medications and veteran suicides. later trade pacts to open new

markets for american businesses. monday greg metcraft, chair of the international organization of securities commissions spoke about efforts to ensure global financial stability and to prevent another financial crisis. his remarks came during an event at the national press club. this is an hour. >> we are going to get started here. let's make sure the cell phones are turned off or any other vibrating or noise making devices. good morning and welcome to the national press club i am hosting this morning's news maker news conference featuring mr.

metcraft who will speak as chairman of the iosco. they have been at the forefront of global initiates to head off another financial crisis like the one that devastated markets not so long ago. we saw long time financial institutions disappear and millions of people thrust into unemployment. the economic recovery has been a long time coming. since the melt down national and international regulators have focused a great deal of attention and effort to change the way financial institutions are regulated in an effort to guarantee global financial security and stability. thus was born the notion of the institutions ss [ inaudible ] so if they fail their failures don't take other institutions down with them. chairman metcraft has been

making headlines by going public with his view that they may have gone too far. chairman medcraft believes regulation should not stifle risk taking buzz risk taking wealth creation. [ inaudible ] capital markets for support economic growth and will comment from a market regulatory perspective and he will comment on where the debate might head and what iosco thinks is required in the asset management sector consistent with iosco press release issued on thursday. just a few procedural notes before i turn the over once the chairman has completed his remarks we will open the floor to questions priority given to

credentialed media. when you are called on please identify yourself by name and by organization. chairman medcraft the floor is yours. >> thank you very much. good morning everyone. well i'd like to thank the national press club for the opportunity to actually talk about i think some very important issues that are currently on the international regulatory agenda. and as david said, today i'm here in my capacity as the chairman of the board of the international organization of securities commissions or iosco. so today i would like to touch on three key topics. one, is to briefly describe what iosco does and our role in what i believe is so important for the future which is how we build

globally integrated capital markets. having a vision whether it is in 20, 30 40, 50 years, having a vision for free flow of capital around the world debt capital markets, equity markets and funds management. and having the markets at the end of the day to achieve that is about having trust having trust among regulators and by investors in markets. and most importantly and i think we have to remember is the role that capital markets do and will continue to play more importantly into the future in underpenning growth and jobs. i think it's a very important theme of my speech today is financing growth and jobs around the world. so secondly i'm just going to comment from a markets and

financial services regulative perspective on where the international regulatory debate has been since the crisis. and third, i'm going to comment on where the debate might head and iosco thinks what is required in particular in the asset management sector. i should say at the outset that i'll limit my comments to the international regulatory agenda and experience. it's obviously not appropriate for me to talk about issues at a national level here in the united states. these are actually matters for your own regulators and policy makers. so let me turn to iosco and who we are and what we do. so iosco brings together financial services and markets

regulator from over 120 jurisdictions around the world. we actually account together for over 90% of the value of global capital markets debt capital markets, equity capital markets funds management and derivative markets, a very significant part of financing the world economy. our members include regulators from the largest and developed jurisdictions to frontier jurisdictions with tiny capital markets. our fundamental objective -- if you think about what we do as financial services and market regulators our fundamental objective is to allow the markets to do their job. and the way we do that -- the job is actually to fund the real economy and therefore economic growth and therefore creating jobs. that's what we are about.

and we do it by making sure that investors basically have trust and confidence in the markets and that the markets seem to be fair and efficient and transparent and that any systemic risks that may be posed are mitigated, not eliminated but mitigated. so basically, as i said, if markets cannot ride effectively we believe they provide a key element to economic growth wealth and jobs. and basically we work together globally in a number of ways, all of which have cooperation and collaboration at their core. that is what we do. i want to focus on seven key activities of how we work around the world together to give you a much better feel for what we do. so firstly and most importantly

we develop gardens for our members to use in deciding how they regulate. if you think about the ultimate mission of having global integrative markets and having common global approach to how you approach regulation is really important. so we look at whether it's in the area of giving guidance in terms of regulatory supervision or enforcement, our two more critical tools as what we do as markets regulators. and to give you an example, since the crisis we have developed gardens among other things on regulator credit rating agencies, the iosco code of conduct is embedded in many legislatures around the world, on hedge funds, secureatization asset management and most

importantly recently in financial benchmarks. and last week what we did along these lines is we actually published guidance on what framework looks like basically guiding countries who are looking at how they can gain confidence that we all can rely on in terms of enforcement solution. that's what we do. the second thing is not just giving guidance on conduct supervision and enforcement to help countries around the world have a consistent approach we cooperate on enforcement how market regulators ensure we are able to enforce cross borders around the world. our multi lateral memorandum of understanding between members on enforcement investigation forms

