 So, we will now move to our next panel called Closing the Macro-Pudential Framework, which goes a little bit into that direction. And again, let me remind the audience that you can ask questions at the end of the panel discussion on Webex by raising your hand or on Mentimeter. You see the code here at the bar at the top of the screen. So please think about your questions and file them. We're happy to take them. So let me introduce now the chair of the next panel, Alexandra Zürschröder, who is the Deputy Director General of Financial Stability, Financial Services and Capital Markets Union at the European Commission. She will introduce the panel, and I will hand over the floor to Ms. Zürschröder. Please go ahead. Tony, thank you very much for the introduction. Good afternoon, ladies and gentlemen. Welcome to our panel discussion on what we call Closing the Macro-Pudential Framework. I have to say it's a real honour and a pleasure at the same time to moderate the discussion this afternoon. And with me, I have four highly distinguished speakers, all with long-standing experience in Macro-Pudential Policy, and let me start by the Vice President of the European Central Bank in charge of Macro-Pudential Policy, Luis de Gindos, Richard Portas, Interalia member of the ESRB Advisory Scientific Committee, and also Professor of Economics at London Business School. My third speaker today is John Schindler, who has spent more than 20 years at the Federal Reserve Board and is now, since February this year, the Secretary General of the Financial Stability Board, the FSB, and last but certainly not least, Daniel Tarullo, Nomura Professor at International Financial Regulatory Practice at Harvard Law School and Interalia, a former member of the US Federal Reserve Board. Our panel today is supposed to have a critical look, whether the stronger focus on Macro-Pudential Policy that was launched as we all know following the Great Financial Crisis is today still fit for purpose. And indeed, and even the lecture we got just now on artificial intelligence, I think demonstrated very well we are finding ourselves today in a changing environment, a changing economic environment of higher inflation and interest rates. We have recently witnessed episodes of market turmoil and there are many other challenges. So indeed, and thank you very much for the organizers of the conference to have this discussion today, because it is a good moment to check if the reforms that have been done are still achieving their objectives or are they gaps? It's the regime we are working with taking sufficiently account of quite rapid, I have to say, new developments that did not exist when the reforms were made. But before I give the floor to the panelists, let me kick off maybe with a very few short remarks from the European Union perspective. And many of you will know that since basically 2014, the EU has established a comprehensive Macro-Pudential Toolkit for banks that builds a lot upon international standards, agreed upon by the Banking Committee on Banking Supervision. And it consists primarily of capital buffers added on top of minimal capital requirements. There are also some other Macro-Pudential tools such as tightening risk rates for certain bank exposures, concentration limits or liquidity requirements available too, but I have to say those have been used less frequently. I think it's safe to say and also documented with numbers that the European Union Macro-Pudential Policy Toolkit for banks has increased the resilience of its banking sector in a preventive measure, leaving it prepared as we have witnessed not so long ago to adapt to adverse shocks for instance in the COVID-19 pandemic. And it has also contributed in our view to addressing the specific risks stemming from the systemic importance of large and complex credit institutions. But let me turn to Macro-Pudential Policies for Non-Bank Financial Intermediaries, the NBFI that are very high on the Commission's agenda. Many of you will know, but maybe not everybody, that we have recently introduced some measures to address liquidity risks for NBFI. And let me give you an example for insurers, the review of the Solvency Tool Regime will most likely introduce powers for competent authorities to suspend redemption rights for life insurance products. And that is in line what we have already done for investment funds. And we are in the EU, in the Commission in the process also to assess the effectiveness of what we have today for NBFI. And this in this respect, we consider cyclical and structural systemic risks to be examined very thoroughly. And I know there are also many other topics like climate change and crypto assets and cyber risks. And all these topics are also very high on the agenda of European institutions, European Central Bank, the ESRB, but also very much an international forum. And that brings me immediately to my panelists. And I will start with Louis DeGindos. Louis, perhaps you could provide us with your views, what kind of improvements have been made in the macro potential framework, but perhaps what would you see as gaps, which may need to be filled if you are looking forward and assess the current situation. The floor is yours. Thank you, Louis. Thank you very much, Alexandra, and good afternoon to everyone from Frankfurt. And thank you very much for the invitation to this ESRB annual conference. And looking forward to our discussion about the macro potential policy framework, whether regulatory reform met its objectives and whether there are some gaps that need to be closed. Let me emphasize three achievements that represent a great improvement from the pre-global financial crisis times as they substantially increased bank resilience and contributed to the stability of the financial system. I am referring first to the establishment of macro potential authorities at national and European levels with clear mandates and policy objectives. Second, the active use of macro potential tools across jurisdictions. And finally, the enhanced cooperation between micro and macro potential authorities. At the same time, and the pandemic also highlighted that macro potential policy had not reached full maturity. Could have been more effective if more capital buffers had been built up in normal times. And it provided with additional tools, in particular for non-banks. More recent events also reminded us that not only capital, but also liquidity issues can become quickly systemic in something that you have indicated, Alexandra. Last autumn, we saw shocks to market liquidity in the U.K. when price falls in core government bond markets, led to forced selling by non-bank financial intermediaries. Earlier this year, we saw shocks to funding liquidity, where deposit runs at an unparalleled speed, led to the largest ever bank failures in the U.S. and the merger of a global systemically important Swiss bank following liquidity outflows. So, after highlighting the important