- sensitive application of basel capital standards. and, last but not least, large exposures of banks vis - a - vis counterparties of the shadow banking system need to be adequately measured and controlled by looking through complex investment structures. finally, the effectiveness of regulatory requirements with regard to shadow banking must be constantly assessed and their implementation should be peer reviewed at the global level. as outlined, addressing the liquidity risk of money market funds, procyclical credit expansion via securitised financing, and interconnections between banks and shadow banks are key regulatory reforms. adequately regulated, it should be possible to effectively mitigate systemic risks posed by such non - banking financial institutions and enable them to affect financial stability more positively. bis central bankers ’ speeches

and foster emerging best practices for business continuity. challenges in addressing the risks of regional disruptions i would now like to identify three primary challenges in implementing a strategy to address regional disruptions. these challenges involve people, business, and technology. in developing strategies for regional disruption, we must recognize that the safety of people - - our colleagues, employees, and their families - - is paramount. different strategies of regional diversification, along with efforts to strengthen security and crisis response within regions, will help protect our people. one of the challenges that we face, however, is how to increase individual safety without losing the efficiencies that we have gained from concentrating staff and expertise at critical geographic locations. the effect of regional diversification on business also presents challenges. firms will both incur costs and reap benefits with diversification, but it is often difficult to justify adding costs to address contingencies. firms inevitably have a number of strategic priorities and projects that contend for resources. we also recognize that some firms are in different positions than others in addressing regional issues. some firms have a national or international “ footprint ” that makes it somewhat easier to take important measures to diversify operational centers and back - office operations. others, because of historical circumstances or regional specialization, have harder decisions to make. these issues are always difficult. firms that play significant roles in critical markets, in particular, need to think very carefully about the new situation we are facing, along with their importance to their customers, counterparties, and the markets generally. at the highest levels of major firms, there is a real need for leadership in dealing with an issue that goes beyond ordinary business decisions. our white paper asks a series of questions about how to identify critical firms that need to adopt sound practices for regional diversification and seeks guidance on cost and similar issues. the third important challenge involves technology. some key technologies for data storage and communication do not accommodate regional diversification as readily as we all would like. the challenge here will be to modify existing arrangements, solve technological problems, and find new ways to facilitate diversification. i am sure that the firms attending sibos are very aware of these issues, and i trust that the market for these technologies will see a flow of very creative solutions over the coming months. i would like to add a note about telecommunications. we have known for some time that our progress in automating the financial markets has made us highly dependent on telecommunications. in our own discussions within the federal reserve and our discussions