absolute core of how market regulators inforce around the world. through that cooperation we are able to go through jurisdictions and get information we need. you may be aware that most stock exchanges around the world will not allow foreign jurisdiction located countries to list unless they are a member of the iosco mmau. there is the ability to cross borders. we have 105 members assigned and they use it to prosecute cross border market abuse which in turn provides confidence to investors investing in cross borders. the third thing we do is supervising the conduct of those we regulate. we actually use principles of supervisory cooperation which we developed in 2010. and if you think about regulation and how we can build confidence these three elements

are important. one is giving guidance in terms of regulatory standards. the second one is actually how you can cooperate in supervision and the third is about enforcement. it is simple, the three things that build trust and confidence between regulators. the fourth key thing that we do is actually what we do for tomorrow's engines of growth which is the 80 countries that are our growth and emerging markets group. we actually look to help them build regulatory capacity. and we do that across a number of different initiatives. so we have education and training programs. in fact, we are in the process of launching an online training program for regulators around the world in emerging markets. we conduct in-house courses for regulators. but even importantly we actually have an online knowledge database where regulators in

emerging markets can ask regulators in other parts of the world if they are facing issues and looking to develop policy in their country. it's all about providing resources to actually give them the information to fill the gap, to help them develop their markets. we also undertake assessment programs where we have just done one in the case of pakistan where we assist them against international standards and identify the gaps so that investors coming into that country can have an idea of actually how that country fits with international standards. again, that is building regulatory capacity. what it is doing is building trust and confidence in that country as an investment jurisdiction. and most importantly another initiative we decided is we are going to look at developing regional hubs on a basis around the world in different regions of the world. that will define us as a global

standard setup in that we will be based all over the world. so very excited about our regulatory capacity building work. the fifth area where we provide support and basically think about it is people. nothing is far more compelling than the opportunity for building trust and confidence around the world and then having the ability to encourage and supporting activity among our members. to that end we have launched an international register which allow regulators from all over the world to identify opportunities, to post for various periods of time. the reason this initiative is one i discovered many countries have bilateral initiatives which many others were not aware of. frankly it is about connecting the dots connecting the dots. connecting the dots is how you

actually build global cooperation. it's how you build globally integrated markets. the sixth area is getting members, helping members understand emerging risks in global markets because if you want to be a good regulator and proactive and forward looking then you need to be watching what is coming ahead of you in the future. and that has been a major thrust particularly of mine over the last few years where we have been focusing on digital reduction and what is happening on corporate governance and informing members so they can be better at what they are doing and not actually resisting development but actually helping business harvest the opportunities that come from innovation while mitigating the risks. and the seventh area we focus on is collaborating with industry. if you are a markets regulator

you have to be collaborating closely with industry. and also with other international forums like financial stability board where i and others represent the interest of our members. there are the seven key aspects of what we do. all seven of those contribute to building that global mission towards integrated capital markets. i will say that i believe that these activities are what has helped us emerge as the key global reference point for financial services and markets regulation. and that is the way we want to be seen. it's the way we are seen. and most importantly that we strengthen that perception in the future. and today is a great opportunity to highlight to you actually what we do in that mission. so as i said earlier, we have grown with the increased importance in the markets we regulate. and these markets, i believe,

capital markets will continue to play an increasing role in financing the world economy. i say that for three reasons. first of all, it is significant increase in global retirement savings as result of both demographic change in developed countries and some in undeveloped countries and structural changes in developed countries as they evolve. that generally means movement of savings from the banking system to funds management system. the second key aspect of why markets will continue stronger in funding the world economy is the impact of post crisis regulation, high levels of capital required and liquidity. what is happening? you end up with more and more being funded in the market based financing sector. the third key aspect of why i believe market based financing

will continue to grow is digital disruption. you all know and will all see whether peer to peer lending, crowd funding, the challenge is basically intermarket based financing. so i believe that in the longer term iosco's activities will help build globalally integrated global markets which is most importantly and i thought passionately about build the free flow of capital around the world. markets which have the trust and confidence of those that participate in them, markets where regulators had the mutual trust in one another. markets where investors issuers and participants can actually access those markets freely wherever they are whether investors or issuers, new york,

london johannesburg. and most importantly, most importantly markets that actually fund the real economy and economic growth and jobs. so let's talk about my second topic, the post crisis reform agenda. i like to make two particular comments which i believe are important in terms of the context of where i think we should be heading. the first is about the type of issues we have had to address since the crisis. and the second is about how we have gone about addressing those issues. so many of the issues we have to address since the crisis were cross sectural in nature requiring cross sectieral

solutions. our work at iosco and something i am passionate about is secureatization. because as you are probably aware is secureatization is seen in many countries around the world as an important technology to facilitating funding of the real economy. the other issue that we focused on as money market funds has been very well received around the world. in addition many of the issues rise in the post crisis have been new. the regulation of otc derivatives is an example of what has been largely greenfield's territory. at the national level, financial services and markets regulators have had to work with central bankers and banking supervisors more intensely than ever before and i would hope as equal partners which is most important.