achievements and challenges, let me mention three areas for further improvement in the design and factioning of the macro potential framework for banks, and suggest ways of strengthening the framework for non-max. First, it is important that more macro potential policy space in the form of releasable capital buffers is available in normal times. This approach enables authorities to respond to a wide set of economic shocks. The full release of these capital buffers in periods of distress mitigates the risk of bank deleveraging, when banks might be reluctant to use other regulatory buffers to avoid limitations such as those on dividend payouts. Several countries have recently modified their macro potential frameworks to build releasable buffers in a more flexible way. At the ECB, we strongly support this positive neutral cyclical buffer approach. In this regard, we also support regulatory initiatives at the European level that aim at increasing the flexibility and effectiveness of the counter-cyclical capital buffer framework, allowing for time-lear activation of the measure. Second, it is recognized that more world-based measures proved to be very effective in limiting the indebtedness of forwarders and addressing systemic risk in real estate markets. Consideration should thus be given to empowering national authorities to activate these instruments by adding them to their macro-prolucidation targets. Should risk be mounting, more world-based measures can usefully complement capital and liquidity-based measures traditionally applied on banks. And third, turning to liquidity, the recent episodes were a reminder of the importance to look at the design of liquidity standards for banks and its macro-prolucidation dimension. The increased digitalization and use of social media in the context of the system-wide decline in liquidity that we witness may call for a closer analysis of the liquidity regulation going forward. In principle, the existing regulation already provides some scope to introduce liquidity measures for systemic liquidity risk for banks. In contrast, regulation of liquidity risk in the non-bank financial sector and its system-wide dimension is incipient. The non-bank financial sector has been growing rapidly, increasing its market footprint and becoming more interconnected with a wider financial system. With non-banks playing an increasing role in financing the real economy, it is crucial that the non-bank financial sector remains resilient in times of stress and does not contribute to exuberant risk-taking during market upsurgements. Recent stress episodes have highlighted that vulnerabilities in non-bank financial institutions arise from liquidity dispatch and leverage. These vulnerabilities have crystallized during the March 2020 market turmoil, the failure of Arkego's capital management in 2021 and the UK government killed market stress in 2022. Some of these episodes required extraordinary policy actions by central banks to help stabilize markets, raising moral hazard concerns. A macroprudential approach for the non-bank financial sector should thus aim at enhancing the sector's resilience across a wide range of entities and activities. Such an approach could build on existing policy frameworks, for instance in the investment fund or insurance sector, and develop a comprehensive set of policy measures that address risks from a systemic perspective. Given the large cross-border dimension of non-bank financial activities, it is also clear that any further reaching policy reforms should be rooted in a strong international coordination, including across the euro system and targeting activities and entities. In line with the international policy agenda, this means, first, swiftly finalizing and implementing the FSB recommendations on addressing the liquidity mismatch in open-ended investment funds. Second, remaining equally ambitious in delivering recommendations that enhance the liquidity preparedness of market participants to meet margin and collateral calls. And third, developing a globally consistent approach for addressing risks from excessive non-bank leverage. In a second step, possible gaps in the policy toolkit should be assessed to identify areas where additional macro-potential policy tools could be needed. This should also involve assessing the institutional setup and the role of authorities in implementing these policies. We have seen that the macro-potential approach has been instrumental for increasing banking sector resilience after the global financial crisis. There are good reasons to expect that strengthening the policy framework for non-banks from a macro-potential perspective would further enhance financial stability and reduce the risk of policy leakages. Ultimately, it would be key in supporting monetary policy in fulfilling its objective by ensuring a more stable provision of funding to the real economy. Thank you very much for your attention. Back to you, Alexander. Thank you very much, Luis, for your insights and also for keeping in ten minutes' time with all your very interesting and useful recommendations. And let me turn to Richard. Richard, I think you are the right person to give us a bit of views to follow up what Luis said on NBFIs, and perhaps also something on crypto assets. That would all be very interesting. And I think you have a powerful presentation. Your floor is yours. Thank you. That could be my view. Richard, I can see you, but I don't hear you very well. You don't? Maybe the technical team can help? You're hearing me better now. What's not happening is that nobody's advancing my slide. Are you hearing me? Oh, very well, no. Not too well. That's not good. See, I could probably do something about that, but we won't. My microphone. You're hearing me better now? Now it's perfect. Okay, very good. But now can somebody advance the slides? The slides are there. There we go. Very good. Okay. And Luis has covered some of these issues already, so I'll be fairly brief here, certainly on the background, and simply stress the third bullet point about vulnerabilities in the system. We've talked about liquidity mismatch. We've talked about excessive leverage, but I think we should think a lot more about interconnectedness. Interconnectedness among entities in the non-bank financial intermediation system, and interconnectedness between those, between the NBFI and the banking system. And we can try, I think, a lot more to map those interconnections to be alert to what could happen if one of the nodes gets into trouble. We know about the dysfunctions that we've seen, and we know about the official interventions that have been necessary. There are recent developments legislatively, on the one hand with the amended AIFMD. We may have missed a boat there to some extent. Some of the issues we're talking about could have been, perhaps, dealt with, addressed by the revision of the AIFMD, and we're not. And we've also seen this, particularly in the U.S., but