>> terrific that the reality of george, doug and mark a big round of applause? [applause] [inaudible conversations] [inaudible conversations] ♪

>> thank you very much. i hope you enjoyed our panel. as you can take away from that session, there's so many moving pieces and enormous complexity. as i said this morning there's a reason we haven't had tax reform are the years. the best and brightest hope you're able to take away some key insights. the session today is really about the washington policy summit. washington doesn't operate in a vacuum. in fact, we operate in the global financial community, and end with that, we were honored today to be able to have one of the leading intellectuals, leaving officials with respect to how we think about global financial institutions, global capital flows and global regulation. of course, ends again about my dear friend of the governor of the bank of england, but also the stability for it. ladies and gentlemen, mark carney.

[applause] >> thank you very much, 10. thank you for taking a few moments before lunch, it is a tad. i wanted to come back to the iis washington policy summit. i was last here to similar gathering in 2011, which was very early in the international financial reform ross says. for the iis that bad time with a lot of and research about the issues at the time, there were three major concerns about that reform process. the first was whether or not reforms would be consistently implemented against the g20. secondly, regulatory arbitrage, particularly in shadow banking. and thirdly whether the reform process is held with repair the recovery is just beginning at the time.

i'm going to start by suggesting that those debates i would suggest have been largely settled and settled to the positive. the international minimums panders that have been agreed through this g20 fsp process are being barred large consistently and promptly implemented into major g20 jurisdictions. you don't have to just take my word for that because the progress is being regularly assess not just by the aif and ourselves as practitioners, but the ss the peer-reviewed and the imf. in general, what we found is when countries deviate from the international agreement on a deviate in any true sense here, it is because they've chosen to go further. so they are super equivalent so to speak. the second thing we are finding is that we are trying to have an approach and i would argue that we are largely successful ms

that we are applying a consistent approach to similar risks. they are being treated the same regardless of whether it originated in the system. we have put in place a series of measures to address those major opportunities that encourage shadow banking comic convention exposures of things on the balance sheet are now on balance sheet with inappropriately capitalized not surprisingly much smaller and more generally, shadow banking is being replaced by market based finance, something that we might cannot so they support. rk base finances had a competition and resilience to the system in the connector membership, it is adding them or is, which reflects much better if the totality of the financial system and it did several years ago and detained another scrape it bare. with respect to the macroeconomic impact, it has

been apparent for some time that having well-capitalized and liquid tanks is a prerequisite rather than an admin to growth. and those economies where reform is to trick us in recoveries have the most robust. indeed, when we look at the global outlook right now, i argue that the broader benefits of reform are now being realized. the system smooth, financial systems move from fragility tour is resilience. is growing in non-major economies and they increasingly diversified between banks and markets in a system that has demonstrated an ability to dampen ready to amplify shots. the biggest question now is how do we take advantage of that progress? i would suggest three priorities in my remarks today. the first is that the reform

implementation process should be dynamic as well as effect is. that's really an issue for the authority. that means that we need to adjust measures at there are unnecessary duplications, inconsistencies or material unintended consequences. i object it is not just resilience. it is sufficient resilience. the second thing we need to do for stating the office that is important. we need to resist steps that would fragment the global financial system. rather, what we should be doing is taking full advantage of the progress that has been made to build a system of deference to each other's systems, to each other's approaches when they achieve comparable outcomes. i'll expand on most points in a moment. the first, i want to read into the record for a moment just what a difference a decade makes, a decade of financial reforms.

a decade ago, 2007, regulation and advanced economies have become ineffective. woman risks in the system were ignored, often fragile and unfair, numerous instances of misconduct in its official party discipline him large firms. there were few participants who were exposed to the full consequences of their actions as government focused on the short-term. after the lehman debacle, g20 leaders committed to radical reform of the financial system and they charged the fsb with fixing the fault line that caused the crisis. the comprehensive reform program had four main components creating brazilian banks, and made too big to fail, transforming shadow banking into market-based financing making derivative markets save. you can see from the photo it is much safer to be a central banker than a politician because i am still here and there is

only one of those politicians i believe who's still in office. a decade on, having taken those instructions and in fact i'll tell you that is. angela merkel will be asking that question, what have you done with the last 10 years. the answer will be we have made the system safer, simpler and fairer while we are in the process of doing so. in terms of making the system safer, the central achievement has been the transformation of bacon. a decade ago, banks are often woefully undercapitalized and they had complex business models that provide not the goodwill of market and in the end i'm taxpayers. today, the largest global banks can stand on the road. capital requirements are 10

