. ” ) why was america ’ s central bank given this unique structure? the reason was to provide legitimacy and a broad geographic presence across the nation for an institution that often has to make difficult decisions. over time, this structure has provided the federal reserve with grassroots connections, local insights, and diverse perspectives that few other federal institutions enjoy. we are always looking for opportunities to interact with and learn from community bankers. events like this one are an important venue for exchanging ideas, as i ’ ve mentioned, but there are many others. for example, community bankers sit on our federal advisory council, which meets with the board of governors for three mornings each year to discuss developments in the economy and in the banking industry. we meet on a similar schedule with a second official council, the thrift institutions advisory council, which brings together thrifts, saving banks, and a variety of other depository institutions, most of them smaller, from around the country. in addition, community bankers sit on the boards and the advisory councils of the fed ’ s 12 regional reserve banks and 24 reserve bank branches. both the board and the reserve banks organize regular meetings involving community banks and a range of other participants. for example, the reserve banks are meeting with community bankers, community development organizations, and other stakeholders to discuss barriers to and opportunities for extending credit to small businesses. of course, many of our regular interactions with community banks arise from our oversight of bank holding companies and state - chartered banks that choose to join the federal reserve system. this supervision is guided by the board, but conducted day - to - day by the reserve banks and their examiners, many of whom have lived and worked within the districts they serve for many years. we believe this approach ensures that federal reserve supervision of community banks is consistent and disciplined but also reflects a local perspective that can take account of differences in regional economic conditions. for example, in the midwest, where many community banks specialize in agricultural lending, federal reserve examiners maintain a special expertise in the agricultural economy and the associated lending practices. they also draw frequently on the expertise of regional and agricultural economists in the districts to maintain an up - to - date understanding of local conditions. so while many bankers tell us that federal reserve examiners are analytical and tough, few tell us that they are unfair or uninformed about what ’ s going on in the local economy. we believe that this kind of response speaks to the effectiveness of our supervisory program for community banks, and we take pride

basel concordat. the concordat emphasises the general responsibility of home country authorities to supervise banks'worldwide consolidated activities, as well as the host country responsibility to supervise foreign bank establishments in their territories as individual institutions. our emphasis on market and self discipline and our less prescriptive regulation has led to new zealand's supervisory and regulatory activity neatly complementing that of apra and the other home supervisors with whom we share banks. in fact, we feel that new zealand leads the world in home / host dovetailing from the host viewpoint within the very general framework provided by the basel concordat. when it is done well, both home and host supervisors can benefit in obvious ways from each other's supervision. in new zealand, we openly acknowledge the benefit that our financial system derives from the role played by apra, and the other home - country regulators. however, we are also keenly aware that the interests of home and host supervisors can and do diverge, and that these divergences lead to differences in the style and substance of supervision and regulation. moreover, these differences are likely to manifest themselves most sharply in the very pressured circumstances that a distressed bank brings. such differences include : • different statutory objectives. for example some supervisors have depositor protection as their main objective, while others have soundness and stability. • how capital should be allocated. each supervisory authority would like to see as much capital reside within its own jurisdiction as possible. • how risk should be allocated. each supervisory authority would prefer that the risk resides outside its own system. • each supervisory authority is only responsible for financial stability in its own system. the effects on the financial systems of other jurisdictions of any actions taken to manage a bank failure in one's own jurisdiction are likely to be considered second order. • different views on appropriate techniques for responding to bank stress. • different perceptions of when a crisis is systemic - a particular risk when the subsidiary plays a much larger role in the host system than the parent plays in the home system. • each system may also be subject to different destabilising influences. these differences are not straightforward to resolve when there is a largely bilateral relationship between home and host countries, of the kind faced by new zealand. for these reasons, and in the absence of any fair and formalised, operationally and legally robust, international framework, a host authority would not purely rely on the home authority to protect the host financial system. all supervisors'actions are ultimately bounded by the legislation