this is happening in Europe now, too, the expansion of private credit. I'll come back to that. Next slide, please. So, one example of the difficulties of dealing with, dealing with leverage, for example, is the fact that leverage can be attained through synthetic leverage through derivatives. And as you can see, the conventional measure, which is the blue line of leverage in the hedge fund sector, has not risen, but those green bars have risen a lot. And that's those are the derivative exposures in the hedge fund sector. Next slide, please. So, the policy issues that face us are alignment of redemption terms with the liquidity of the underlying assets. We talked a little about that. Possibly greater use of swing pricing. And possibly greater liquidity buffers for dealing with margin calls. The leverage and liquidity regulation of non-bank financial institutions is a very difficult topic. We've issued a report, DSRB, has issued a report focusing mainly on liquidity. And the next issue that we should be focusing on is leverage. The trouble is measuring leverage across different categories, wide range of categories, and heterogeneous categories of non-bank financial intermediaries. It's extremely difficult. We've spent a lot of time talking about that in the non-bank financial institutions. Expert, DSRB, but it's a pretty difficult issue and problem. Should non-banks have access to central bank support in episodes of stress? And that I think is an issue that we should be talking about more and the possible implications of such access to such support in terms of regulatory intervention. The same story for banks. If you're going to have a lender of last resort, the lender of last resort has to be in their regulator to limit the moral hazard that arises from the existence of the lender of last resort. What about market maker of last resort? Central banks really do not like to do this, but they have been forced into doing it by events over the past, about in particular in 2020, but in other times as well. And again, if that's going to happen, we need a pretty good work for it. We need a clear set of rules applying to the use of the market maker of last resort function. And then private credit. As I said, I come back to this. It's direct lending, broadly defined, direct lending by non-bank financial intermediaries. And does that improve financial stability? It might do. If it were to move the lending from the highly leveraged duration mismatched banks to less leveraged duration-matched funds, you can't think of counter arguments, of course. Do the non-bank financial intermediary lenders do the non-bank financial intermediary lenders have a message that my voice, the audio is not good anywhere? Is that true? Are you hearing me now? Are you hearing me? We hear you not so well, at least I can. Not so well. Yeah. Let's move the mic even closer and see whether that's any better. Is that better? No, it's fine. Okay, good. So I was saying that the private credit, which is growing very fast in the U.S., is starting to grow here and might actually be a positive phenomenon, although the lenders themselves are not really necessarily able to act with the same monitoring capabilities as banks. Next slide, please. So let me turn, if I can. Next slide. Next slide, the crypto. Crypto assets. Oops, back of it. Back to the previous slide. That's it. Some background. You know about the rise of crypto and then the crypto winter in 2021-22. And crypto is now in a state of everybody talking about a comeback, but it's not quite clear what's actually happening. There have been many failures and scams and hacks and so forth, and that I've set some of them out on the slide. Some of the stablecoins, supposedly stablecoins, have actually broken their pegs, famously tether at one point, but also USDC at the time of the Silicon Valley Bank crash. The key danger here is the interconnectedness of crypto with the traditional financial system. So far, that is not very well-developed. That is not very extensive. But if, as is now widely conjectured in the financial press, if crypto assets exchange-traded funds are enabled, that could be a very attractive investment vehicle for those who want to get into crypto. And then we could find a much greater interconnectedness with the traditional financial system, something of concern. The lobbying efforts, of course, of crypto, they were at their peak with Sam Bankman Freed. They've become a little more reticent now, but they're still very considerable lobbying for relaxed regulatory requirements in various jurisdictions. And there are different approaches in jurisdictions, in different jurisdictions. So there is little international cooperation so far, and that brings us to regulatory arbitrage. Then we do have, in the European Union, a wide-ranging new regulation just now being introduced. Most of that is investor and consumer protection, but it's not very much related to the macro-prudential issues that we're considering here. Next slide, please. So the risk scenarios are straightforward. The algorithmic stablecoins, an algorithmic stablecoin could collapse. We saw one of those cases. It didn't have much implication beyond the crypto world, but again, if the interconnection is developed further, it could. A run on a reserve-backed stablecoin, again, that's like a normal run on a bank, and could have similar consequences. The holding of crypto by traditional financial institutions, in that case, they would be vulnerable to the very volatile conditions in the crypto markets. If you then go further and find crypto entities actually owning traditional financial institutions, this is not something I think we should want to see, and certainly could bring considerable dangers. If native coins like Bitcoin were to become prominent in traditional payments, they then would be, they are vulnerable to hacks and congestion, and that could affect major financial services. So there are different regulatory approaches. I've talked about the markets in consumer and crypto assets regulation of the European Union. The US has not gone that way. It's a regulation by enforcement so far without any overall principles. One approach would be simply to leave crypto alone and let it implode, which it may do, even if it's regulated, an alternative approach would be in particular for the native coins, like Bitcoin, simply to regulate investment in that in the same way that we regulate gambling, because that, after all, is what it is. And next slide, please, the final slide, right. And these are my personal reflections, if you like. Nothing to do with my ESRB activities in principle, at least. I find no so far, no convincing use case for crypto, crime, fraud, et cetera. Money-longering has become a significant issue with the suggestion that a lot of the funding of AMAS has come from crypto being transferred to them and utilized to fund their activities. So as for blockchain, what are the examples of the