so globally iosco has had to work with the committee more intensely than ever before. i think also as a part of this post crisis the increasing importance of markets regulators is now really strongly coming to focus. but it has been a challenging for all of us and i think a very fruitful one. i think we have come a long way. as i said, my second comment is actually about how we have addressed those issues. so let me focus on the reform agenda for what has been called shadow banker, key aspect of the reform agenda. what i or we would now prefer to call sustainable market-based financing. i have a real issue with the bedeviling of the name shadow

banking. frankly, i'm not sure it was the right name. i think this has taken on this name of sustainable market based financing. let me firstly point to three points. the first is the fact that the agenda has for some time been driven necessarily by financial stability and systemic risk considerations. as david said earlier there were dark times back then and there hasn't been really a focus on the world market based financing in funding the real economy. i think that is now where we are today. we need to focus on not on what happened then but how we can take that and use it to help moving more towards the agenda. and, again i think what is important we need to think about how we have assessed the risks

posed. the international regulatory community i believe may have been too willing to draw conclusions about the nature and the risks posed by market-based financing to financial stability. again, as i said, given the traumatic experience in '07 and '08 that is not surprising. but there is a concern that the international regulatory community may have gone too far in seeing problems and has under estimated the effectiveness of the existing tools to regulate market-based financing. it's a very important message that i want to deliver is very much that. the third is about thinking that have gone into policy prescriptions to address those

risks. these tools have tended to be based on those used by credentialed supervisors not market regulators. so while i have worked for the banking sector they weren't necessarily working for market-based financing. so at iosco we have grown increasingly concerned about these developments. they don't fit with the way we look at the world and our responsibilities as markets and financial services regulators. the markets that we regulate are built on the idea of risk taking. that's what happens in markets. people gain money they lose money. that's markets. but that risk taking is actually the essence of the system. it's the essence of wealth creation, economic growth and

jobs. we see regulation in markets about insuring that they accurately and fairly price those risks and market participants act with integrity. if you think about it we all should be aligned in markets with participants because at the end of the day if you don't have the trust and confidence of investors and issuers you don't have markets. very simple. trust and confidence in markets of investors and issuers is essential. that's what we are about is making sure the trust and confidence is there. regulation should be careful not to stifle risk taking. that's what markets are about. and making it expensive and the tools that we develop and use

should be tailored to the risks we think warrant regulation and supervision. and the markets space it's not about regulation it's conduct supervision and enforcement. that's how you regulate markets. that's how you regulate markets. it's not about how you regulate banks. so i would like to outline how i think these concerns should be taken into account in charting a path forward in international work particularly in relation to asset management. you will be aware there has been underway for some three years work under designation of non-bank noninsurer systemically important financial

institutions. acronyms are something interesting in regulatory world coming from investment banking. this work has extended to the asset management space and is now embarking on further work to understand and address the risks posed by the sector. i want to touch on two issues which iosco is flagging and will continue to flag through discussions with the fsb. and these two issues are judgments about the asset management sector and the need to act or not and secondly actionable solutions that we need or may not need in this sector. let me touch the first item. judgments about asset management sector. the first issue is about being

careful of jumping to conclusions about the nature and the extent of risks in this space and the need to act. frankly, if you think about it as regulators who focus on enforcement before we take something to court we have to make sure we have enough evidence to make a case. here we need to make sure that we have fact-based decision making, evidence-based. our view is that we should only progress thinking about solutions once we are satisfied there is strong evidence of a problem. pretty logical. i want to make three points on this. the first also, is about the quality of evidence. this should not be theoretical and drawn from academic papers based on what might have happened in the distant past.

it should be based on what we are currently seeing, on what we might think happens in the real markets which we regulate. that is our real experience because that's what we do. that's what we do every day of the week as market regulators. the second is about making sure that the evidence is collected jointly and collaboratively across all sectors but most importantly -- i know from my days as 30 years in investment banking is with industry. industry having credible data access. it's important to work in partnership with industry before you draw conclusions. it then has a proper evidence base. the evidence is not just simply data. it's about how fund managers, big fund managers are, but about

industry practice that they take in addressing risks about the effectiveness of conduct supervision and enforcement. that is why you cannot in what we do, do things without industry, without engaging industry. at the end of the day they don't want to blow themselves up either. they want to run businesses for the long term. really important that collaboration. the third is about how we go about deciding when a problem or risk is so important that it needs to be -- this is very clear about the objectives and balance we want between and i think this is important the balance we want between financial stability and security and economic growth and job outcomes. so, again i'm not convinced that there is evidence that asset managers put financial

