##iciencies in a firm ’ s capital planning process, as well as because one or more relevant capital ratios would fall below required levels under the assumptions of stress and planned capital distributions. likewise, the stress test is relevant not only for its role in the capital planning process. as noted earlier, it also serves other important purposes, not least of which is increased transparency of both bank holding company balance sheets and the supervisory process of the federal reserve. enhanced liquidity standards as with capital, the financial crisis also brought attention to defects in the liquidity riskmanagement practices of large financial firms. as seen during the crisis, a financial firm – particularly one with significant amounts of short - term funding – can become illiquid before it becomes insolvent, as creditors run in the face of uncertainty about the firm ’ s viability. while higher levels and quality of capital can mitigate some of this risk, it was widely agreed that quantitative liquidity requirements should be developed. the basel committee generated two liquidity standards : one, a liquidity coverage ratio ( lcr ) with a 30 - day time horizon ; the bis central bankers ’ speeches other, a net stable funding ratio ( nsfr ) with a one - year time horizon. however, insofar as this was the first - ever effort to specify such requirements, the governors and heads of supervision of the countries represented on the basel committee determined that implementation of both frameworks should be delayed while they are subject to further examination and possible revision. as is the case with enhanced capital standards for the largest banking firms, the basel committee ’ s liquidity initiatives are consistent with the federal reserve ’ s obligation under section 165 of the dodd - frank act to impose more stringent liquidity standards on the largest bank holding companies as well as other systemically important nonbank financial firms. the lcr has been actively reconsidered within the basel committee over the last year or so. as this work proceeds, four types of changes appear particularly ripe for consideration. first, the lcr ’ s definition of high - quality liquid assets should be broadened. in this regard, we support efforts to move away from the current credit risk - based approach and toward a quantitative liquidity - based approach. second, some of the assumptions embedded in the lcr about run rates of liabilities and the liquidity of assets might be grounded more firmly in actual experience during the crisis, as the lcr may overstate in particular the liquidity risks of commercial banking activities

– in its capacity as consolidated supervisor of the bank holding company – is working with the occ, the regulator of the national bank, to review the firm ’ s response and remedial actions. in particular, the federal reserve has been assisting in the oversight of jpmorgan ’ s efforts to manage and de - risk the portfolio in question. as this process proceeds, we anticipate also working with the occ and fdic to identify the changes in risk measurement, management and governance that will be necessary to improve riskcontrol practices surrounding the firm ’ s trading activities and to address trading strategies that led to these losses. in addition, the federal reserve has been looking at other parts of the holding company to determine if governance, risk management and control weaknesses – similar to those exposed by this incident – are present elsewhere. while we have, to date, found no evidence that they are, this review is not yet complete. conclusion the recent financial crisis disrupted the financial system and the broader economy on a scale and scope not seen since the 1930s. some of the world ’ s largest financial firms collapsed or required government assistance to stay afloat, sending shock waves through the highly interconnected global financial system. asset prices fell sharply, flows of credit to american families and businesses slowed dramatically, and millions of people lost their jobs. extraordinary actions by governments around the world helped to provide stability, but more than four years after the onset of the crisis, the recovery is far from complete. it is critical that we complete the implementation of capital and other prudential measures to prevent another crisis and protect taxpayers from having again to recapitalize financial firms. thank you very much for your attention. i would be pleased to answer any questions you may have. bis central bankers ’ speeches