[ applause ] good afternoon. Financial Regulatory Reform, thats certainly the most common phrase being mentioned in this town. And with the help of my panelists were going to attempt to discover and analyze what that really means and what can be expected in the months to come in terms of Regulatory Reform. Here in the u. S. But importantly, what that means also in regards to the global regulatory frame work and interaction of u. S. Regulators and firms with those of the rest of the world. One common theme that we have heard consistently from both the Regulatory Community and the industry has been that a goal to support qualities which foster Economic Growth and Capital Formation but at the same time ensuring that safety and soundness is good. So Regulatory Reform gets mentioned and im going to quote in the last couple of days and most of them this mornings, comments that have been made by the Regulatory Community on this topic. Ill start probably with Governor Carney here on this stage, saying talking about efficient resilience. Not only about resilience but about making it efficient but also about dynamic effectiveness, meaning you need to assess regulations in a constant basis and be willing to make revisions to regulations that might have unintended consequences. Secretary ama nuchen talked abot reaching proper Regulation Without sacrifice in efficiency in the resilience and stability of the system. Governor jay powell this morning here in town also indicated that the kriesz is regulatory is needs simplifying regulations. Also somebody in fountain p town from singapore talking about an opportunity to fine tune regulations. Then ill finish with former governor tarollo, the architect of many of the regulations that exist in the u. S. Who in his parting speech at Princeton University talked about the document for recalibration and reconsideration will be warranted on the basis of experience once we go through implementation finalizing implementation. Thats an excellent background to say there is a clear opportunity to look back at regulations. We start with sandy. How so much has been done in terms of reform since 2008. Whats your assessment when you look at the comprehensive set of regulations that has been put forward in terms of coherence in terms of your old package . I you heard Governor Carney talk about it this morning. One and a half trillion dollars more in capital, like a trillion dollars more in liquidity, resolution and recovery are protocol has been done. I think in that respect we are afforded the position to take stock. And i think thats very, very important, around as we take stock we can really think about sort of the two dpoents components of what would prize this. We spent the better part of the decade thinking about the safety and soundness of financial institutions, because they were not safe and sound enough prior to the financial crisis. And it becomes critical now that they are to ensure that theyre fulfilling their role in society and in the economy to support Economic Growth and in an appropriate way. And in that context, thats really what we need to be thinking about and just to sort of provide a little bit of a framework around that, you know, in the u. S. Alone where weve got sort of two times the International Standards, that reflects a gold plating thats worth about 49 billion worth of incremental commonality to one. Thats about 600 billion worth of Incremental Capital held at institutions that could be lent into the economy or deployed to shareholders or reinvested. Why should we care about that . Again, the fundamentals of Economic Growth. Weve seen through this election and around the globe, its not only about growth. Its about consistent participation in that growth. And weve seen that broadly speaking, not everyone is participating in the opportunities that they should be and its time for us to be paying very close attention to making sure its equalized. As we look at the framework in those contexts, where is the opportunity . And when i say opportunity, if this is not about rollback or shouldnt be about rollback and it shouldnt be talking about a specific rule but really thinking about, ok, how did all these rules come together . They were written simultaneously across jurisdictions, across multiple prudential regulators as well as market regulators and theres probably more overlap that we need to have that doesnt enhance safety and soundness, but certainly reduces the amount of capital thats available to be deployed and equally reduces the amount of liquidity thats offered into the marketplace, which we should become a little more protective of. We dont talk about this enough, i dont think, but in the u. S. We were able to exit, you know, the Great Recession more quickly than other parts of the globe because weve got a diversified model. Weve got both lenlding directly from banks lu also Capital Markets that are able to serve the needs of borrowers. Preserving liquidity in there by ensuring that weve got deep pools and good amount of access, we use that, investors have more to invest in. The cost of borrowing is lower. That comes back to the starting point of more opportunity for everyone. I think, you know, the other aspects that there are opportunities to think about are in sort of Governor Carney said lets avoid fragmentation. The harmony, ensuring that we have a consistency of frame work or the