efficiency savings supposedly due to crypto? And if you are trying to consider to calculate any savings, any calculation has to include an allowance for the costs of know your customer and anti-money laundering. And it's not clear that the calculations so far have acknowledged that. There's no doubt in my mind that crypto does not have the standard attributes of money. If we established in our report that it is not a hedge against inflation, the crypto activity is not as decentralized as the advocates of crypto would like or would like to have us believe. That's for sure. Smart contracts, they're not smart. If you have no recourse and you have to rely on code being being code itself being trustworthy, if you have no body of contract law, it's not clear to me that that is a smart system for contracts. Blockchain is clearly vulnerable to hacks. And I give you some numbers there about the extent of hacks. The purchase and holding of native coins, like Bitcoin, as I say, I believe is indeed gambling and should be so regulated. Otherwise, one might argue that formal regulation, like Mica, simply legitimizes crypto. And we shouldn't go in that direction. That pass has been sold already in the European Union, but there are other jurisdictions, as we know. And then finally, we see, and there are a lot of examples of this, that national governments are often keen to foster financial innovation. And one part of that is crypto. And so we in the UK, I'm afraid, are among those who are competing for crypto business. And that is not, as far as I'm concerned, a wise policy course. France, we did not accept, we did not accept Binance in our regulatory system. We told them to go away, and they didn't go away. They went to France, and France welcomed them with open arms as a positive financial innovation. But the latest was that France, the French authorities raided Binance's offices in Paris, and it's not clear what is now going to happen. So we may indeed, and we are seeing to some extent, a migration of crypto to Hong Kong and Dubai, in particular, jurisdictions which are very welcoming. But again, that opens up the issue of regulatory arbitrage and the need for close international cooperation in dealing with crypto. And I'll stop there. Thank you. Richard, thank you very much indeed for your thoughts, including your personal thoughts about crypto assets. I found them very interesting, and certainly a lot of food for discussion. Let's see, maybe we can come back to that when we have a discussion among us or with the colleagues on the screens. But let me turn to John to provide us with his views. Maybe John, my question about gaps, UC gaps would also go to you. And of course, we're also interested to hear your views on the recent market thermal episodes we had this year. And what is happening in the FSB on this front floor is yours. Thank you very much. Thanks, Alexandra. Thanks for having me. Can I confirm if you can hear me okay? We hear you well and see you well. Perfect, great. Thank you for having me here today. It's a pleasure to be here in this virtual setting. It's very nice to be part of this panel. I've got former FSB members, current FSB members, and Richard's presentation actually set up my own presentation very well, so I'm very happy to be a part of this panel. I am representing the FSB, which is an institution that was formed following the global financial crisis with the remit of addressing regulatory gaps. Which that crisis exposed. But the FSB's mandate is not just a backward-looking mandate. It's not a backward-looking mandate. As financial markets evolve and as new shocks emerge, we have to constantly ask ourselves how effective our policies are and where the gaps in our framework lie. Could I go to the next slide, please? Events over the past few years have, unfortunately, provided us with ample opportunity to assess ourselves and to give us a better sense of where the gaps may be. The market turmoil at the onset of the COVID-19 pandemic provided us with an opportunity to consider which areas of the financial system needed to be further strengthened and which measures that were put in place following the global financial crisis to make the financial system more resilient. We're working as intended. The Russian invasion of the Ukraine and the ensuing volatility in financial markets, notably in commodities markets, highlighted gaps in our assessment of linkages between those commodity markets and the rest of the financial system and the channel through which shocks could spread. The liability-driven investment turmoil, the guilt market episode of a year or so ago, highlighted gaps in our understanding of how leverage in the financial system can work and the possible amplifiers in the event of some sort of market stress. The FTX failure, which was just mentioned by Richard, is another example. Here, I should give the FSB some credit for having identified and warned of the financial stability risks associated with crypto asset markets. And just to be clear, this was, they did these warnings before I was here as Secretary-General, so it's not me tooting my own horn. This is the FSB as an institution. Nevertheless, when FTX failed, it underlined the need for a comprehensive approach to crypto asset regulation. And then the March banking turmoil of earlier this year, which underlined and highlighted gaps in regulation and supervision, and for us, importantly, the resolution framework. We don't want these things to happen, these events that are on the screen, but when they do, it is imperative for us as regulators to examine those situations, learn what we can from them, and one of the lessons we always have to be looking at is what gaps were revealed by these events. I can't talk about all of them, thankfully, Luis and Richard have talked about some of them, but I do want to touch on the March banking sector turmoil and crypto asset markets. And if I have a minute, I will mention non-banks as well. Could I go to the next slide, please? So the turmoil in the banking sector earlier this year raised a number of issues, and one of those that was put firmly in the spotlight was resolution regimes, including the FSB's key attributes, which formed the backbone of the international standard for resolution. The key attributes were adopted by the FSB following the global financial crisis to address, or at least partly address, the problem too big to fail. Their aim is to make it possible to resolve any financial institution in an orderly manner without severe systemic disruption or exposing taxpayers to loss. The framework itself is quite comprehensive. It sets out the resources that must be allocated for use in resolution, and it describes how a systemically important resolution, how a systemic important institution should be resolved. The March terminal highlighted at least two gaps in our framework with respect to resolution. First is that institutions that are not systemically important on their