susan schmidt bies : enterprise - wide compliance programs speech by ms susan schmidt bies, member of the board of governors of the us federal reserve system, at the bond market association ’ s legal and compliance conference, new york, 4 february 2004. * * * introduction i want to thank the bond market association for the opportunity to speak to you this afternoon. given the evolution of the financial markets and financial services industry and the unfortunate events that some firms have recently encountered, comprehensive and robust management of legal and reputational risks is becoming more essential. the agenda for this conference reflects many of the concerns that have been raised over the past two years regarding legal and reputational risks in general, and conflicts of interest, the adequacy of public disclosures, and the transparency of accounting in particular. i know that we all hoped that with the new year we could put behind us the corporate governance shortcomings and financial restatements of the past several quarters. unfortunately, the news about parmalat demonstrates that we are not yet out of the woods and that corporate governance problems are not limited to the united states, but are a global issue. financial firms are facing losses and possible legal and reputational risks in connection with their dealings with this company. the industry still has a lot of work to do in managing risks, and this conference is an excellent step toward addressing important risk - management issues in the context of the compliance function. in addition to sponsoring this timely conference, the bond market association has been at the forefront of myriad initiatives relating to risk management and compliance. one especially important initiative has been the association ’ s participation with other industry groups in establishing the joint market practices forum. the forum ’ s first initiative has been to articulate a statement of principles regarding the handling and use of material, nonpublic information by credit market participants. the statement of principles fulfills a number of objectives. the most critical, in my view, is the promotion of fair and competitive markets in which inappropriate use of material, nonpublic information is not tolerated. at the same time, the statement allows lenders to effectively manage credit - portfolio activities to facilitate borrower access to more - liquid and more - efficient sources of credit. this recognizes that the liquidity and efficiency of our financial markets are related directly to the integrity of, and public confidence in, those markets. the forum ’ s statement of principles also provides a number of meaningful recommendations, some of which have already been adopted by the major participants

changes to the age for receiving full retirement benefits or initiatives to slow the growth of medicare spending could affect retirement decisions, the size of the labor force, and saving behavior. in choosing among the various tax and spending options, policymakers will need to pay careful attention to the likely economic effects. * * * the relative aging of the population is bound to bring with it many changes to the economy of the united states - some foreseeable, many probably not. inevitably it will again require making difficult policy choices to balance competing claims. the decade - long acceleration in productivity and economic growth has seemingly muted the necessity of making such choices. but, as i noted earlier, history discourages the notion that the pace of growth will continue to increase. though the challenges of prospective increasingly stark choices for the united states seem great, the necessary adjustments will likely be smaller than those required in most other developed countries. but how and when we adjust will also matter. early initiatives to address the economic effects of baby - boom retirements could smooth the transition to a new balance between workers and retirees. as a nation, we owe it to our retirees to promise only the benefits that can be delivered. if we have promised more than our economy has the ability to deliver to retirees without unduly diminishing real income gains of workers, as i fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels. if we delay, the adjustments could be abrupt and painful. because curbing benefits once bestowed has proved so difficult in the past, fiscal policymakers must be especially vigilant to create new benefits only when their sustainability under the most adverse projections is virtually ensured. * * * responding to the pending dramatic rise in dependency ratios will be exceptionally challenging for the policymakers in developed countries. while i do not underestimate the difficulties that we face in the united states, i believe that, given the political will, we are better positioned than most others to make the necessary adjustments. aside from the comparatively lesser depth of required adjustment, our open labor markets should respond more easily to the changing needs and abilities of our population ; our capital markets should allow for the creation and rapid adoption of new labor - saving technologies, and our open society should be receptive to immigrants. these supports should help us adjust to the inexorabilities of an aging population. nonetheless, tough policy choices lie ahead.