ability to recognize the equivalent around the globe. Again, back to the protection of global markets, Global Collateral pools because that enhances not only the u. S. Economy but also the global economy. Then i would say to his remarks around, you know, efficiency, you know, in the u. S. We do have a more fragmented Regulatory Environment, you know, for firms like mine, there were seven regulators in the mortgage states. There are five. A consistent approach on determine what is the right implementation approach or the appropriate frame work for compliance champion actually enable us to deliver expenses, deliver what our people want, be sure we have our right framework to exercise our own management teams and enable us to deploy those resources for other things. Thats how i think about it. Ill come back to some of those great points later on in the conversation. Heather, its not only about banks, Regulatory Reform. There is opportunities for reassessing whats been done on the insurance side. Whats your take on that . Well, were very encouraged by the initial approach that the administration is taking. It seems very thoughtful and systematic. The executive order that was issued for Financial Regulation is very encouraging, particularly its focus on efficient and effective and taylored regulation. Thats something that we think makes soens as well as assessing the fit for purpose of the regulation, whats the iming pact of the regulation . Were encouraged by that starting point. Within that context, we do believe that theres there was a lot of energy ex pended by the fsoc during the last administration on the designation of entities, nonbanks such as my company and a couple of others. And that theres really an opportunity now for this administration to take a shift there and really focus on what are the activities that could actually create Systemic Risk and take more of an activitiesbased approaching to stemming risk, which we think is critically important and an Important Role for us to play. Shifting that energy towards looking at the you know, what are we know the known transmission channels for Systemic Risk and interconnectedness, asset liquidation, substitutability. What are the activities that really create Systemic Risk . And when you approach it from this stand, youre almost certainly going to have more impact than selecting less than a handful of firms to just slap higher capital on top of. And when you actually define the activity, youre going to be able to find that efficient effective regulatory response. In this context for insurance, we think the most effective role that the fsoc could play is to identify activities that potentially create Systemic Risk, come up with recommendations and work with the primary regulator which in our case woobl the state Insurance Commissioners and the neic to solve for that problem. So this is this also avoids creating unlevel Playing Fields. In our industry theres over 800 insurers. We all compete with each other to a certain extent depending on what product youre talking ability or service. So ensuring that that level Playing Field is there we think is quite important and an activitiesbased approach can accomplish this. We also think it would be more consistent with this desire effect of a toorld approach that the executive order embraces in its principles, weve seen over the last administration in a they really diverged away from that. Right now, the Federal Reserve currently has out an advance notice of proposed role making on the very first insurance sol yhency regime at the federal level for insurers that own banks as well as insurers that maybe dont own banks but were designated as nonbank, and in doing that, rather thanning a pond, very proven accounting and solvency regimes at the state level with respect to the nonbank insurance fees, theyve come up with an entirely new accounting regime and solvency regime. These are the types of issues that could be that arent yet developed. Theyre within development but theyre at the point of development where a new administration could come in and align those types of roles with the executive order principles. And theres a global dimension that we can discuss later on. Ok. Jennifer, you represent the bank that has very specific Business Model, so regulations do impact you probably in a different way. But whats your assessment of the whole emphasis thats being put in place and how is that impacting your firm . Its been a big impact on our group. We are a prime example of why its needed. We actually one of the examples of this is supplementary leverage ratio. It requires focussing a certain amount of capital, whether its equities or bonds, so if the Business Model is more of that cash of Central Banks because theyre more involved in the payment process, which is what we are. I think that looking at institutions differently as heather mentioned based on their Business Model and also based on their activities and based on what they are involved in versus based on their size and based on the type of based on their size i think that that would go a long way toward that. Again, i dont think we need to start from scratch. We talked about Regulatory Reform as an old thing but its really a new thing. Most of the capital and lick liquidity themes have been satisfied. The set began a review of the testing processes in 2015 and 2016. In some cases there have