stability at risk simply because they are large. as yet, we do not have concrete evidence that this has been or might be the case. in this respect i find the industry's recent commentary compelling. if you think about it during the depths of the financial crisis net outflows from funds were small and certainly not on a scale to impact a broader market. and another aspect of the current study is the ecosystem of funds management. the focus here is really restricted to mutual funds. excludes sovereign funds, excludes pension funds. you have to look at the ecosystem. that's important. getting back to mutual funds basically the crisis reflects nature of mutual funds. by nature and definition they

are investors who are generally in it for the long haul. they generally take short term fluctuations in their stride and don't necessarily rush to redeem. that is the behavior we have seen. in rare instances where they might managers have tools in place to manage the flow of redemptions. however, there is scope to explore the extent to which some activities of asset managers might pose broader market risks. i am encouraged by the fact that the financial stability board has embarked on work to better understand these risks. work which will inform further regulatory guidance in this area. i see this as a very good outcome of their work. so my second issue i mentioned before was about solutions once

we decide where there is work to do. we should not look to find new and possibly inappropriate solutions before we understand what we're already using. what refinements we may need to the existing tools we currently have. let's not re-create the wheel. so in the asset management space, market regulators and asset managers already have tool kits at their disposal. tool kits from conduct supervision and enforcement which i believe have been effective in managing disruptions over decades in markets in jurisdictions around the world. and these include rules on eligible assets, on liquidity thresholds, restrictions on

leverage, on stress testing on knowing your investor requirements and most importantly in terms of more recent times redemption restriction tools including gates, side pockets and suspensions. i have seen them working in my market. i have seen them working in other markets. so iosco as the regulator of including funds management around the world we have described these tools in two previous reviews and provided guidance on when and how they might be used. and we have actually presented these tools to financial stability boards to explain this is what we do. that is what we do. here is how it works. i think part of it is about education. we are very happy to educate. in 2012 we published the

principles on suspension of redemptions. again providing guidance on when and how the managers should suspend redemptions. our report there set out two market regulators around the world alternative measures which could be used to deal with iliquidity based on real experience around the world not just theoretical possibilities in member jurisdictions, real world regulation for real world possibilities. sort of logical really. so in 2013 we also published the principles of liquidity risk management which includes guidance about managing liquidity on a day to day basis based on real experience. we published the recommendations on the use of these tools for money market funds in 2012. and if we decide there is an

issue then surely the world we have already done in terms of suspension or liquidity management should be the starting point for any future work. we should not use tools developed for banking and insurance space as our starting point. this is markets. we understand markets. this is what we are looking at. these tools were developed to deal with firms who have different risk profiles to asset managers frankly like creating a square peg for a round hole. it has to be appropriate for use. and we are dealing with something that is so dynamic and so important as funds management. as i said before in terms of facilitating the funding of the real economy. let's be careful how we tamper

with this. so at our meeting in london last week the board of iosco discussed how we should be progressing our work in this asset management space. let me outline to your our decisions last week. we decided three things. [ inaudible ] in identifying potential systemic risks and vulnerabilities in the asset management space. the second is that this review should take precedence over further work on methodologies for the designation of systemically asset management. let's sort out if there is a problem first. and the third was once this review was completed the work on designation should be

reassessed. our thinking was this review should focus on four areas. and the first is actually about insuring that we have the data to monitor and understand the risks in what is clearly a dynamic space. that's about collecting more and better data than we currently have. and that then will inform a better decision making about risk management and monitoring. and to that end i think the s.e.c. had published a proposal, a risk rule making proposal on looking at better data from the asset management sector. europe has done a similar thing. i think what we need is to have ultimately some sort of standard template where regulators around the world can actually share better the data about this sector. that is so frankly logical in a

modern world particularly in a world where we want to have globally integrated capital markets. it's having an ability to share information on a consistent easy fashion. frankly we know the tools are there it is a matter of harnessing them. so the second is about liquidity management and those that are currently being dealt with at the moment. so liquidity management is at the heart of asset management. talk to any asset manager liquidity are essential. so we need to be comfortable with liquidity risks and how they are being effectively managed. that is something that we will be focused on. in particular thinking about tailored to particular types of funds the sort of stress test that might be appropriate, appropriate to the fund, appropriate to the fund, not to a bank.

