exogenous forces, this might not be surprising. indeed, similar observations were made in the late 1990s as the deregulatory forces that culminated in the gramm - leach - bliley act ( glba ) led to predictions of a few “ financial supermarkets ” that would offer the full range of financial services to all customers. more recently, industry analysts and commenters have pointed to the range of capital and liquidity regulations that may be pushing firms toward the same target state business model where large firms provide a wider range of financial services. if true, an obvious follow - up question is whether this should be a concern from a supervisory and regulatory perspective. today, i will discuss the premise that large banks in the u. s. have indeed become more similar and then consider some reasons why this might be a topic of interest for the official sector. i can think of several compelling microprudential and macroprudential reasons why this would be the case : the need for an appropriate risk management framework that is commensurate with evolving risks ; the need for supervisors to ensure that our assessments are 1 / 5 bis central bankers'speeches proactive and flexible enough to evaluate evolving firms ; the potential for similar firms to become “ systemic as a herd, ” where a given shock leads to correlated responses and large - scale disruption in the provision of financial services ; and the potential for firms to move away from areas of comparative advantage, which could diminish the overall efficacy of the financial sector. i ’ ll conclude with some implications for our supervisory regime. environmental context the performance of financial firms in the decade since the financial crisis has been influenced by a broad range of external forces. i ’ ll focus on three factors impacting how financial services are provided and their impact on large firm similarity : the regulatory response to the financial crisis, the interest rate environment, and technological innovation. regulation the u. s. official sector has taken meaningful steps since the financial crisis to promote greater resiliency and stronger risk management at the largest firms. 3 this includes : a greater focus on both the quantity and quality of loss - absorbing capital ; standards that focus on both short - term and long - term liquidity management and positions ; activity restrictions ; enhanced risk management standards and expectations ; and new resolution and recovery regimes. 4 i will focus on the capital side, where the largest banks face a number of regulatory standards and supervisory expectations that impact both capital positions and the firms ’ capital planning process. the

a question about how correlated the firms other positions are to the risks the hedge fund is taking. it goes beyond the firm's direct credit exposure to the hedge fund, to the fund's overall risk profile. large hedge funds typically use multiple prime brokers, and they are, of course, reluctant to disclose to those institutions real time information on their overall positions and trading strategies. so the banks and investment banks do not generally know what their overall exposure to credit and market risks might be in the event that a large fund is forced to liquidate positions. this knowledge gap has led many to advocate the provision of information on actual positions of the major funds, perhaps aggregated by a third party. according to the proponents, this would help market participants and regulators to identify potential concentrations or crowded trades, and that knowledge would help diffuse them before they became a problem. this type of transparency has understandable and enduring appeal, but it is unachievable. there is no feasible way to try to capture in real time the rapidly changing exposures of different institutions to different risks in any meaningful fashion. no one with access to that information could make sensible judgments about the level and nature of actual concentrations and whether the risks are excessive. we continue to explore ways in which the provision of greater information to counterparties and to the markets more generally could help reduce vulnerability to financial crises. for now, though, the practical limitations on achieving greater transparency underscore the importance strengthening the robustness of the shock absorbers in the financial system. we are not likely to ever be in a position where we have the capacity to identify the source and estimate the probability of future financial shocks. and policy makers are unlikely to ever be in a position to diffuse concentrations of risk or crowded trades ahead of a crisis. the most sensible thing we can do is to improve the capacity of the core of the financial system to handle adversity, and this requires continued focus on improving the strength of the capital and liquidity cushions, as well as the market infrastructure. let me end with a few quick thoughts on the role of monetary policy in this context. can monetary policy play a pre - emptive role in reducing the vulnerability of financial markets to the type of dynamic we saw in 1987 and 1998? central banks cannot realistically hold out the prospect of using monetary policy to prevent asset price bubbles, conditions of " excess " leverage in parts of the financial system, or other factors in markets that might lead to the types of positive feedback