, it is my hope and expectation that we will learn more about how to use market discipline both to strengthen our banking system and to avoid additional regulation and supervision of global financial institutions. at the federal reserve, we plan, however, to require that at least the large, complex banking organizations establish and implement a disclosure policy to provide stakeholders with information that can be used to evaluate the organization ’ s risk profile. our examiners, as part of both the holding company inspection and the state member bank examination, will review and evaluate such disclosures for their conformance to best practices and their contribution to stakeholders ’ understanding of their risk at that organization. we should all be aware that additional public disclosure is not a free good, especially if it works. banks will find that additional market discipline constrains their options, and supervisors will be concerned about creditors ’ response to bad news. but both constrained options and swift market punishment are part of the desired effect of market discipline. supervision if, and i underline “ if ”, ( 1 ) banking organizations develop working, verifiable, and reasonably accurate methods of evaluating and categorizing credit risks ( 2 ) capital requirements are linked tightly to those risks ( 3 ) public disclosures induce realistic market discipline and ( 4 ) market, operational, and legal risks are under control, then the direction for supervisors seems reasonably clear : to validate systems, policies, and procedures. now, i have purposely set up a straw man so that we can all appreciate how much work remains to be done. despite the many tasks that lie ahead, the path that i believe we are on will, i think, lead to supervisory efforts that focus on a bank ’ s management information and risk - management systems and on providing management with evaluations and criticisms designed to improve those systems. to be sure, transactions - testing will remain an important effort. but, critically, the safety and soundness of the bank will depend on how well its risk - management systems work, the judgment its management brings to bear in using those systems, and the effectiveness of market discipline. it will, i think, increasingly be the job of the supervisor of global financial organizations to evaluate and test systems and to evaluate and criticize the accuracy and helpfulness of the information banks disclose about their own risk profiles. internal systems and public disclosure, in short, are the real first line of defense. the only alternative for the large and complex banking organization, as i have noted, is intrusiveness

ben s bernanke : brief remarks speech by mr ben s bernanke, chairman of the board of governors of the federal reserve system, at the united states - mexico chamber of commerce annual gala, washington dc, 12 may 2011. * * * good evening. i am very pleased to join the united states - mexico chamber of commerce at this gala dinner as its members look back on another year of working to build the mutually beneficial trade and investment relationship between our two countries. the ties between mexico and the united states, both economic and cultural, are close and enduring – in no small part, i am sure, because of the nearly 40 years of effort by the chamber. thus, i am especially honored to join agustin carstens, the distinguished governor of the bank of mexico, in receiving your good neighbor award. thank you very much. muchisimas gracias. i have benefited from many years of contact and shared experiences with agustin and his colleagues at the central bank of mexico. some years ago, i had the opportunity to visit the bank of mexico. as an economist, i found the visit very stimulating. but i must confess that i enjoyed the trip as much for the cultural excursions as for the economics. i remember in particular the beauty of diego rivera ’ s monumental mural in the national palace in mexico city. as with so many things, i credit my wife, anna, who has a graduate degree in latin american literature, for my greater - than - average appreciation for the arts of mexico and the other latin american nations. perhaps agustin might also credit his spouse, the writer catherine mansell carstens, for an appreciation of culture that encompasses both of our nations. i met agustin not long after i came to washington to serve on the federal reserve board. he was then a highly regarded deputy managing director of the international monetary fund. in late 2006, not long after i became chairman, he became finance minister of mexico, and last year he succeeded guillermo ortiz as governor of the bank of mexico. we have had many opportunities to meet and share views about the u. s., mexican, and global economies. my appreciation for his wisdom and insight as an economist and policymaker has grown with each encounter. our productive and, i hope, mutually beneficial relationship reflects the close relationship of the united states and mexico. our countries are tightly linked through trade. the united states is by far mexico ’ s largest trading partner, accounting for about two - thirds of total mexican merchandise trade.