impeded and end - users deprived of valuable services. across all of these concerns, the underlying factors may be either structural or cyclical. and they go wider than the traditional focus of securities regulators on the integrity of transactions in public “ end user ” markets. in practice, the components of individual markets give us a list of things to focus on. a list that goes well beyond firms : products and their distribution in primary markets ; the rules of the game and infrastructure for trading, including the role of market makers ; the infrastructure for post - trade clearing and settlement ; and asset management practices. especially for “ end - user markets ”, these are subjects typically associated with securities market regulation not with mainstream microprudential supervision. i want to bring out that they are, nevertheless, integral to financial stability authorities. under each of those headings, i shall raise a few points that have not featured prominently in recent debates. to be clear, i shall not attempt to cover all important markets. and i shall not address important questions about the role of securities regulators in crisis management, circuit - breakers, or counter - cyclical policies such as varying minimum margin requirements as conditions change. moreover, i must stress that i speak only for myself. the issuance and distribution of securities toxic abs and cdos – cash as well as “ synthetic ” or derivative versions – were at the centre of the crisis. they were not toxic for the financial system because they were risky or, indeed, because many underlying household and business borrowers became overindebted. markets can price ( and ration ) risk they comprehend ( if appropriate requiring yields that inhibit issuance ). they were toxic because they were mispriced ; and they were mispriced in part because they were misunderstood. through the consequent enticements to leverage, that misunderstanding engulfed banks, asset managers, credit insurers and, eventually, the authorities. both dealer - financing markets and end - user markets closed. bis central bankers ’ speeches listing authorities and securities regulation and yet all of those securities were issued and / or distributed under the securities laws and policies of developed countries or financial centres with elaborate securities market regulation. prospectuses or other documentation had to meet regulatory or listing requirements. those requirements were meant to be exacting if the securities were issued onto the public markets. in europe, it seems most issuers of abs and cdos chose to list them in ireland or luxembourg. in many jurisdictions, including the usa,

_ 0904a. pdf see tucker p m w ( 2010 ), “ shadow banking, financing markets and financial stability ”, january 2010. bis central bankers ’ speeches in a world in which regulatory arbitrage is endemic, it is a fact of life that the re - regulation of banks will set up incentives to build banking - like functions in other forms. the import of this for my remarks today is that securities market regulators ( and insurance regulators ) need either to be relaxed about the supervision of shadow banks being transferred to banking supervisors or, alternatively, vigilant about maintaining regimes that do not permit systemic risk to accumulate beyond the perimeter of the banking system. in the uk ’ s planned new regulatory framework, the financial policy committee will be responsible for recommending to the treasury when prudential supervision of a type of firm should shift from the securities regulator to the prudential regulator ( and vice versa ) ; and it will be able to advise the fca on when it needs to revise its rulebook in the interests of stability. different jurisdictions will come up with different arrangements to address this issue, but i would say that every jurisdiction is going to need its own solution. and, perhaps for the first time, that has highlighted the need for some international co - ordination of policies on shadow banks. the fsb is just starting to explore this virgin territory. 21 asset managers and incentives the vast majority of the asset management world is not engaged in shadow banking and, more important, does not of itself jeopardise the stability of the system directly if it gets into trouble. the taking and absorption of risk by unlevered funds is a fundamentally healthy part of the system. but financial stability authorities cannot be indifferent to this industry. by investing in the debt and equity of banks, it is a vital part of market discipline. we do not want – and cannot have – a system where the first line of defence after the management of banks themselves is the cadre of official sector supervisors. for the system to be healthy, we need boards, auditors, equity investors and debt holders to play a big part, and for investment decisions to be subject to constructive incentives. yet, there is relatively little debate about whether the incentives of asset managers made the system more prone to crisis. although not a subject for today, an important part of this is the drive to develop resolution regimes that entail debt holders taking losses on their exposures to distressed banks and dealers. that will create an