been good ideas. One is operational risk. Operational risk is a risk and thats capital held against that. None of us are against Holding Capital against operational risk. Everyone has to recognize that based on the way its done now, it takes away from resources both on a regulators side and on the banks side. The regulators have an issue of how should we really allocate this capital charge. How should we be and all the recommendations, it is a helpful step, so i think we can build off those Reform Efforts over the past several years. Weve tried to taylor specifically to different institutions and different Business Models. So lets assume that its filled here. She had launched a review asking for feedback and upset. What are you telling him . Whats on the list of the kind of issues that treasury should be looking at . I guess again, the first one i started out with was i guess we need to look at any of the u. S. Goal siting thats been put in place and look before the rational for that and where that ration avl doesnt exist, make adjustments. That would be i guess in the sir charge that would be in the supplementary tlesh told and the underlying components of tlac and long term debt. I get back to what jennifer mentioned on the lerchl. For some institutions it is becoming binding and its never really good to have a risk agnostic measurement as findbinding, to coming back to thinking about cash and potentially carving out the bank of england to do that already. If youre not able to do that, you remain with this high calibration. You could have sort of weird outcomes. For example, tanks could turn away deposit because they dont ultimately want to carry a 6 capital charge against it or excess hlqa is not into the marketplace because it draws too much capital. And that matters, right . That affects the cost of financing. With regard to stress testing, which is one of the other major binders of binding constraints of institutions i think for the majorities, it is the binding constraint. Looking through to what the underlying assumptions are. There the stress test is good. Balancing growth, maybe theres opportunity there. Call, i think weve seen studies its so granular in its nature it hands on certain segments and acts inspect different ways. So there was a paper that talked about how ccar weighs hooefl on business p lending and mortgages and it draws more daechlt youve seen banks move away from those two activities. Call on the other side, the audits strenuous on commercial infrastructure. I would say lets look at it, lets make sure we get sort of the right gran layerity, the right level of both stress and assumptions going through and then also, you know, contemplate whether or not the qualitative assessment should be part of the passfail requirement and i argue that it shouldnt. Those are the broader issues i would think about. Most if not all of these that you just mentioned are possible of being changed through changing regulations . Uhhuh. From a logistical perspective, are there changes in the law that would be required, that you think are needed . Dodd frarmgts, were talking about stress testing. Dodd frank requires a level of stress testing. It doesnt talk about frequency or assumptions. Its really about the Decision Making that occurs at the regulatory agencies and there might be some new rule making that might be required its no legislative. So all in all its quite doable in supporting the Economic Growth. Heather from an insurance perspective, whats on that wish list of the issues that the treasury should be putting in the report . I mean, potentially its not that long. But i would start with, you know, certainly relearning reorienting the fsoc which is something that treasury mnuchin can certainly can do as the chair of the fsoc towards an activities based approach to Systemic Risk and utilizing the primary regulators to effectuate any changes that need to occur. This is certainly not unprecedented because this is actually how the Previous Administration chose to deal with the Asset Management industry, was exactly that same way. So a line just takes out as the better approach. But also in the context of the international discussions, stay at the table. I mean, it is important that the u. S. Remain at the table on discussions around the insurance capital standard, for example, thats under discussion at the iis. And as well, how the fsb deals with issues of Systemic Risks potentially within the insurance sector and there again we are pleased that a task force has been set up at the ais to explore the idea, the concepts of an activities based approach to potential Systemic Risk within the insurance sector. So again that would be consistent with the fsb and i yos coe and fsocs approach to potential Systemic Risk within the Asset Management industry. So theres a lot here to work with that again as was commented on previously is all within the administrations authorities. And certainly consistent with the executive order and the Core Principles that have been laid out. You can work on legislation but thats obviously a much longer path. You may need legislation to get certainty Going Forward into a new administration in the future. But theres a lot of executive and Regulatory Authority that dodd frank frankly conferred to the fsoc and other bodies that allowed them to make some remarkable changes without the need for sort of the long haul