own could be systemically important upon failure. For example, as we experienced, if they share characteristics with other banks, such as a common business model, a common client base, etc. And second is that having a plan for how to resolve a failing institution is great, but having two plans or three plans is better in order to be able to choose the best option for the circumstances that present themselves at that time. And perhaps a third point, a related point, would be that the decision itself to bring a firm into resolution is challenging. Even if that's one of the options, there are political and other overtones to that decision that make it challenging. Our own, the FSB's own postmortem into the events upheld the appropriateness and feasibility of the key attributes, but we need to do more work to ensure that a resolution can be successfully and swiftly executed when necessary, and the FSB is conducting further work in these areas. Could I go to the next slide, please? So let me turn to another way that we learn about gaps, and that is when those gaps didn't necessarily exist at the beginning or when we first started looking at things, because, you know, the vulnerability that brings about the gap didn't exist. And in this case, I'm thinking of a gap that might emerge because of financial innovation. Ten years ago, crypto assets didn't exist at least in any significant scale. So our post-crisis framework was not built to explicitly account for them. I know that some have argued that the financial regulatory framework can already handle crypto assets with existing regulation, but I'm not sure that that's a universally held view. In fact, I'm sure it's not a universally held view. As part of the FSB's remit to monitor and assess vulnerabilities affecting the global financial system, the FSB monitors financial innovation. And in 2018, the FSB developed a framework to assess potential transmission channels between the crypto sector and the traditional financial system. Then in February of last year, we published a report highlighting the risks to financial stability posed by crypto assets. A focus of our work since then has been the development of regulations for crypto asset markets and activities as well as for global stablecoins. And those recommendations were, we were very grateful, were endorsed by the G20 a few months ago. And I think I'd like to reiterate a point that Richard made, or maybe make it even reiterate it and make it clear there, consistent implementation of the recommendations on a global scale is critical because otherwise the regulatory gap will still exist. 100 countries, 150 countries, if you're leaving somebody out, it's not going to be an effective regime. So promoting global implementation of our recommendations will be a big focus of our work over the next year. If I could go to the next slide, please. It's already been mentioned non-bank financial intermediation, what we called shadow banking at the time of the global financial crisis. I want to highlight some work. Louise mentioned the liquidity imbalances. Richard also spoke about these. So I just want to briefly say that liquidity supply and demand, it's been a focus of the FSB's work over the last couple of years. They tend to be in balance in good times. But in stress time, that liquidity supply tends to dry up and the demand soars to the point where sometimes liquidity can't be sourced or purchased at any price. And this forces market participants to behave in ways that could be detrimental to financial stability. This could be fund redemptions. It could be forced asset sales, anything that helps to transmit that shock to the entire financial system. The FSB has a fair amount of work on this and on some other areas that were already mentioned, including the non-bank leverage, for example. This work is not being done in a vacuum. It's being done, it's worked closely with other standard setters, notably IOSCO. And this is to ensure that our policies complement an interlink effectively. And I think this goes to Richard's point about mentioning it with crypto in terms of that cooperation. If I could go to the last slide and I'll just summarize using a few points there. I think we all know that these gaps exist and some of these gaps have been there for a long time. Maybe we didn't know about them because we needed some sort of stress episode to reveal a gap that was already there. Some of these gaps weren't necessarily there before because something like financial innovation brings about a new piece of the financial system that we weren't set up to handle so that introduces a new gap. And I think about something like MVFI, which is something that was on the radar screen, but as markets have shifted, as we've increased regulation in one area activities have shifted to another, maybe something that was too small to matter has now jumped up on our radar screen. So I think there's a variety of ways that these gaps come about. As somebody representing the FSB, I have to say that all of these to me reinforce the importance of the FSB as a forum to promote global cooperation and coordination. And I thank you and I'll turn it back over to you. John, thank you very much for your broad overview in touching on many different topics. One can possibly identify gaps and also some of the ideas how we can close them. And also that you mentioned the global perspective that is certainly very, very important. And let me turn to my last speaker, and that is Daniel. And we have heard a lot about what's happening in the European Union. We have spoken about more the multilateral framework, but of course we're also very much interested in development in the United States, and I think you are the right person to bring us a rest what's happening, especially maybe the banking, but also the non-bank banking sector we have just heard about. Please, the floor is yours. Thank you, Alexandra. So there's an awful lot that one can say about macro-predential regulation obviously, and the previous speakers have touched on a number of those topics. In talking about the United States, I want to zoom in a bit and focus in particular on the thing that's always worried me, and that continues to worry me. And that is the analytic capacity and legal and institutional capacities of relevant authorities here in the U.S. Both to identify and take action when there are arts at the market engage in significant levels of maturity transformation with substantial reliance on short-term wholesale funding. That is where you have the intersection between a good bit of leverage and a short-term funding structure. And so in going through this, I'm going to start with banks and then turn to non-banks. Within the prudentially regulated, that is the banking sector, I divide developments into three categories. Those that are kind of upside, those that are kind of neutral, and those that are downside. On the upside, I'd say that regulation of GSIBs has been