runs that occurred repeatedly during the crisis and clearly increased its severity. third, we now have rigorous, forward - looking capital stress testing that recognizes the dynamic nature of the financial system and guards against the excessive optimism that can build during a credit boom. these three reforms are well advanced and, in my view, have left the g - sibs far stronger than they were before the crisis. together, they significantly reduce the probability of a large bank failure. but they would leave us short of meeting the overriding objective of eliminating the too - big - to - fail conundrum without a fourth reform – a viable resolution mechanism that could handle the failure of these institutions without severe damage to the economy. until recently, no nation has had a way of handling such failures without that degree of damage. for more information, see daniel k. tarullo ( 2014 ), “ liquidity regulation, ” speech delivered at the clearing house 2014 annual conference, new york, november 20. bis central bankers ’ speeches authorities around the world have been working to develop an approach to resolving large financial firms that credibly imposes losses on shareholders and debt holders consistent with the basic tenets of our capitalist system, but does so in a way that protects the rest of the financial system and the real economy from severe damage. the single - point - of - entry approach developed by the federal deposit insurance corporation ( fdic ) in conjunction with other u. s. supervisors is a promising innovation, especially in combination with the recent proposal of the financial stability board to increase the “ total loss absorbency capacity ” of systemically important firms in terms of their total levels of equity and long - term debt. when fully worked out, these new regulatory regimes should permit a large, consolidated entity that owns banks or broker - dealers to continue to function even if the ultimate holding company ceases to be viable and must be recapitalized or wound down. as i said at the outset, these reforms directed at the g - sibs are well advanced. but much implementation remains, including, most notably, addressing cross - border issues associated with the failure of complex global firms. it will take time and continued international cooperation to complete this task. 2 infrastructure : the crisis exposed a number of important weaknesses in the infrastructure of the financial markets – what might be more plainly called the plumbing. reforms aimed at addressing these weaknesses receive less public attention than those focused on the g - sibs, and are in some respects less advanced in their conception

strong trade and investment linkages in the region, a more important aspect of financial integration for asia is that it will facilitate a more efficient intermediation of funds within asia. asia ’ s more developed financial markets and continued initiatives to liberalise the financial sector will also strengthen inter - linkages with both the traditional financial markets and with new financial centres in other emerging economies. going forward, products from asian financial markets can be expected to increasingly assume greater importance as an asset class. it will thus increase the potential for the diversification of risks and contribute towards stability of the international financial system. it will also expand the options for investors and borrowers and thus, contribute to more efficient allocation of financial resources across borders. in addition, the development of the capital markets in the asia region will have the important role in channelling part of the sizable savings of asia back into productive investments in the region. with greater liberalisation of the financial sector and the capital account, and the increased linkages of the national payments systems in asia, and the greater presence of regional institutions in the individual domestic financial systems, the trend for increased financial flow within the region will continue. given asia ’ s favourable economic prospects and more developed financial market, asia is already attracting volatile capital flows. the route that asia is taking to forge greater financial integration will however be different from that of europe. unlike in the european union, asia has not ventured to have centralised institutions to coordinate financial integration. rather, it has leveraged on existing regional groupings and existing networks to forge greater collaboration in areas of common interest. secondly, a common currency is not on asia ’ s medium term agenda. to minimise exchange rate risks and facilitate intra - regional trade and investment, countries have ventured into arrangements to use domestic currencies for trade settlements. let me touch on policy and strategies adopted in asia. asia has tended to not adhere to rigid ideologies but rather focus on institutional building and financial market development, strengthening of the payment systems and the regulatory and supervisory framework. indeed, many of the reforms that are now being widely debated to address the weaknesses observed in the global financial system during this crisis have already been implemented in asia. this includes the adoption of sound liquidity frameworks, substantially strengthened governance and risk management practices, comprehensive financial safety nets, and the implementation of counter - cyclical measures such as loan - to - value ratios. while a decade of financial reforms have paid off, increased regional efforts on surveillance, crisis management, liquidity