of legislative change. Whats missing in that list, jennifer . So i would build off of both of those comments. I absolutely agree that ccar is on our wish list, but again i dont think its as simple as ccar. Living wills or no living wills. Thats one thing i would add to the list. Its much more do we need a qualitative review of ccar when we have a year round supervisory request. We can build off of what the fed has already done. They have already said its not necessary for large and noncomplex financial institutions. So we can extend that to the rest of the banks. So similarly, its not about living wills versus not living wills. Just like ccars its a helpful Risk Management exercise. What we can do is look at the processes that were going through. So is it necessary to have it every year when dodd frank only requires the periodic review and if theres no material business changes, do we really need to go through this year long process every year on the side of the banks and also on the side of the regulators. In terms of having a seat at the International Table i think thats important. We are all global organizations. We as a bank have operations in the uk and in ireland and on the continent. Whether we are involved in the negotiations or not, we are going to be regulated by the same negotiations because were regulated by those regulators in the uk and in the eu. So i think it is very important that we have a seat there, so we have a common language. If we had to manage our businesses in terms of capital and liquidity subject to different standards, subject to the different framework in the u. S. And asia and europe and the uk that would be a nightmare. You know, that would be very inefficient and both in terms of internal operations but also in terms of market efficiencies. I think thats very important. Sandie, lets continue on that topic. Regulation has been developed sort of global contentious, with the committees, et cetera. In the letter here in the u. S. Created some uproar in europe and other parts that the u. S. Is withdrawing from the international process. You hear comments like that. Whats your take on continuing Going Forward that the u. S. As part of the efforts the Basel Committee, with the standards. I think its essential. You dont want differentiated pockets of you know credit worthiness or risks around the entire globe. I think that was part of the issue with 2008. I think, you know, the mchenry letter is more about, you know, participation at the International Table but with increased transparency so that theres a more robust understanding of, you know, whats being negotiated and insuring that you have appropriate interest aligned and you take into account the Competitive Landscape to insure a reasonable level of consistency. So i dont think the mchenry letter was about pulling out. It was more about, okay, you cant not respect the up requirements for transparency and comments that wed go through in the normal u. S. Rule making. It needs to be incorporated in that base, but i think the International Standards are fundamental. Both in markets and oversight. Heather, some of the topics that you were mentioning theres the framework for systemic assessment of Insurance Companies, the iis is working on the International Capital standard. Whats your take on Global Standards for the Insurance Industry . You know, i would say its a little complicated when it comes to the insurance sector in the sense that were subject to different accounting rules and different markets. And so what we believe is certainly doable is when you respect those statutory those actual accounting rules that lead to jurisdiction. So we are in favor of an International Capital standard conceptually. The problem with the current proposal thats on the table is that it does create a lot of economic volatility, noneconomic disruption. That is not appropriate for an industry that has very long dated liabilities. So that gets to the point this is a discussion thats been influenced very much by the solvency two proposal, solvency two thats been adopted in europe. So that gets to my point previously that it is important for the u. S. To be at the table in these discussions. Because jurisdictions are obviously going to promote rules that they already have in place based on accounting standards that they already have subjected to. But its more complicated because we do have proven accounting and insolvency roles here in the u. S. That we believe should be built upon, not supplanted. I think thats the main message i would send. Jennifer, one of the topics of the center of this debate about global has been revisions to the basel capital framework. Some call it basel 4. Whats your assessment of the process . What can we expect of that process Going Forward and the kind of things at stake when basel is looking at revising the capital rules . So i think i said in the earlier remarks, we think its good to take another look at the capital rules after seeing them in place for a few years, its good to take stock. See where we are. See where we can make changes. I think one of the areas for example where there has been positive changes is in the Security Finance and transactions and securities lending area. Where in the past, the way that we measured it, we didnt take into account normal risk mitigation, like portfolio diversification. And the Basel Committee recognized that