implement international financial standards and agree to undergo periodic peer reviews using imf / world bank financial sector assessment program reports, among other actions. an important number of initiatives being discussed are aimed at preventing the financial system from leveraging itself to the extent that it did before the crisis. capital adequacy and liquidity are at the center of the discussions. it is important to be aware that less leverage, although beneficial from a prudential perspective, probably implies less potential for economic growth. another important set of initiatives are aimed at modifying the regulatory and supervisory architecture. for example, in some countries discussions are taking place about moving banking supervision under the aegis of central banks. however, at the end of the day, what it is important about a building is not its size or particular style, but whether or not it serves the purpose for which it was built. buildings should be designed according to the particular climate in which they will operate. i would like to share a few thoughts about some of the lessons we have learned during this crisis with regard to the challenges that globalization represents to financial authorities : 1. regulatory and supervisory arbitrage : for any financial regulation to be effective, it is of paramount importance to avoid the sort of regulatory arbitrage that has been taking place to date, such as financial intermediaries ’ practices of booking some of their operations in the places, entities or conduits where they face a more favorable regulatory or supervisory treatment. in this sense, it is crucial to advance in the international harmonization of domestic financial regulations – e. g. resolution regimens, accounting standards, provisioning rules, capital definitions. 2. incentive structure : regulations will not be effective if they do not alter incentive structures. financial markets have some particularities. within these particularities lie the incentives that make them vulnerable. and it seems that actions taken towards correcting some of these vulnerabilities uncover other weaknesses : limited liability and deposit insurance schemes create incentives for more risk taking. the problem is that the growing complexity of the financial system, as well as the availability of new instruments ( the products of financial innovation ), considerably complicate the task at hand for regulators. the challenge faced by authorities is to create the right incentives and to understand the motivation behind innovation. 3. large cross - border banks : there is ample agreement that systemically important banks pose a complex challenge to financial stability. a vast stream of literature has always seen as positive the consolidation and expansion of large cross ‐

klaas knot : strengthening financial resilience - lessons from pittsburgh speech by mr klaas knot, chair of the financial stability board and president of the netherlands bank, at the bloomberg global regulatory forum, new york city, 22 october 2024. * * * good morning everyone. it could have been right here in new york city. that would have been fitting, as this city was, and still is, the center of gravity for global finance. but, as it happened, the us administration made a last - minute decision to pick pittsburgh as the venue for the g20 summit. we are back in the fall of 2009. less than a year earlier, when g20 leaders first met in washington dc, the world economy had been facing its greatest crisis in generations. at the pittsburgh summit, the memory of the crisis was still fresh. the fall of lehman. the rescue of aig. the race against the clock to prevent a total meltdown of the financial system. leaders from the 20 largest nations in the world had all gone through those fateful crisis days. they shared a conviction that this should not happen again. ever. they decided on a massive strengthening of regulation to address the weaknesses in the global financial system and to curb excessive risk taking. and they endorsed the mandate of the newly established financial stability board to coordinate and monitor progress. pittsburgh turned the tide. the rest is history. but it is an unfinished history. for sure, the reforms that were agreed in pittsburgh did substantially strengthen the global financial system. in recent years, markets have experienced several episodes of turmoil, and we have seen potentially destabilising failures of banks and non - banks. but the core of the system has held up relatively well. so, one interpretation is that the financial system has proved to be resilient. but that is not entirely true. take march 2020 for example. this turmoil was contained both through improved resilience and unprecedented policy actions. without the combined force of these policy actions, the reforms implemented since 2009 may have not been sufficient to stave off another financial crisis. and it's not only in 2020 that unprecedented policy actions were needed. in 2023 the fire brigade had to turn out again. so, we've made progress, but there is much left to do if we want a truly resilient financial system. one that can finance the economy through thick and thin without recourse to extraordinary support. furthermore, the financial system is evolving, and so