics and finance, and it is a challenge the federal reserve takes seriously as well. gary stern, president of the minneapolis federal reserve bank, has been an inspiration in the fed as well as within national council on economic education. the economic educators of the federal reserve system have recently launched