the other thing we are looking at iosco at the moment because that is what we do is debt capital markets. we look at bond markets. we have a study at the moment looking at the risk and structural issues in bond markets around the world because that's what we do. and the third area we want to look at is leverage which we will do. and the fourth is about developing a better understanding of the risks posed by the transfer of investment mandates in times of stress. it's a logical thing for a regulator of funds management to think about. so wherever we land after this work and whatever guidance we develop we'll need to be sure we don't unduly stifle risk taking. it has to be measured. if the core characteristic of markets it's a characteristic of markets that they take risks which ultimately deliver wealth

economic growth and jobs. so in conclusion i want to flag the importance of being careful and of being cautious in driving a regulatory work on market-based financing and in particular in the asset management space. what we need to do is to ensure that our work is not just about insuring the stability of the financial system but recognizing the role markets have to play in funding economic growth and creating jobs and facilitating that role. at the same time insuring that recognizing that markets are all about taking risks and they have to be regulated in a very different way to banks. we need to make sure we have a good case before we act in these

areas. and we need to ensure that we recognize that the tools and approaches we currently have as market regulators conduct supervision and enforcement are a great starting point and should be the basis of any further regulation in this area. at the end of the day if you think about it we recognize fundamentally that for markets to do the job to fund the real economy you have to have investor trust and confidence. everything we do in conduct supervision and enforcement is directed at that because that's actually why markets exist and why we want to make sure that they can do their job. equally try to make sure that trust exists around the world so markets cannot only do it in a single country but can do it integrated throughout the world. thank you everybody and thank

you again for the opportunity to address this group. thank you. very interesting discussion i think. i'm assuming we will get a lot of questions here. this is the q&a part of the program. as you pose a question please identify yourself. >> with reuters, i want to ask you about the fsb. they have are supposed to come up with rules for asset managers in november, i believe. what do they think about what you are saying now? have you coordinated your message with them? >> well, look iosco is an independent standard setting body on behalf of the world's

regulators. and we participate in the financial stability board. we do not report to the financial stability board. but we coordinate with them. we did inform the day we took this decision and i spoke to mark and i believe that he is supportive and understands the reasons for why we have taken our decision. so that's where we stand. >> you think that package is still going to come out in november? >> that is for the fsb. as far as -- i think what is important is that we have a meeting in new york tomorrow, the standing committee on risk of the fsb and i guess we will discuss iosco's position. let's face it, at the end of the day we are the regulator and standard setter for funds management around the world.

it's not the financial stability board. i think that is clear. >> it seemed like a few months ago doubling down on approach for asset managers. can you walk us through how you got from that to reversing course on the plan? >> i have been involved in this for a while. my background was in asset management. i think it has been a journey. the journey should be establish the problem, the facts and then decide a solution. i have been troubled that we seem to be developing a solution before we develop the problem. so i think that's why we have ended up where we have is to say -- i think you see the fsb

second consultation where we say let's focus on activities. i think it has been evolutionary process. i think that you have seen a more assertive iosco and will continue to see a more assertive iosco from now on. we believe now that we realize that what we regulate which is the markets is just simply going to play a more important role in funding the world economy. >> just a follow up question. you said governor carney i think was supportive. do you -- >> he understood what we were coming from and probably wouldn't want to quote him beyond that. he understood what we were saying. >> you expect fsb to follow your league? >> we are an independent standard setting body. we don't report to the financial stability board. we have a voice there. we would like to have a stronger voice there because we represent

a small percentage of the voice of the financial stability board. we are trying to change that but we can still represent a very vocal voice. >> freelance writer on assignment for risk professional magazine. you said at the beginning that identifying and monitoring emerging risks has been one of your priorities. what emerging risks do you see? >> well, clearly we think that -- we think about the risks as sort of what i see as probably four mega trends. the first one is clearly structural trends around the world moving into the markets which for the reasons i mentioned earlier. and that is just going to keep

going. the percentage funded through markets will be greater next year. it's just going to keep going. the second mega trend is clearly digital disruption. and what that in particularly digital disruption and financial services and markets. we see that right across the value chain. frankly, my attitude to this is what we need to do is where we -- generally the reason digital disruption happens is because generally because seems to be value between the consumer and the originator. so generally results in a bit better outcome for consumers. so i always say let's look to see what we can do in harvesting opportunity and mitigating the risk. at the end of the day the outcome we want is the same. it's the same. we want to make sure that investors have got trust and

confidence. processes to get the trust and confidence with whatever it is means a different way of thinking. the same time it means you have to think about how you enable those startups to actually talk to you and make sure because the issue is the financial system is not yet that adaptive to the digital world. one of the things we have done in my company of australia is set up an innovation hub looking at online portals advisory committee. i guess facilitating that innovation is important. another aspect, though, in terms of risk is cyber resilience. that goes hand in hand with what is happening with digital. there i have been concerned about making sure that -- i think you -- you can't really stop, can't be completely