and they came out with a new proposal for whats called the revised comprehensive approach. They recognize that changes need to be made. In that sense we welcome that. As i mentioned before, operational risk. We do think there could be further changes that could be made. But at the same time, you know, we shouldnt stop and say were good with where we are. You know, because the whole process is a learning process. And we need to look at the regulations together. You know, we have talked about capital in terms of basel 4 but theres also liquidity. So we need to look at the interaction between the lcr and the flr and how do they Work Together . The other point i would make is something that folks dont talk a lot about. But are the rules that actually can change for the positive. So one example of this is if the proposed capital charge for Interest Rate risk. Basel came out with a proposal for a specific capital charge for Interest Rate risk that was based on a static point of time, look at the Balance Sheet. And a lot of the industry commented on it, and said, you know, the Balance Sheet is dynamic. We look at things and thats how we manage our Interest Rate risk. Because the liabilities run off and you have to plan for that. You need to do it in a supervisory manner. Thats how the u. S. Has done it for decades. And to Basel Committees credit they took it and came out with a revised version. They did it on a supervisory basis. I think things like that dont get as much attention as quote unquote basel 4 or the other revisions. But that is an example of why its important to have a seat at the table and be part of the common practice and for the u. S. And the european regulators to be involved. Sandie, basel 4 has been discussed also in the and governor carnie, he talked about how to approach this issue in terms of developing a framework for understanding what what are the cost and benefits of regulations. The third core principle in the executive order talks about the Impact Assessment and i think regulators and policymakers are looking for input and help from the industry with how to do that cost benefit analysis. What can we tell them . What in that role you can understand the potential circumstances of the regulation . Firstly, probably the folks that are most versed in understanding the cost benefit analysis are actually the Banking Institutions themselves because we have to take all of the rules that have been written by the myriad of rule makers and then make sure that we are delivering against those rules while continuing to serve clients and while continuing to generate value for shareholders. So theres a real line of sight and the rules as they come together result in Business Model decisions and i think we can collectively, you know, shed some light on that. And i think in a cost benefit, before you even get to doing that analysis, i think a good amount of work and and the Basel Committee should focus on this. Going into the financial crisis one of the big concerns and issues were clearly around lefr rag and leverage and transformation of liquidity as being fundamental issues. When you think of the rule making around them, you can rattle them off. We have the lcr. We have nsfr. We have tlac. We have u. S. Short sale, we have margining requirements all meant to address the transformation. And supplemental leverage. Each one of those has dealt with it as if you were not compliant with any of the others. So i think step one is to sort of unpack that and address the risk sufficiently one time and if you think about its compliant with if others, perhaps youre no longer presenting a systemic foot print and therefore that should not be part of the charges, right . So i think thats one way to think about it. Similarly, again, before you get to cost benefit analysis, i think we should look at where we have conflicting rules and decide what we want to achieve and im thinking very squarely in the you know, the derivative space. We have pushed really hard to get the derivative 80 of the derivatives are cleared in a standard way. If you look at slr theres no credit for ccp activity versus bilat. And segregated margin is not counted in the offset. The same exact thing could be said. So before you get to the coa coast cost benefit make sure were addressing the risk we want and encouraging the behavior you want. Then you can do the math. I think the reality is by unpacking those pieces, theres an awful lot of capital that can be redeployed and liquidity that can be added back to the marketplace which will be valuable again in support of Economic Growth. And heather, any of the consequences of what has been done so far on insurance . Can we at this stage assess at this end . Its a little difficult to assess in the most impactful for our industry. Even the fact that the First Federal insurance solvency rule that its still in an anpr stage that would be something that would be measurable if that was already in place. And its not. But i would say that at least within our own company weve taken certain steps, you know, quite proactively to deal with the increased Regulatory Environment that occurred in the last administration. And of course its Public Information that we have announced the spinoff of our u. S. Retail business which was the start of our company of course only 1 50 years ago. Looking at it in a more microlevel, i would say that we are looking