implemented with an emphasis on their systemic importance, even where the kind of regulation looks micro-predential, I think has been motivated by macro-predential considerations. That's why U.S. GSIB surchargers are higher than the internationally mandated surcharges. That's why the liquidity regulation de facto goes well beyond what the LCR and NSFR require. It's why the counterparty credit risk and risk management requirements are very, very strict for GSIBs. And I think all in all, while one doesn't want to draw too strong a conclusion from the relative stability of banks both in March 2020 and in March 2023, I do think that that's at least some modest evidence for the proposition that when it comes to GSIBs, the U.S. has done not a complete job, but a reasonably good job of taking account of their importance to the financial system and regulating them accordingly. So on the neutral point, my neutral point is that stress testing, although it continues to provide a really quite good picture of the financial system, at least for the roughly 75% of U.S. banking assets that are covered, I don't think it's developed in the way that one might have hoped a macro-predentially driven stress test would develop. There's been no follow-up on the explicitly macro-predential enhancements that the Federal Reserve identified in 2016, things like incorporating fire sales and liquidity squeezes into the stress test. And then there's the downside, and the downside John has already referred to, which is the March 2020 failures of several mid-sized regional banks, which raised questions in my mind about analytic capacities, or at least the resoluteness with which the analytics were being done, that how could one not see that there was going to be a problem when you had really rapid growth, 90% of your funding was coming from uninsured deposits, you had a lot of unrecognized losses on your balance sheet, and you had a business model which used to look like an advantage to markets, but it kind of morphed into a disadvantage because of its idiosyncratic characteristics. So I think there there was a bit of an analytic breakdown and as people have already alluded, there obviously needs to be some regulatory change, changing AOCI, doing something about the exposure to that level of uninsured deposits, and I would say the U.S. really needs to just bite the bullet and do something about interest rate risk. Pillar two doesn't work, there's not much of a pillar two instinct in the United States, so I think it needs to be done through a pillar one regulation. Turning to non-banks, the basic point I think to make here is that non-bank regulation, non-bank prudential regulation, it swings a lot with political change, even more than in the bank regulatory area. The Financial Stability Oversight Council is headed by the Treasury Secretary, that inevitably I think gives it more of a political feel. It's not Christine Lagarde sitting there, it's not Jay Powell, Christine's counterpart sitting at the head of the table, it's the Treasury Secretary, and I'm extremely fond of the current Treasury Secretary, but it's just a way in which things do change, and we've seen that with the attention to non-bank SIFIs and to potentially worry some activities. During the Obama administration, with the Secretaries of Treasury, whom he appointed, there was a fair amount of attention, there were designations of non-bank systemically important institutions, which would then be regulated by the Fed. Under the Trump administration, there was an explicit walk back from even thinking about naming non-bank systemically important institutions. There was a stated desire to do something about systemically threatening activities, but in the event nothing was really done. Now, since President Biden's appointees have been put in place, the FSOC has become considerably more activist. Their analytic capacities, which are always, I think, significant, have been brought to bear. A lot of good working groups, some good reports that are coming out, but the action continues to lie mostly with individual agencies. And a lot of the latent legal authority was actually with the SEC. And even in the Obama years, the SEC was not inclined to take on a systemic risk regulatory role. That's changed with Gary Gensler as chair of the SEC, which is why I think you've seen over the course of the last 18 months or so a number of relevant initiatives. The revamp of the approach to money market fund regulation. I'm not sure they're quite there yet, but at least it's another try. It's proposal on open-ended mutual funds. It's rule requiring more transparency and investor protection measures for private funds, including hedge funds and private equity funds. It's private fund reporting requirements have been increased. Those are not publicly available, but they go to that point that Richard was making about private credit. Will the authorities at least know what kind of exposures are building up there? And finally, although people with perhaps a bit more ambivalence around it, the SEC proposal for central clearing of treasuries. There, I suspect that treasury and the Fed are not sure that the proposal is quite where they want to be right now. But at least it is moving forward the effort to come to grips with potential problems in the treasury market. So then just a couple of things on institutional structure and capacities. I mentioned already that there's definitely there's decidedly more of a political center for FSOC. And that means that you get bigger swings, I think, in the level of activity. And so, right now I like the level of activity, but it's going to shift as new administrations come in. There are a couple of other institutional features which sometimes go unnoticed. The SEC, the Fed, these agencies are represented only by their chairs. And yet to get anything through the agency you need to have a majority of the full board or commission. And that's actually occasioned some friction over time, both under Democratic and Republican administrations. And finally, the presence of some of the non-voting members and state representatives, just kind of, it's a little clunky. And I think the FSOC operates a little less efficiently as a result. But a more pressing issue is that there are areas in which no member agency of the FSOC has authority to act. And that includes hedge fund or mortgage rate or private equity firms, not in terms of their transparency, not in terms of some of the classic SEC things, but in terms of their overall leverage, their overall liquidity profiles. So the SEC can get in in terms of traditional securities like perspectives, and that can be very helpful. But they can't go in and say that a hedge fund has to limit its leverage, for example. And that is a gap. It's the kind of thing that John was alluding to. We have to look out over the horizon and see where our might problems arise and where is legal authority lacking. You can perhaps get at some