times higher. banks have raised over $1.5 trillion of new capital and they are disciplined by a new beverage ratio that guards against risk. they are also more robust because they change the funding models that leads to do global liquidity standards. the system is simpler in part because they are less complex and are more focused to new households and businesses into each other. business strategies that once relied on high leverage, risky trading and wholesale funding are disappearing. trading assets have been cut in half and intra- bank lending is down by two thirds. in parallel, the system is simpler because a series of measures are inseminating the fragile farms of reinforcing the best market-based finance. a decade on from that a bcp

crisis, toxic forms of shadow banking with their large this masters, high leverage an opaque off-balance sheet arrangements no longer represent a threat to global financial stability. other more construct new forms of what was called more construct it forms of market finance, money markets -- money market funds and repost securitization are now subject to policy numbers they reduce their risk and reinforce their benefit. in tandem with these developments, global assets under management have grown rapidly from around $50 trillion a decade ago to 75 trillion last year equivalent to about 40% off total financial assets. this growth creates new sources of fun in an investment, promotes international capital,

reliance on big funding and brings wealth and diversity to the financial system. at the same time, the scale of asset management reinforces the need to minimize sudden stocks in times of distress. the fsb estimates more than $20 trillion of assets are held in times susceptible to such risks. in january this year, responding to the direction the g20 leaders, the fsb finalize its recommendations to address structural vulnerabilities and reduced liquidity mismatch is an asset management. these recommendations are not operationalized. the system is also simpler because more durable market infrastructure is untangling the previously complex dangerous web of exposures than derivative markets. the derivative trades were

largely unregulated, unreported and bilaterally clear. uncertainty of such exposures contributed to the panic. in pittsburgh in 2009, the g20 knots a series of reforms designed to make these markets save her and were transparent including requiring save recording and central clearing of otc trade. centro counterparties reduced contingent risks in banking if the massive derivative markets more robust. the extent to which they reduce overall systemic risks however depends on their resilience and resolve ability. to these ends, the fsb will deliver further detailed guide and the ccp resilience, recovery resolve ability to the summit in july. by the argentinian senate in 2018, the fs the bug report on whether any additional financial

resources are required to safely resolve ccp. in terms of fairness, the system is fairer because reforms and an era of too big to fail they been addressing the root causes of the conduct. with large complex banks operated in the heads i win tails you lose bubble. the privatize profit before socializing losses and the music stopped. galasso financed crystallized in 2008 could only be public support over the following year totaling 15 trillion u.s. dollars in public a lot, government guarantees, liabilities and special central bank liquidity fans. to bring back the discipline of the market and in reliance on public funds, fsb members have great standards to ensure that

nature banks can fail safely in the future. these include reforms to secure the tools empowers authorities need to deal decisively with tanks and at the same time, major banks are required to make themselves easier to resolve, including by writing and living wills. most importantly, global standards that require the banks hold sufficient that such that in the event one of sales at successor could be recapitalized, support the continued operation of its most important activities. the culmination of these initiatives and the determination of authorities to complete the job explains for the too big to fail public subsidy for private systemic banks have fallen by 90% in the united kingdom. put simply, a decade on, market discipline is back. the system is also fair because we are addressing the root

causes of misconduct. we all know in the wake the crisis of a series of scandals from selling to manipulation undermined trust in banking. the financial system and to some degree in markets themselves. the economic consequences of that lower trust has been enormous for this event has been enormous. global banks this conduct cross reach over 320 billion u.s. dollars, capitals that otherwise could have been to support up to $5 trillion of lending to households and businesses. we have a misconduct action plan to address the root causes of these issues through first improvements to banks, governments and compensation structures to align better risk and reward. secondly, new global standards or conct the fixed income market and thirdly, reforms to major benchmarks in order to reduce the risks and

manipulation. to be clear, authorities cannot and should not legislate for every circumstance can watch every transaction or anticipate every market innovation. fines and sanctions have a role in determining this conduct the whatnot on the road bring back the cultural change we all need. u.k. authorities have developed from a reliant -- successive reliance on punitive firms and their shareholders to greater emphasis on more compelling incentives and ultimately a more solid grounding in improved firm culture. in the united kingdom, a significant proportion of variable compensation or senior employees must now be deferred for a period of up to seven years. this ensures that it can be clawed back if necessary over the time scale that is generally associated with misconduct issues to come today.

