its own, with little prospect for self - correction. moving with maximum speed against this backdrop, policymakers at the federal reserve acted swiftly and unreservedly in an effort to break the damaging psychology that was taking hold. the series of policy actions announced over the past month – both conventional and unconventional – reflected a full recognition that the current shock is qualitatively different from the financial crisis of 2008, without a culprit other than the virus itself. unconstrained by a diagnosis of who was to blame – and considering the mounting downside risks – the speed and scale of the policy response was free to match the dimensions of the unfolding shock. i won ’ t review all of the actions that the fed has taken over the past month – they are well documented elsewhere – but i would like to note of the breadth of activity to stabilize the financial 1 / 4 bis central bankers'speeches system and to support the flow of credit, both within and outside banking system. to that end, i ’ ll describe a few of the lending and credit facilities that the new york fed is charged with standing up to supply credit for households, businesses, and state and local governments : commercial paper funding facility by the middle of march, unusually high funding needs and pullbacks by key lenders of short - term funds led to surging rates in the market for commercial paper, or short - term ious issued by businesses and municipalities. interest rates on longer - term commercial paper, in particular, rose to levels not seen since the financial crisis of 2008. many issuers were reportedly unable to place commercial paper with a term of longer than a week, leading to increased risk that companies would not be able to fund basic operational needs, such as meeting payrolls or financing inventories. with backing from the u. s. treasury, the federal reserve established the commercial paper funding facility as a funding vehicle that can purchase new issuance of commercial paper from highly rated businesses and municipalities, and certain issuers that were downgraded after the virus shock. by providing assurances to issuers and investors that retiring commercial paper can be replaced with new issuance, the facility will promote confidence in the market and support the flow of credit to businesses and municipalities. corporate credit facilities ( ccfs ) at the same time that short - term commercial paper markets were nearly frozen, so too were markets for longer - term corporate borrowing – at precisely the moment when companies most needed a financing buffer. borrowing rates for investment -

had a clear insight into the financial health of their counterparties. although each market participant could calculate its bilateral exposures to a particular dealer and the particular dealer could understand its own exposure to each of its own counterparties, this didn ’ t answer the broader question : how exposed were the clients and dealers to others in the financial system through their derivatives trades and other open positions? because there was no easy way to know who was in difficulty or not, the incentives were all on the side of assuming the worse – closing out open trades, hoarding liquidity, and retreating to the sidelines. the crisis had made it crystal clear that the regulatory regime had not kept pace with the rapid growth of the global otc derivatives market. in assessing the shortcomings of the otc derivatives market after the crisis, a global consensus has been reached. although i will be over - simplifying in the interest of time, i view the following aspects of reform as the most important. first, there have to be strong incentives in the system – such as capital requirements on banks and securities dealers – to provide an impetus for dealers to standardize otc derivatives trades whenever practical. the goal is fewer bespoke trades and more standardized trades. second, the g20 leaders agreed that all standardized otc derivative trades should be mandatorily cleared through ccps by the end of 2012. third, records for all otc derivative trades – including bilateral bespoke trades – must be reported to trade repositories. the data as part of this reporting requirement would include key trade attributes and a legal entity identifier so that aggregate exposures could be readily calculated. fourth, the two standard - setting bodies mentioned earlier – cpss and iosco – would strengthen and broaden the principles for financial market infrastructures. fifth, these principles would be adopted globally, strengthening the resilience of the financial system. the logic behind these five elements of reform goes like this : standardizing trades improves transparency and price discovery. this mitigates the opaqueness that helped to generate the illiquidity and loss of market function evident during the crisis. requiring that such trades be cleared through ccps is designed to reduce the aggregate amount of risk in the system. that is because the gross exposures can be netted down when all the dealers clear through one common central clearing party. in a ccp framework, the bilateral exposures of each dealer to one another are replaced by a single set of claims