rather to weigh the severity of the specific problem with the effectiveness of how your control processes worked. did you discover the problem yourself? did you communicate with us at an early stage? did you set in motion a careful effort to fully understand the issue and its ramifications? did you learn from a specific problem to make broader changes that would allow your organization to be more proactive, rather than reactive, going forward? while the onus is clearly on the firm to carry out these various steps, our awareness of what is taking place often makes the process work much more smoothly and effectively. in turn, the federal reserve should aim to become more transparent in our conveyance of supervisory expectations. • through the exam process, we provide feedback to specific institutions, including comments directed at areas where we would expect continuing compliance risk management improvements. most of this communication is, of course, a highly confidential dialogue between the supervisor and each supervised institution. • as i mentioned when firm - specific problems are severe enough, we may take a public enforcement action. professionals in the compliance risk management arena will find it valuable to keep track of actions issued by the agencies. although a public action is levied on a firm - specific basis, it could hold a larger implication for the rest of the industry about issues where supervisors may be particularly focusing their attention. it could also signal an area where other banks may find similar weaknesses. • when a fundamental change is expected on a widespread basis, we don ’ t convey our expectations by using public actions against individual firms. in these cases, the federal reserve will disseminate information by issuing written guidance, or by communicating its high - level findings from horizontal reviews of bank operations which may help the industry adjust its practices. i will leave you with two brief final points. • first, we all need to assume that managing legal and reputational risk will remain a challenge going forward. it is highly unlikely that the rapid pace of innovation and crossborder expansion will slow down, and further legal and regulatory changes are always to be expected. • but second, and to end on a positive note, i do think that the interests of the private sector in maintaining the long - term integrity of franchises - and the official sector - in ensuring integrity of market practices - significantly coincide. this should encourage continued collaboration and dialogue and a more transparent and effective approach to the setting of expectations and developing of standards. thank you very much.

experts fly in and fly out? if certain compliance tasks are outsourced, is bank management providing effective oversight? vendors must be scrutinized and, very simply, outsourcing cannot diminish, in any way, the firm ’ s accountability. these objectives may be met through a variety of organizational models, depending on factors such as the size and nature of each bank ’ s businesses, its geographical scope, its culture and existing reporting lines, and the legal and regulatory framework in which it operates. there is no “ one - size - fitsall ” organizational model that we require or even expect. implications for supervisory authorities let me now offer a few key principles for the way in which supervisors should be carrying out their responsibilities. first, supervisory authorities have a responsibility to establish clear regulatory requirements, supported by industry and examiner guidance. the goal is to have well - structured rules that implement legal requirements, supplemented by guidance outlining where and how discretion may be exercised. second, supervisors should employ judgment in how they deal with problems that are found. depending on factors such as the severity of the problems and the responsiveness of management, the federal reserve uses the range of methods at its discretion - from offering recommendations in an exam report, to entering into confidential supervisory actions, to the taking of formal public enforcement actions. third, we need to continue to increase coordination among regulators, both internationally and within the u. s. this will lead to a greater consistency in the overall supervisory approach that is followed, as well as more consistency in the messages conveyed to individual firms. • coordination in development of policy is important. as an example, in 2005, the basel committee published a high - level paper on compliance risk and the compliance function in banks that supervisors around the world are making use of. • on a more firm - specific level, we, as a host supervisor, look to have effective coordination and communication with the home country supervisor - particularly when we find a serious problem, such as a significant compliance issue. it is our policy to share our concerns with home country supervisors, so that they will not be surprised and, even more importantly, will be able to make judgments on the implications of our us findings for the global organization. in certain circumstances, this could lead to very explicit and public coordination of enforcement actions with home country supervisors. in several recent cases, the federal reserve has taken action to deal with a specific us compliance problem, while the home country supervisor has taken a leadership role in a broader