These ranged from continued experimentation of unconventional monetary policies and the need to ‘balance’ that, with preserving financial stability, to the continued reemphasis in fiscal and structural policies in both advanced and emerging economies. But in facing a world of paradoxes, perhaps we too need to take full advantage of the strong foundations and conventions that were built in the past, yet remain sufficiently nimble and unafraid to rethink and reconstruct in facing the uncertain future. Errors will be inevitable, but the more important point is our ability to correct them and to remain committed to achieving the right outcomes. This is true for policies of central banks as well. Bank Negara Malaysia’s Approach to Monetary Policy Within this context, please do allow me to share with you the approach to monetary policy that Bank Negara Malaysia takes. Bank Negara Malaysia’s decision-making processes and governance framework today reflect the combination of the efforts and progress since the establishment of the Monetary Policy Committee (MPC) a decade and a half ago. Not many of you might be aware, but the MPC had its first meeting in 2002. In fact, the upcoming MPC meeting in November would mark our 100th MPC meeting since 2002. Before that, monetary policy formulation was conducted under the absence of an established framework and a standard structure. Over the years however, the MPC has evolved and enhanced its effectiveness as the sole body responsible for the formulation of Malaysia’s monetary policy and policies for the conduct of monetary policy operations.

Many have argued that subsidiaries offer sub-optimal use of bank capital, which will be split up and locked up in separate geographical pockets or jurisdictions. In times of stress they could not so readily rely on parent level support or the home central bank. The inability of subsidiaries of international banks to leverage on the capital of their parents would limit their lending in many emerging market economies. This may in turn have negative impact on the trade, investment and other economic activities of these emerging market economies. Besides, liquidity management would likely be more efficient for a branch than for a subsidiary as funds can flow more freely within the same legal entity. On resolution, it is true that the insolvency proceedings for a subsidiary would normally be simpler than for a branch, but in practice there could be many complications such as: linkages to other group entities through intragroup guarantees and exposures, service reliance and shared management, to name but a few issues, which would affect the ultimate resolvability of a subsidiary when it actually happens. 15. After the Global Financial Crisis, the subsidiarisation model has actually gained greater support in some jurisdictions. This is because some home supervisors of internationally active banks feel that it might be easier for these international banks to undertake “de-risking” operations should trouble occur in overseas subsidiaries than in branches. 16. From Hong Kong’s perspective, we believe that subsidiaries and branches of overseas banks can and do play different roles in servicing the real economy.