protected. i say the united states national institute security standards is a fabulous methodology. what we are looking at is what we can do -- looking across the various primary markets funds management derivatives, what we can do in terms of guiding in terms of setting various i think not surprising that cyber attack is the next black swan although you're not supposed to know the black swan. but this one looks obvious. i think that's a second thing. the third area for us always is what i call innovation driven complexity. whether it be products, whether it be markets or technology itself. when i talk about products, i talk about you know complex

derivative products, targeted at investors aren't world. and we're doing a lot of work on that at the moment. the other one is the in markets is clearly high frequent trading. and that goes to the heart of markets. you think about it. i said before, the fundamental thing of markets is to fund the real economy. so there i think we have to be careful in term of the liquidity out of the market, for example. and i guess the fourth key for us is getting that balance between allowing the market the free market to do its job and balancing that with investor trust and confidence. you think about it the two should be aligned. frankly, if you don't have

confidence, trust and markets you don't have markets. and if we don't have something to facilitate the system, so those are the three key areas. the other one this i think is the big issue that is emerging is conduct and culture. i think we'll hear more about. this what frightens me is when we peel the onion and look in supervision and what we see. it is the issue of the need to change culture. i'm very passionate about it. don't think where we're headed post cross-ice post crisis is simple. it's about doing the right thing by your customer and getting that culture back. having been in banking 40 years ago, getting back to thinking

about just dong the right thing is probably what we've all got to think more about. i think there say lot of pro active stuff happening here. unfortunately though, i think you've got to have -- it's a carrot and stick approach. the carrot is where we see our country without surveillance. dealing with the top management of boards and saying you've got a problem. that's important. the easy way is pro actively dealing with trying to fix the culture. helping ports do it. but equally, i think it's the stick. the stick is important unfortunately. we know human nature is driven by often three things. one is people who just fear going to jail. probably getting caught and what happens if you get caught. so making sure i believe those in management who are

responsible, i think individual accountability is more important, probably more important than big corporate finds. at the endst day, corporations are simply people, are simply people. and that determines behavior. i think if you're going to get culture right and have trust and confidence in the banking and financial system, i think the way to win that back is to make sure that there are the right check and balance there's. we're going to hear a lot more about. we're seeing what is happening around the world and for our own exchange and benchmark. there is a lot of work to be done there. >> yes, we're -- we hit the fifth anniversary of dodd-frank. how well have the i remember how difficult it was to get the regulators legislatures

onboard. to do it 20 times over and 20 different cultures is kind of difficult. so how -- has there been -- how good of a job has there been? >> look i think it's incredible. it's massive. what happened since the crisis. look at the otc derivatives areas. i had breakfast this morning and it's incredible how far around the world regulators are now cooperating. and even them, it's one team. we may argue about which team view is prevailing. look at the end of the day. i say this to the financial stability board. you know we want to be more inclusive in fsb so we don't get the wrong outcome. i think working -- look tend of the day, the one point i said bemerging -- globalization is a fact of life. that is the other mega trend. i didn't mention before. it's a fact of life.

markets are globalized, right? the internet, it facilitates globalization. so we are globalized. we're in markets. therefore, it's essential we work as more and more globally. so i do believe it's working well at fsb. look, in the crisis some things work well. other things are still in trying. when you think about it, there was a massive amount that was done. many of the measures is effective. i believe the issue of derivatives, you look at history, one thing we know it's quite interesting in lessons of history is normally you find that normally it's the fire to recognize that markets have changed and become more global is often when you end up with a process. when markets are ahead of regulation, that's where -- you even got the crisis.

history doesn't repeat itself but, you know, it rhymes very well. i think we need to learn the lessons of history. there are other crisis and we'll learn again. we're shaped by change. >> thank you. >> hi. >> hi. >> given the global nature of markets that we were just talking about, do you see the legalant antly identifier part after your plan going forward? >> well, i mean that is -- i think it's a great initiative, the financial stability board. i think that ability to track through is very important. i can't really kmontcomment on sm management. i think that is a great initiative and i welcome it, actually. >> dave michaels with bloomberg news. you noted during the crisis that

mutual funds were not significant but you also talked about liquidity risk going forward and liquidity management. can you elaborate more on what you see, the specific kinds of funds you see as posing liquidity risk and then also you mentioned bond markets and that part of your talk. you could elaborate a little more on what your concern is about bond markets? >> so in relation to -- a lot of this, frankly, work we're doing is to reassure the financial stability board and markets that, you know the tools we have are appropriate. okay? and -- and if there is a need for change to identify it. so in the case of funds you know, as i said we're going to be looking at at the activities of funds and how they deal with you know liquidity mismatches