to address the rolling bad apples problem, mechanisms are now in place in the u.k. to ensure an individual's move, their histories, to. it is known to those considering hiring them and the office he is considering whether to adopt an approach more broadly. u.k. authorities use their computing power to encourage market participants to establish standards of market product this that are well understood, widely followed and which are dynamic with market developments. that is why the global market standards board is establishing readily understood standards for their market and if by next month the global fx committee will release the first consistent code of conduct for fx markets. both of those are examples of the best in the market ,-com,-com ma codifying the best

of market. of course, these codes won't be of much use if nobody ever follows her and forces them. instead of putting it into legislation are hard black line legislation, our approach in the u.k. has been to use management response ability through something called the senior managers regime. but that does is seek to address common refrain of senior management that didn't appear to be aware of what was taking place in their firms. it doesn't that mean senior managers have to know everything going on in firms. that is unrealistic. what it does is reestablishes the link between seniority and accountability. senior managers are required to take reasonable steps including training our proper oversight to prevent or stop regulatory breaches in their areas of responsibility. we put this in place about 18 months ago and the u.k. for

banks, insurance and investment firms have a nasty adoption spreading. time for our voluntarily implying in the fsb is now revealing the broader merits of such responsibility. so i would argue that a decade on, individual responsibility is returning. so the question posed at the outset is how do we take advantage of the full progress being made. the first is dynamic effective implementation. full timely and consistent implementation of the g20 reforms remains essential to deliver a financial system that supports growth in the short, medium and long term. we must finish the job to build a level of resilience our citizens deserve. but we also must do so as efficiently as possible.

implementation must not only be a fact is, but must also be dynamic. that is the authorities must learn by doing and make adjustments as necessary to optimize their efforts without compromising the level of resilience the reforms are intended to achieve. to embed a more dynamic approach, the fsb is now developing a structured framework to evaluate reforms. the new framework will be delivered to the g20 summit. it will support a more comprehensive impact analysis and will help inform future decisions about any possible adjustments to reforms. as we assess the effectiveness reforms at the global level, any national authorities or conduct in similar exercises with respect to their domestic efforts. these are to be welcomed provided the overall level of resilience is maintained.

now, my second priority is to resist fragmentation because we should be frank very nascent risks that if left unchecked could threaten the progress made and ultimately undermine our shared object date for strong, stable -- strong, sustainable growth. these risks include the impact of reform fatigue on implementation moment to after all the decade is a long time. secondly, the outcome of the brexit negotiations, thirdly, -- basel three. the system is at a fork in the road. on one path, trust and cooperation diminished. the trade and innovation are

curtailed. authorities don't have sufficient confidence in efforts to promote financial stability reciprocated elsewhere and concerns about the risks to openness could intensify. if that happens, domestic authorities could impose local requirements on domestic entities of foreign terms. in a world where many banks and financial market infrastructures are highly and to connect it, though it frustrate the benefits that flow from open trade and investment. in other words, taken the low road would be suboptimal for job growth and management. fortunately, there is another path, which is the high road. it builds on the foundation of the new response to the global financial system, foundations that are being put in place after a decade of hard work. the combination of robust

international standards and greater trust is a consequence of transparency, implementation intensive supervisory cooperation can create and enhance system -- can create a system of enhanced equivalent in mutual deference. such approach would allow capital to move more freely comic efficiently and sustainably between jurisdictions with robust standards consistently applied, wholesale financial services could be brought more fully into trade agreements can to keep in the global financial system open and resilient as supporting greater trade, investment and innovation. ..

they bring their authority, expertise and objectives. it's not a treaty-based organization. the the standards of the fsb do not have a direct force in any member jurisdiction. decisions are ultimately a matter for national authorities who act i in the own self-intert and recognition of the benefits of the open financial global system. that's what guys and disciplines this reform process. actually the reforms agreed at the fsb would amount to little if they didn't represent the best collective judgment of our members on how to get the job done. but because they are the product of the authority expertise and shared objective of its membership in the fsb reforms can create the foundation for an open global financial system. we have now agreed all the

common minimum standards and they are now being consistently and transparently implemented. the playing field for cross-border activity is being leveled. opportunities for regulatory arbitrage are being reduced. in short, platform is being created for deference to each others' approaches when we achieve similar outcomes. and to seize this opportunity, authorities need to share relevant information and work together to manage cross-border challenges to financial stability. we have the mechanisms to do this. they've been developed by the fsb and the baltic committee -- basel committee, for coordination when things go wrong. in the decade ahead, we will be in the g20 increasingly well positioned to take advantage of these building blocks.