at some of the issues within title 7, the derivative title. To build on the theme i had mentioned earlier of having inactivity based approach looking at regulation, one can argue that title 7 is exactly that. And quite effective. And we embrace much of what title 7 accomplishes and has accomplished within dodd frank through the regulatory implementation process. But we are theres a couple of outstanding items and we as Insurance Companies in order to have good Risk Management have to engage in end user derivatives. So its really no different than thinking of an airline that is checking their fuel risk as we take on liabilities which is the job we do. We take risk we accept risk from others and manage that risk. We often need to almost certa certainly check for currency risk, Interest Rate risk. As title 7 is being implemented there is theres theyre set to come online for unclear derivatives, initial margin requirements and this is a little bit of maybe too much belts and suspenders, getting to many of the points that have been made. And really is not aligned with the risk associated with the transaction. Look at the credit quality of the end user. And figure out what is appropriate in the initial margin requirement. Another example would be the realtime reporting to swap data repositories. You know, that really right now is a requirement to do it as quickly as possible. As quickly and technologically as possible. And thats about its been defined as like 15 minutes. In many instances, we have situations where the actual derivative transaction itself, this is as an end user takes time to actually execute. And so we can get speculators actually front running us. We believe that realtime reporting should absolutely stay in place for the regulator. Thats not an issue. But sort of rationalizing that so that you still have the transparency into the derivative market which is critical. To being more rationale in what the reporting time line actually is. Again, not for the regulator but for the public. A couple of examples on that front. So jennifer, in the same l e line, theres also bending regulations. Some of them have been implemented, some of them are still fundamental review of the trading book. The nsfr. Theres still some things that the fed is working on. What would you recommend in terms of having a second look or at least some part in terms of thinking how to putting it forward . I think folks are already taking a pause and taking a second look at the regulations. We think thats a good thing. I mean, as we mentioned before its part of the entire review of whats been put in place. We need to look what the problem is, we need to look at the policies that have been put in place to solve them and how they all interact and whether theyre coherent or whether were overlapping or whether were working against each other. The final point i would make, so far we have been talking about regulations and rules that have to come out. And the other important point is super vision. Thats what we deal with with on a day to day basis. No matter how much we look at the rules if on a day to day basis what were subjected to is a result of supervision is different, then that could be the dividing constraint. The example of this is a living will context. Were subject to the liquidity coverage ratio and liquidity context, but then also separately part of living wills the banks are also subject to whats called r lap which are liquidity requirements and brings up the liquidity resources. For some banks that could be more punitive than whats required as a formal rule. Thats how we need to look across the spectrum, not only at the rule making but the supervisory process as well. I see that were running out of time. Well, we actually ran out of time but im allowed to take 1 1 2 minutes extra. So 30 seconds for each one of you. It seems that we are close to having a vice chair for regulation at the fed. Lets assume that person has been nominated and confirmed and you have 30 seconds to tell that person what to do on his or her first day at the job at the fed. Whats that . Okay. I guess look at it from the 360 degree perspective. Find balance and make sure that your Financial Stability views have two components. That your banks are safe and sound and they can do the job that theyre meant to do which is by supporting consumers and corporations. If you focus on that, you will end up with the safe and sound system. Youll probably find the right level. Heather . I think it would be a simple message that banks and regulation doesnt work for insurers no matter what the size. Right. Right. And can be a tough thing to convince the fed. So they build on the state based Regulatory Regime where needed. I would say build on tailoring, because among the Bank Institutions we serve different anies and the purposes of the economies. It doesnt make sense when they have different purposes and different risk profiles. I have one, small banks, medium banks and large banks. Right. They have that in their minds. Well, help me thanking the wonderful panel for the discussion. Thank you. So for our final panel for the day, we will focus on the trump administrations trade objectives. Explore possible trade initiatives by the administration Going Forward. And anticipate the likely implications. Kristen silverberg returns to the stage to ask the these questions of her panelists. Karan bhatia,