end of the 1980s, more than 200 banks were failing annually, and there were more than 1, 000 other problem banks. this experience provided important lessons and forced supervisors and bankers, alike, to reconsider the way they approached their jobs. for their part, bankers recognized the need to build their capital and reserves, strengthen their internal controls, and improve practices for identifying, underwriting and managing risk. supervisors were also reminded of the need to remain vigilant and of the high costs that bank failures can bring, not only to the insurance fund but to local communities as well. the fdic improvement act of 1991 emphasized that point, requiring frequent examinations and prompt regulatory actions when serious problems emerge. beyond these largely domestic, institutional events, banks and businesses throughout the world were dealing in the 1980s and 1990s with new technologies that were leading to a multitude of new and increasingly complex financial products that changed the nature of banking and financial markets. these technologies have brought many benefits that facilitate more efficient markets and, in turn, greater international trade and economic growth. they may also, however, have raised macro - stability concerns by concentrating the growing volume and complexity of certain activities within a small number of truly global institutions. it is essential that these largest firms adequately manage the related risks of these activities and that they remain adequately supervised. for it is these institutions that have the potential to disrupt worldwide payment systems and contribute most to systemic risk. in addition to the formal supervisory oversight exerted by regulators, concerns may be eased somewhat by the strong counterparty discipline being brought to bear world wide on banks and other financial institutions dealing in these new products. the scrutiny among counterparties in the global market place has contributed to improvements in capital positions and in overall risk management practices. in many ways, u. s. banks have been in the vanguard in applying technological advances to their products, distribution systems, and management processes, with such applications and innovations as atms, home banking, securitizations and credit derivatives. such efforts, combined with greater attention to pricing their services and measuring their risks, have had material effects on the increased strength and profitability that our banks have seen. within the united states, our banking system has also experienced a dramatic consolidation in the number of banking institutions, with the number of independent commercial banking organizations declining from 12, 400 in 1980 to 7, 400 in june of this year. 1 that structural change has also contributed to industry earnings by providing banks with greater opportunities to reduce costs. the challenge

but what does all of this have to do with you? importantly, your being here at the graduate school of banking today means that you have embraced high - road business models for your banks. we need bankers like you to remind us of the positive role that you and your institutions play and how you contribute to the revival of a financial system that serves the goal of common and widespread prosperity. the path that we collectively travel is influenced by the fact that we live in a society populated by institutions with radically different business models : the low - road models can be incredibly large and complex or they can be small and predatory. because there are costs associated with financial regulation, i am advocating that we understand the public benefits that the financial activity dictated by the model is intended to deliver. is this our regulatory fate, to be weighed down as a society with the costs and burdens of regulating the complexity of our financial sector while promoting the public benefit of traditional community banking at the same time? i will not be able to supply you an answer in the next two minutes, but i will give you one small part of an answer. and that part is you. you are an essential ingredient for bringing innovation to real banking. innovation comes in many forms, of course. to give one example, technology is revolutionizing banking, and that does not apply only to the largest banks. depending on how old you are, you may take the ubiquity of technology for granted. but when i reflect on what i ’ ve seen and how different my teenagers ’ world is than the one that i grew up in, i can tell you that the pace of technological development in my own lifetime has been breathtaking. at the risk of dating myself, we have moved from a time when we still wrote our college term papers on typewriters to a time when the processing power of the phones in our pockets and purses is making even desktop computers increasingly irrelevant. ( by the way, if you ’ re wondering what a typewriter is, you can look it up on your smartphone. ) not surprisingly, banks have taken advantage of this trend and developed tools and systems to enhance both customer service and internal operations. think about your own banks and how you interface with your customers. a number of customers may still prefer the personal touch of coming into the branch, but i ’ m also willing to bet that an increasing number of your bis central bankers ’ speeches customers expect to be able do business electronically when it is convenient for them, not