and adjust and so i can't really predict what the outcome of that will be. but what is appropriate is obviously depending upon the structure of the fund and the way in which it's -- it may -- liquidity redemptions, for example, stressing to see how it would affect in a liquidity test and whether it would work in a simulated study. and that again feeds through you know, to just making sure that people are confident the system works. then communicating the stress scenario to everybody. that underpins trust and confidence is what we're all about. equally in the secondary bond market, we've all heard about structural issues and the bond market. and so we're looking at that -- we're doing a survey across the world of bond markets and my background is in fixed income markets. i must say in this area i think that it's quite interesting. generally we know that there is

a whole talk about market making, for example. well, you know, generally unfortunately, you know, the issue in market making often is that when you need the liquid it is generally not there. so as a -- when i was in markets, i never relied on market makers to be there when i needed it, frankly. you need to think about other options. i do think, you know on one hand you've got discussions people saying well, yes, the world has changed. but -- about the fact that the liquidity is less. if you think about it, precrisis, you had a massive amount of leverage liquidity in the banking system because of what was going on training box. what we want in markets is sustainable markets. sustainable bond markets. whatever we, have we want them sustainable. i never thought that what we had precrisis was particularly sustainable because it was liquidity driven out of banks. you have people saying maybe we have to do something in

liquidity and capital because it's making it hard. i don't think that is the solution. you have others saying if something really goes wrong central banks can provide the liquid. i don't think that is a solution either. that comes from moral hazard and other things. what you got to do is think about, you know, i think the industry needs to think about what real money investors really need. if you want to build real liquidity in bond markets. and what they often need is, you know, they want to buy bonds that are in the index upon which they're managed right? so issuing bonds that are actually in the index, it's like equity markets. we know what happens once you get into the index. liquidity goes up. that's like 101, right? then you think about the principles often if you are a regular issuer like this market you know regular issuers they absolutely thrive on building liquidity with the investor base. they issue into the same maturities. they make sure the documentation

is simple. make sure you have a good derivative market because maybe they don't necessarily want to -- you may want to keep the liquidity position but sell off the risk. a good example is pinco that got their money back in days. so i think there are fundmentals there. let's talk to the experts. let's talk to the industry. that's what we're about at. that's what we do. >> that wraps up the session today. this newsmaker is coming to a conclusion right now. >> we'll be available for questions for a few minutes. but we've come up on the end of

our hour. we appreciate everybody showing up. i hope you gained a lot of insight from the chairman's comments today. >> thank you very much. i very much appreciate you all coming. so thank you very much. >> on the next washington journal, a look at the debate over gun laws after the recent church shooting in charleston, south carolina. there is a survivor of the virginia tech shooting and advocate for the organization every town for gun safety. also syndicated columnist ann culter talks about her new book called "adios, america." we'll also take your calls and look for your kmenlts on facebook and switter beginning live at 7:00 a.m. eastern on c-span. >> tuesday, the secretary

hearing of sib area tack that exposed the personal information of an estimated 4.2 federal workers. a senate appropriation subcommittee will hear from the opm and inspector general and the former home land security chief information officer. that's live starting at 10:30 a.m. eastern here on c-span 3. >> first families take vacation time like manufacture us. and like presidents and first laiz ladies, a good read can be the perfect companion for your summer journeys. what better book than one that looks inside the personal life of every first lady in american history. first ladies, presidential historians on the lives of 45 iconic american women, inspiring stories with fascinating women who survived the scrutiny of the white house. a great summer time read available from public affairs as a hard cover or an e-book

through your favorite bookstore or online book seller. in a news conference monday surrounded by south carolina lawmakers, governor nicky haley called for the removal of the confederate flag from the grounds of the state house. here's a look. >> for many people in our state, the flag stands for tradition that's are noble. that tra decisions of history, heritage and ancestry. the hate filled murderer who massacred our brothers and sisters in charleston has a sick and twisted view of the flag. in no way does he reflect the people in our state who respect and in many ways revere it. those south carolinians view the flag as a symbol of respect integrity and duty. they also see it as a memorial a way to honor ancestors who came to the service of their state during time of conflict.

that is not hate, nor it is racism. at the same time for many others in south carolina, the flag is a deeply offensive symbol of a brutally oppressive past. as a state, we can survive and indeed we can thrive as we have done while still being home to both of those viewpoints. we do not need to declare a winner and loser here. we respect freedom of expression and that for those who wish to show their respect for the flag on their private property, no one will stand in your way. but the state house is different. and the events of this past week call upon us to look at this in a different way. 15 years ago after much contentious debate south carolina came together in a bipartisan way to move the flag from atop the capitol dome. today we are here in a moment of unity in our state without ill

will to say it's time to move the flag from the capitol grounds. [ ablaus ] [ applause ] >> 150 years after the endst civil war, the time has come. there will be some our n. our state that see this as a sad moment. i respect that. but know this for good and for bad, whether it is on the state house grounds or in a museum the flag will always be a part of the soil of south carolina. but this is a moment in which we can say that flag while an

integral part of our past does not represent the future of our great state. the murderer now locked up in charleston said he hoped his action was start a race war. we have an opportunity to show not only was he wrong but just the opposite is happening. my hope is we can move forward as a state in harmony and honor the nine blessed souls who are now in heaven. >> last year there was legislation that requires the state department to take action to return the american children abducted to other countries. next, a house foreign affairs subcommittee h on international child abduction. this is two hours and ten minutes.

