Therefore human capital development should not be viewed as an expense but as an investment for the future. Without such investment, our insurance industries will not be able to quickly make the leap forward and we risk losing the opportunities to players from more sophisticated economies that are ready on the sides to take advantage of our inadequacies. On this note, I am pleased to note that in the short span since its establishment in December 2004, the ASEAN Insurance Training and Research Institute, or AITRI, has successfully conducted technical training and seminars on insurance for over 200 insurance regulators, supervisors and practitioners to date. AITRI has also received recognition from international organisations such as the International Association of Insurance Supervisors and First Initiative for the training programmes that were conducted. Despite its limited capacity and funding, AITRI has continued to serve as the regional network centre for insurance education and research, providing opportunities for regulators to meet, learn and share experiences. I wish to urge ASEAN countries to leverage on AITRI as the regional platform for greater interaction and collaboration and continue to provide support to enable the institute to expand and play the role expected of it. In addition to building capacity within our own respective economies, there is great potential for the ASEAN insurance industry to increase our competitiveness as a region in order to retain a greater share of the insurance business particularly in reinsurance and underwriting of large, specialised risk which traditionally flows out of the region.

Basel II will not only help banks to measure and allocate the provisions and capital necessary to withstand expected and unexpected losses, but it will also help supervisors and market participants to ensure that banks have done so in a way that will maximise the likelihood that they can continue to operate, even in the most difficult of circumstances. BIS Review 34/2005  3  Sound corporate governance The second reason I believe Basel II will promote financial stability is that it promotes more effective corporate governance. Risk management must be based on a strong foundation of corporate governance. A bank can have the most sophisticated measurement tools in the world, but if it is poorly governed, it will be vulnerable to financial and operational weaknesses. The Basel Committee recognised this when it developed the qualifications that banks must meet in order to adopt the most advanced approaches under Basel II. While much attention has been paid to some of the more complex quantitative aspects of Basel II, I believe the most important qualifying criteria are those that address how the bank’s risk management framework is governed. Banks that adopt Basel II will be expected to have a comprehensive and sound planning and governance system to oversee all aspects of their risk measurement and management process. The board of directors, senior management, and audit and other control functions will be expected to exercise their duties in a rigorous manner. I believe that better managed banks under Basel II will be safer, sounder, and more resilient.