of it through things like regulating collateral requirements and margin requirements in repo markets, where authority does exist. But it's still decidedly second best. And I think that remains a major gap in the United States. And something that the FSB, I would hope, would over time consider and try to see if it can produce some recommendations for moving forward. So bottom line, big improvements in 2008 on the biggest banks regulation, some issues around maybe the mid-sized banks and how that needs to be further addressed. But still significant gaps, I think, in authority on non-bank financial activities, even though in the last couple of years we've seen a significant step up in activity where that authority does exist. So thank you. And Alexandra, let me hand it back to you. Very good, Daniel. Thank you very much for your very deep insights. Very, very interesting, I have to say. Gentlemen, listen. I think we have basically 10 minutes left among us. And I would open the floor among ourselves about comments, questions. I mean, we have covered a very wide range of topics. I would perhaps just have one question, but then I would also leave it to you to ask your colleagues in the panel if there is something you would like to react to. My question was a bit about Richard's intervention about private credit. I mean, I found that quite interesting and would maybe interested to get your views how this private credit could perhaps be a bit more optimally regulated. So to take something concrete with me, but the floor is open. I'm sure you have others have comments or questions. So just to reinforce something that I think Richard was suggesting in his own comments, that whether private credit is a good thing or a bad thing depends a lot on the characteristics of the entity that extended private credit. You know, if it's largely equity-backed and they're not subject to runs, then sure you lose a little bit on the monitor, maybe a fair amount on the monitoring side, but it seems to me you pick up a lot on the financial stability side. But if you don't have monitoring and in fact, in truth, you're actually dependent on shorter-term funding and you've got quite a bit of leverage and you've got no regulation, then that's kind of the classic prescription, right? There's a latent problem. So I think this is in part about information, figuring out where the problems lie and understanding that here in particular, it truly is not a category of firms that pose a problem. It's a kind of firm with one or more kinds of profiles that may pose the problem. Richard, you would perhaps like to come in or...? I'm just interested in the knowledge with your net monitoring. And in fact, in truth, you have to do it. Yeah, Richard, I think we are back with your connection problem. Perhaps, Alexander, I can jump in and I have, you know, unfortunately I have to live at 4.15. You know, perhaps something that you know much better than myself, but that Richard referred to is the Mica regulation. The Mica regulation refers and is focused on stable coins. It's not as much about crypto, but it's totally focused on stable coins that is a different, let's say, animal with respect to the rest of the crypto assets. So you have to put it, you know, a little bit in perspective. Yeah, thank you. That's a very good clarification. Okay, maybe we see that if Richard can hopefully join us back and otherwise, I think, Connie, I would give the floor to you. I'm sure that also our audience may have a few questions, but before I do that, my big thanks to all of you for your very insightful, great interventions. I have learned a lot, I have to say. We have covered an enormously wide range of topics. All have their challenges and difficulties. I think it is also important that we continue international dialogue because many of them are not European, not simply US challenges, but they are global ones. So also very happy that we had John today with us. And is that my thanks to the panelists? And I give it back to Connie. Thank you very much. Thank you very much, Alessandra and the panelists. But we do have a few questions here from the audience. So again, I would encourage some to send it via a Mentimeter. You see the code there or raise your hand on Webex. But let me start with the first question, which comes from Ralph Jacob of the ESRB Secretariat. How would we incorporate non-bank financial institutions into the macro-potential framework? Looking ahead, should there be a single but broader macro-potential framework, including both banks and non-banks? This is a very broad question. And I hand it to you, Alessandra, to determine who should answer that question. Yeah, absolutely. No, I think it is a broad question, but I think it is a valid question. You know, we have, as I tried to sketch out in my introductory statement, I think we are quite well advanced when it comes to the banking sector, where all it started. But somebody said that the non-banking sector has, of course, much grown. I think what is needed, first of all, is a zero analysis. And we have started with the colleagues in the Commission to look into that. But I think we need also to have more the views of the affected stakeholders. And that is what we are working on. And this is a quite complex task, as it is not simply one sector, but it is a very range of difficult activities. So we are very much inclined to do that, to look into that. And then I think we have to come back and draw the conclusions, because we cannot simply compare the many different players we have in the non-banking sector and regulate them across the board. But again, problem is well understood by us. So maybe I could say a few words on this question, if that's okay? So in terms of the question about a macro-predential framework for non-banks, I would say it's not like there's a magic entity out there that becomes the framework. I would say it's something we've been piecing together for a decade or more. You go back to 2008, 2009, shadow banking was the term because we knew so little about the non-bank sector relative to the banking sector. But there's been significant improvements in the transparency and not all the way, not as far as we want. But as a result, we now can better assess where the vulnerabilities are. And if you look at things like money market funds, we now have recommendations related to those, open-ended funds. There are now recommendations related to those. Whether you want to call crypto a non-bank entity or something else that's certainly not banking, we now have recommendations for those. So the non-bank macro-predential framework is being put together over time, stitched together like a quilt in some sense as pieces. There is no single non-bank macro-predential regulator, at least not globally and probably in very few countries. But I think we are stitching it together. We've got a long way to go, I would say. But we're making progress. Thanks. If I may. Sure, please. Am I audible