>> the committee will come to order. good afternoon. let me apologize for starting late. we had a series of 14 votes in succession. goen our distinguished witnesses, apologize for the lateness in getting under way. >> i want to thank you for being here, especially the left behind parents that i see in the audience and the thousands more here in spirit, deeply concerned about their abducted child. we would like to interview the act. in today's child parental child abduction rips children from homes and families and whisks them away to a foreign land

alienating them from the love that love them. every year an estimated 1,000 american children are unlawful removed from their homes by one of their parents and taken across international borders. the problem is so consequential and in diplomacy that congress unanimously passed the goldman act last year to give teeth to requests for return and for access. these actions increase in severity and range from official protests through diplomatic channels to extradition to the suspension of development and security or other foreign assistance. calculated to get results as we

did in the return of sean goldman from brazil in 2008. but a law is only as good as its implementation. broken hearted parents across america waited four years for the goldman act to become law and still await full u.s. government implementation of that law. the state department's first annual report that we are reviewing today should be a road map for action. the state department must get this report right in order for the law to be an effective tool. if the report fails to accurately identify problem countries, the actions i mentioned above are not triggered. countries should be listed as if -- if they have high numbers of cases, 30% or more, that have been pending over a year, or if they regularly fail to enforce return orders or have failed to take appropriate steps in even one single abduction case pending for more than a year. once these countries are properly identified the secretary of state then

determined which of the aforementions actions the u.s. will apply to the country in order to encourage the timely resolution of abduction and access cases. while the state department has choice of which actions to apply and can waive actions for up to 180 days, the state department does not have discretion over whether to report accurately to congress on the country's record or whether the country is objectively a noncompliant nation. as we have seen in the human trafficking context and i would note parenthetically that i authored the trafficking victims protection act of 2000 and the goldman act, an accurate accounting of a country's record can do wondered to prod much needed reforms. accurate reporting is also critical to family court judges across the country. and parents considering their child's travel to a foreign country where abduction or

access problems are a risk. the stakes are high. misleading or incomplete information could mean the loss of another american child to abduction. for example, a judge might look at the report filled with zeros in the unresolve cases category, erroneously conclude that a particular country is not of concern and give permission to an estranged spouse to return to their country with the child for a vacation. the taking parent then abducts the child and the left behind parent spends his or her life savings and many years trying to get their child returned to the united states all of which could have been avoided with accurate reporting on the danger. i'm very concerned that the first annual report contains major gaps and even misleading information, especially when it comes to countries with which we have the most intractable abduction cases.

for instance, the report indicates that india, which has consistently been in the top five destinations for abducted american children, had 19 new cases in 2014. 22 resolved cases and no unresolved cases. however, we know from the national center for missing and exploited children that india has 53 open abduction cases and 51 have been pending for more than one year. the report also shows zero new cases in tunisia for the last year. three resolves cases and zero unresolved cases. and yet miss bar barrow will testify to her more than three year battle to bring her children home from tunisia. again the national center for missing and exploited children show six abductions, all of which have been for more than a year. and none of which than the handling of japan, a country that has never issued oren

forced a return order for the single of the hundreds of american children abducted there and not listed as a country showing failing to cooperate in returns. in march, nearly two months before the annual report was released, i chaired a hearing of this sub-committee featuring ambassador susan jacobs in which it was made clear that japan will be handled the new abductions after joining the hay administration, all abductions, including the 50 abductions, for at least the last five years. among those cases is that of sergeant michaelee lie as who has not seen his children jade and michael jr. mike as was a mean who saw combat in iraq. his wife who worked in the consulate used documents to kidnap their children then aged four and two in defiance of a court order telling michael on

the phone there was nothing he could do because, as she said, and i quote, my country, that is japan, will protect me. her country worried about the designation in the report sent a high level delegation in march to meet with the ambassador and explain why japan should be excused from being noncompliant despite one year after signing the agreement, japan has a zero -- zero returns to the united states. just before the report was released, two weeks late, takahashio cada, secretary to the ministers of foreign affairs, told the japanese diet he was in consultation with the state department because we stooif to make an explanation to the u.s. side, i hope that the report contents will be based on our country's efforts, closed quote. in other words, japan got a pass from the state department and escaped the list of countries facing action by the u.s. for their failure to resolve