that teaching and scholarship should highlight the sifi problem, appraise the regulatory approach toward such institutions since the crisis, and consider alternatives. an appraisal of whether more or, as some would have it, fewer measures are needed under the approach taken in the dodd - frank act and related regulatory actions will, i admit, be a little challenging. some measures — including stress testing, capital requirements, and resolution planning — are still in train, and others may be forthcoming as a result of the research program 2 / 8 bis central bankers'speeches the federal reserve is launching to consider the potential for additional explicitly macroprudential features in capital and liquidity stress testing. 3 still, i think it is feasible to teach and assess the general approach of using multiple regulatory tools that impose requirements that force systemically important firms to internalize the costs their distress or failure would impose on the financial system, and then leaving the regulated firms to make decisions as to how to alter their size and activities in order to make themselves most profitable within the stricter regulatory constraints. this approach can be usefully compared to structural or other approaches to the sifi issue, such as caps on overall size or reimposition of the glass - steagall separation of commercial and investment banking. in addressing this topic, i have found it useful to try to specify as clearly as possible the adverse systemic consequences that may be feared by public authorities confronting the possible failure of a systemically important institution. this exercise helps identify the regulatory measures that would be most effective in promoting the resiliency and orderly resolvability of such institutions. on virtually any short list of concerns would be reliance on short - term wholesale funding sources, which may dry up quickly under stressed conditions. a firm with inadequate sources of liquidity may then be forced into responses with systemic implications, such as fire sales of assets and termination of credit extensions to their own counterparties. the other major vulnerability revealed by the financial crisis was systemic risk that may be created through so - called shadow banking activities — that is, credit intermediation outside the prudentially regulated banking system. here is where the integration of traditional lending and capital markets is most clearly in evidence, albeit in quite different ways. in truth, many shadow banking channels passed through prudentially regulated institutions, as with the notorious structured investment vehicles and asset - backed commercial paper conduits. changes in accounting and in bank capital and liquidity requirements have done a great deal to guard against

to strengthen cross - border and cross - sectoral co - operation between supervisors, to enhance convergence in supervisory practices and to reinforce collaboration between supervisory and central banking functions. the eurosystem supports these conclusions. there are clear benefits in keeping supervision close to the institutions being overseen at the national level, while financial integration requires co - operation between the relevant authorities to be stepped up. in my view, positive developments have already occurred in the implementation of these recommendations. for example, the banking supervision committee of the european system of central banks – chaired by deutsche bundesbank directorate member edgar meister – has enhanced and continues to develop its regular monitoring of the soundness of the european union banking system as a whole, as well as its analysis of structural banking and financial developments. these activities rely extensively on the close and constructive co - operation established within the committee between central banks and banking supervisory authorities. indeed, the eurosystem regards the promotion of co - operation between central banks and supervisory authorities as one of its main contributions in the field of prudential supervision. however, the full implementation of the “ brouwer recommendations ” requires additional work in order to establish an effective information exchange – both in times of calm and in times of crisis – and to achieve further convergence in supervisory practices. in addition to the financial stability considerations, the issue of supervisory co - operation also needs to be looked at from the angle of the efficiency of the financial system. indeed, increasing attention is being paid by policy - makers and market participants to the remaining inefficiencies in the financial sector and the residual obstacles to financial integration. for instance, the recent “ gyllenhammar report ” drew attention to the need for greater standardisation of supervisory compliance requirements and practices because of the cost burden on financial institutions developing cross - border businesses. these conclusions were further reinforced in the recent report by the economic and financial committee under the chairmanship of yet another compatriot of mine – kees van dijkhuizen, the dutch treasurer - general. in a similar quest for greater efficiency, considerable attention has also been paid to the community regulatory process, with emphasis on the need to achieve swift rule - making and consistent implementation in different member states. the recent institutional agreement achieved on the implementation of the “ lamfalussy procedures ” represents a major step forward in the field of securities regulation. it removes the burden of detailed and cumbersome regulation at the community level by delegating rule - making powers to a