now? Yes. I've been having system issues, I'm afraid. Partly maybe related to moving to new offices. The only advantage of which so far is that I have a view on Regent's part. But that's not relevant for us. I think John's taking the positive side. And I guess working in the ESRB trenches over several years, I'm not entirely positive. For example, on money market funds, there was discussion, extended discussion, in the European Commission, in the European Union about further revisions to the money market fund regulation. We, ESRB, put forward a set of proposals, and it has been shelved. All that has been shelved. I'm not sure what the politics of that was, but it'll have to wait at least for the next commission if anything's going to happen. And we have made some progress, I think, at least in conceptual terms, talking about liquidity. As I said, I think we have real difficulties with leverage. They're conceptually as well as measuring things. And as far as measuring things are concerned, John, we still have, if we look at the data on non-ranked financial institutions, intermediaries, about a third or more is still other financial intermediaries. The OFIs, the data that we have are still pretty, and that's come down, it used to be 50, I suppose, when I first got into this game, and it's come down to 35. But I mean, still, this is a big issue. But there's more to say. On crypto, the whatever recommendations have come out so far are not being particularly observed in quite a number of jurisdictions. And as I say, we clearly have a regulatory arbitrage, big regulatory arbitrage issue there. Thank you very much. Anyone else on this question? Or I think almost all of you had a comment. We have another question here, which I would like to ask you. It's from Emily Boe of the ERBE Secretariat. This question follows up a little bit on the last one. Macropodential policy has been developed mostly with a focus on endogenous developments within the financial system. How should the framework evolve in a context where exogenous shocks could be the biggest threat to financial stability? Think of recent events, pandemic, war in Ukraine, and related economic disruptions. And of what is yet to come, climate change, more geopolitical instability, AI, and so on. So who would like to start with that? I'm happy to say a couple of words. Just in general, I think one of the the thoughts behind financial stability analysis of vulnerabilities is that you cannot protect against every shock. You cannot, I can dream up a list of a thousand different shocks and I'm not trying to protect against the probability that an asteroid strikes the earth. What I try to do, what we try to think about is building resilient financial institutions that could absorb a multitude of shocks. And we do that by thinking about things like capital and liquidity buffers and other things that protect you against those vulnerabilities. So whether the shock is endogenous or exogenous should matter less if you have resilient institutions. So that's maybe a too general answer to that question, but that's how I think about it at least. And I turn to the other panelists if they want to tell me I'm too optimistic. Well, I'm not about optimism, John. I'm not sure what the alternative would be to tell you the truth. I mean, I agree that the focus needs to be on building resiliency, both in firms and in markets. One can supplement that though with scenario work, but with stress testing in your financial sector and then the kind of latent or early efforts to try to look at an entire system because you can create an exogenous scenario and run it alongside an endogenously driven scenario. And you'll learn something, but what you may learn is you need to make some adjustments in your resiliency requirements. But I don't think you can get to the point where you're saying we have exogenously motivated macro-prudential regulation. I agree with John. I think in the end it's about the concept of resiliency and you just try to figure out what kinds of things would create challenges for the resiliency that you've got. It's right, if I can intervene here. It's right to make that distinction between endogenous and exogenous. And if you look, however, at financial crises in the past, the big phenomenon is the leverage cycle. And that's historically where the action has been. And yes, we are building up resilience to various external shocks, but I think the main thing that we have to be focused on is limiting the vulnerabilities that are generated by the leverage cycle. And if we limit those vulnerabilities, then with the kind of protections that we have in dealing exposed, then I think we're a lot further along. But I would be focusing on that and in particular on leverage. I mean, that's where the, as I say, historically, and I've done a lot on the history of financial crises. And that's where the action is. Alexandra, would you like to sort of wrap it up? I mean, we have no more questions and we're almost running out of time. So, I mean, if we were over to you for some closing words, I think you're muted, Alexandra. I'm sorry. No, no, I wanted, I'm happy to wrap it up. But before, I just wanted to say a few words very briefly on the last question, but that's a bit more related to the particular setup of the European Union, where I think we should perhaps look a bit more closer into the fact that we have still a market policy in the hands of national authorities. That is not something that I would say, but maybe also we could be a bit more stable in Europe if we would somehow find a more convergent EU level when it comes to those policies, but of course, not to the bottom. But maybe with this again, I wanted to thank the panelists for an extremely rich discussion. I mean, I'll take with me that we have facing a lot of similar problems in the EU, in the US worldwide. I think we have made a good analysis of the gaps. I have also ideas how to fill them, but there's also some more work to do. How this should be done. I think somebody said you cannot predict all the risks. I would agree with that. Life is full of risks, but again, I think what we can do, and this is the whole philosophy of having a strong macro potential tools that we can anticipate as much as we can in order to be prepared. That was a bit of a high level conclusion, but as we had so many things and time is running out, I think I will not go in the details. Again, many thanks for your insights, also for Connie for her moderation and have a good afternoon, everybody. And also thank you from us here at the ESRB and the ECB for participating and despite the slight technical problems here and there, but I think it was a very interesting discussion. So we have come to the end of this panel discussion, so thank you again also for the audience for participating. So we will now take a short coffee break and resume at 16.45, so 15 minutes to the hour for our last panel. Thank you very much. See you then.