the authorities considered it necessary to make that call. since the nationalisation of anglo irish bank, the regulator here has adopted what has been termed an “ intrusive ” approach to supervision of the main firms. this involves on - site presence on a daily basis by several regulatory staff in each of the institutions covered by the government guarantee. they have been sitting in as observers on key decision - making committees in each of these banks as well as conducting a number of specific investigations and reviews. meanwhile, more recently we have been re - engaging with the business of understanding the portfolios of these institutions in greater depth. the assets going into nama are of course being subjected to an intensive due diligence exercise which the regulator is not duplicating ; our main focus now is on the rest of the business. as you know, the new head of financial supervision, matthew elderfield, will be starting in a few weeks. he brings his own considerable experience and skills to upgrading and restructuring regulation in ireland on a risk - based basis. we are together planning details of the new structures and approaches that will be adopted in what is rapidly becoming a unitary central banking organisation without artificial and unnecessary internal barriers. it may not be sufficiently recognised just how much restructuring and strengthening there has already been. i find that of the team dealing with the domestic banks as many of seventeen staff members – or about half of the total – were externally recruited within the past year or so, with management and staff moved in from entirely different parts of the organisation since the severity of the crisis became evident around the time of bear stearns. the decision, which predates my arrival, to make a fresh start in this area was clearly a sound one. actually, my personal impression is that, while we will undoubtedly continue to be much more hands - on than in the past, the style of engagement currently being practiced, while appropriate now, will probably not be quite the right approach as a supervisory model for the long term. when things settle, as they will over the coming months, we need to make the transition to a more sustainable and effective way of operating, one that is calibrated to the risks posed by the different firms in the sector. this will involve applying the existing rulebook, strengthened as necessary to plug the holes revealed by the crisis, with a renewed clarity of principles that will serve to back - up and amplify these rules to deal with unforeseen loopholes and blockages. in recent years

securities - lending transactions. resolution a key component of the framework to achieve the resolution of large financial institutions without disrupting the financial system will be new “ bail - in ” debt and preferred - share instruments, which can be converted to common equity to absorb losses should the institution come under stress. 17 these instruments will be issued in large amounts and will have equity - like characteristics that pension funds may find attractive. shadow banking the shadow banking reforms can be viewed through two lenses : ( i ) financial market activities, particularly, repos, securities lending and securitization ; and ( ii ) less regulated financial institutions, such as money market funds, finance companies, hedge funds and managed - asset funds. because the sector is so heterogeneous, broad regulatory principles, rather than explicit reforms, have been developed that jurisdictions can apply to mitigate systemic risk – namely, to reduce procyclical behaviour and the likelihood of runs. these principles focus on reducing four sources of systemic risk : excess leverage ; undue liquidity and maturity transformation ; imperfect credit risk transfer due to incentive problems ; and a lack of transparency. it is important to stress that pension funds, while a type of managed asset fund, are not normally considered to be a source of systemic risk, despite providing non - bank financial intermediation, because these four sources of systemic risk are generally not present. nonetheless, pension funds will be affected by these shadow banking requirements to the extent that they engage in these activities or interact with these institutions. in particular, certain repo and securities - lending transactions will be subject to minimum haircuts to reduce procyclicality. central counterparties for repos and over - the - counter derivatives for repo and derivatives transactions, central counterparties reduce common counterparty exposures and systemic risk. we are encouraging some of the largest and most active pension funds in the canadian repo market to become direct clearing members of the canadian derivatives clearing service ( cdcs ), the central counterparty ( ccp ) owned by tmx group. the goal is to allow the large pension funds to participate directly in cdcs in a way that permits risk to be managed without requiring them to be subject to mutualized losssharing arrangements. less - active pension funds should become indirect clearers through a dealer to realize these benefits. such participation will greatly enhance the resilience of the repo market. similarly, pension funds should clear interest rate swaps through a bank that is a clearing member of