a bank to ignore the cost of capital in managing its business, just as it would be irresponsible for a bank to ignore market preferences and forces when choosing its lines of business. increases to the cost of capital do not simply evaporate on a bank ’ s balance sheet, they are passed through to customers in various ways, including in the form of higher costs for financial services or in reduced availability of services available in the market. the cost of bank capital also influences where activities occur, either within the regulatory perimeter of the banking system or in non - bank entities and the broader shadowbanking system. when the cost of a bank engaging in an activity exceeds the cost of performing the same activity in a non - bank, that cost differential creates pressure that over time leads to a shift in these activities to non - bank providers. where does that leave us? achieving good policy requires acknowledging and balancing the benefits and costs of capital requirements, since it is one of the most important inputs policymakers can use to enhance the safety and efficiency of the banking system. relying simply on the “ more is better ” approach downplays or ignores these critically important tradeoffs. when policymakers consider changes to the capital framework, particularly increases of the magnitude contemplated in the proposal, we must carefully weigh the benefit of increased - 4safety from higher capital levels, with the direct costs to banks, and the downstream effects on consumers, businesses, and the broader economy. we must also consider the broader regulatory landscape and how changes to capital regulations may complement, overlap, or conflict with other regulatory requirements. and importantly, we must consider the broader implications for the structure of the u. s. financial system and for financial stability. while these considerations may caution us against capital increases of the magnitude contemplated in the proposal, i do see a potential path forward for capital reform. the path forward as i consider next steps, i am cautiously optimistic that policymakers can work toward a reasonable compromise, one that addresses two of the most critical shortcomings of the proposal : over - calibration and the lack of regulatory tailoring. public feedback has also assisted in identifying the aspects of the proposal that result in the most severe unintended consequences. in my mind, it will be necessary for policymakers to modify the proposal to mitigate these issues and concerns as we move forward. calibration first, i would like to address calibration. the costs of this proposal, if implemented in its current form,

obstacles to achieving a more effective and efficient set of basel capital reforms. unlike many other areas of reform, the impact of changes to bank capital can be analyzed and understood, which provides a much better ability to compare and reconcile the tradeoffs of specific reforms. in many ways, this is one of the empowering aspects of capital reform. in considering a reform, we have a greater capacity to understand and assess the true costs, including both the direct costs to banks and their customers, but also the potential harm to u. s. bank competitiveness in the global economy. the impact data collected from financial institutions subject to this rule describing effects directly linked to the proposed capital reforms - 13 will allow us to consider the combined and aggregate impact, to help us avoid a capital “ end state ” that is overlapping, inefficient, contradictory, and potentially harmful to banks, their customers, and the broader economy. as i have noted, my understanding is that the federal reserve will release its analysis of its findings and some aggregated information for comment. the data collected and released should help public commenters and policymakers assess the impact of the proposal. it should also serve as a guide to assist in shaping the next iteration of this proposal, whether that be in the form of a re - proposal or significantly revised final rule.