We are very honoured to host the conference for this year and are pleased to welcome so many distinguished members of the legal fraternity, in particular, from other parts of the world to join us at this forum. My remarks today will focus on three key challenges confronting Central Banks, and how the legal aspects impact the effectiveness of Central Banks. The first relates to building the capacity to manage the increasing uncertainties generated by financial innovation, the increasing prominence of the non-regulated sector and the increasing interconnectedness between financial institutions and markets. Such developments have not only resulted in the emergence of new risks to the financial system but have also changed the dynamics of how risks in the financial system are transmitted to the real economy. In this environment, it is vital to have a legal and regulatory framework that is robust and dynamic enough to enable the central bank to respond to these developments. The second challenge concerns the effective implementation of financial safety nets and the effective coordination of the different components of the safety net to maintain public confidence and to support continuous financial intermediation. Appropriate legislation and regulations that ensure credibility and integrity of the safety nets are an essential part of maintaining financial stability. The third relates to the increasingly and highly complex financial and economic integration associated with globalisation. This has resulted in a significant expansion in cross-border financial activities and introduced new sources of risks to domestic financial systems.

The new constituent law also incorporates a specific provision for the Bank to participate and provide appropriate resources in arrangements, schemes, programmes, or initiatives with any other central banks or international financial institutions or authorities to promote bilateral, regional and international monetary, financial or economic co-operation. Conclusion In conclusion, the supporting legal framework for central banking and the financial system is a key element to addressing the challenges faced by central banks. I have highlighted three areas which are currently very relevant in the current global financial system. Central banks in the advanced financial systems have resorted to unorthodox measures to prevent a systemic collapse of the global financial system. While action has been based on the sense of urgency and to avoid a total collapse of the system, in the aftermath of the crisis, an extensive review of the legislation needs to be made. The more challenging part is to effectively address cross-border issues facing national financial systems. Regardless of whether we are in a state of crisis, these challenges will continue to be relevant given that conditions will continue to be dynamic and the trend towards a more globalised world will not reverse. On this highly complex subject, this two day conference will likely generate highly engaging discussions. I wish the Banking and Financial Law School a highly productive outcome and hope that your stay in Malaysia will be enjoyable and memorable. 4  BIS Review 113/2009