brexit will be a litmus test of the future of international cooperation. not least because the starting point is so constructed. the uk and the rest of the eu have exactly the same rules, and with the most highly developed remarks of supervisory cooperation. the capital and banking markets between the -- are highly integrated and the two jurisdictions have the potential to create a template for trade and financial services. so let me finish. my point has been that a decade on from the start of the financial crisis, the g20 is building an efficient and resilient financial system that serves first all of our domestic economies, and secondly, support sustainable cross-border investment and economic activity. as the global recovery strengthens and broadens, now is the time to take full advantage

of these hard-won gains. that means completing this journey from fragility to recite by ensuring that shadow banking is fully transformed into resilient market-based finance, that durable market infrastructure is put in place, that we complete the job attending too big to fail, and that emerging for the bullies are dressed in a timely and consistent manner. it means adjusting reform measures dynamically to maximize efficient resilience and avoiding unintended consequences. consequences. and it means recognizing that because risk to financial stability are constantly evolving, we must work together to identify those vulnerabilities in a timely and consistent manner. and finally it means resisting those forces of fragmentation, but actively building on an open global financial system that places increasing reliance on and deference to each other's national regimes when they

achieve similar outcomes. a decade on for the financial crisis, now is the time to take the high road to the benefit of all. and with that, right on schedule, i thank you and i give you your lunch, i believe. [applause] thank you to mark carney. please join us down for lunch outside the foray. we also have additional seating. that would be to your left as you depart this room, and the hemisphere room to write. please be back up promptly at 1:15. that gives you about an hour and ten minutes. and they will start our conversation with secretary of the treasury steven mnuchin. [inaudible conversations]

[inaudible conversations] >> this institute of international finance daylong policy summit taking a lunch break now. they are due back at about 1:15 p.m. eastern. speakers will include steven mnuchin, white house budget director mick mulvaney, and white house economic adviser

gary cohn. again, more live coverage expected at about 1:15 p.m. eastern here on c-span2. a couple of news items this afternoon. the hill reports that deal may be in the offing on a new republican health care measure. tw.two republican on bigger say they're nearing a deal on changes to the obamacare replacement deal that could move the measure closer to passage although doubts remain. the compromise being brokered between mark meadows, chair of the conservative house freedom caucus, and congressman tom macarthur, cochair of the moderate tuesday group. a conference call for all house republican lawmakers on saturday wilwould be a chance to discusse changes. you can read that story in the hill today. we had this from the washington examiner. utah republican congressman jason chaffetz is unsure if he will finish out his term in congress. this comes one day after shocking the political world by noting he doesn't think a run for his seat again in 2018.

during an interview earlier, he's not sure i if you finish ot the current term in the house. i will continue to weigh the options but it might depart early. as relayed by mr. wright turki told the host there's no political reason he wants to step aside instead he's looking to take offense at some opportunities in the private sector. you can read the rest of the story in today's "washington examiner." a couple of programming notes to pass on. sec republican chair chairman pai will hold a news conference today you can see that life at 12:45 p.m. eastern on c-span. also president trum donald trums meeting with the italian prime minister today. they will speak to reporters in a joint news conference starting at 3:45 p.m. eastern and we will have that for your life when it starts on a companion network c-span. coming up tonight on c-span2 its part to a special program looking at the trump cabinet. we will show you portions of

hearings featuring education secretary at the defaults epa administrator scott pruitt and others. it's tonight at eight eastern on c-span. here's a preview. >> russia, more than anything, wants to reestablish its role in the global world order. they have the view that following the breakup of the soviet union, they were mistreated in some respect in the transition. they believe they deserve our rightful role in the global world order because they are a nuclear power. and they are searching us how to establish that. for most of the past 20 plus years since the demise of the soviet union, they were not in a position to assert that. they have spent all of these years developing the capability to do that and i think that's now what we are witnessing is an assertion on their part in order to force a conversation about what is russia's role in the

global world order. spec it doesn't mean taking a green eyeshadow efforts to the budget for our country is more than just numbers. based on how they can't also allows us to take care of our most vulnerable. my mother-in-law relied on social security in her retirement. she relied on medicare to help her before she died of cancer. pam and i were happy to have that safety net there for her. we would also like that safety net to be there for her grandchildren. our triplets. >> a brief portion of part two of our special program looking at the trump cabinet. you can see the entire broker starting at eight eastern tonight on c-span. >> c-span, where history unfolds daily. in 1979, c-span was created as a