Similarly, the Central Bank cannot reasonably be held responsible for institutions and persons engaged in banking, finance and leasing businesses without authority. Such unauthorized institutions attract investments by offering unusual products. The persons associated with such institutions are usually preying on greed, bypassing many licensed institutions in the country. They oppose the Central Bank when they are investigated, but they start blaming the Central Bank when they start failing. The Central Bank has traditionally strived away from intervening such failed unauthorized institutions. However, in response to public pressure, the bank may take a more interventionist approach, henceforth. Fourth, maintenance of a foreign reserve This is a responsibility of the Monetary Board. International reserve as authorized under MLA should consists of gold and liquid foreign currency assets such as foreign currency notes, foreign government securities, deposits with international banks and international fund transfer instruments Greek bonds. Such reserve has been about 70% – 80% of assets of the Central Bank. There is a misunderstanding even among staff of the Central Bank that the foreign reserve should be managed like assets portfolio with a preferred risk- return balance for business and profit. This is wrong. International reserve under MLA is a reserve, not a trading portfolio, held for the purpose of meeting foreseeable deficit in the international balance of payment of the country and thereby to support greater exchange rate stability and free use of Sri Lanka rupee for current international transactions. Therefore, international reserves should comprise a highly liquid reserve without any known or estimated risk-taking.

The need for central banks to have a broad range of instruments, including macroprudential measures, to achieve financial stability policy objectives is now generally accepted. Focus has also been on the efficacy of different policy instruments that are needed to preserve financial stability, the structure and design of decision making frameworks and the accountabilities in regard to financial stability. For Asia, these considerations have been very much a part of the evolution of financial stability frameworks in the region in this recent decade, in particular following the Asian financial crisis. By virtue of being also responsible for bank supervision, the majority of Asian central banks have a clear mandate for financial stability, whether implied or explicit. In the case of Malaysia, this has supported the close coordination of the macro and micro surveillance functions, and more comprehensive assessments and analyses of the interactions between monetary and financial stability policies. Many central banks in the region also have considerable experience in implementing macroprudential measures, such as lending concentrations, loan-to-value limits and some form of “dynamic” reserving or provisioning policies. The intensification of regional monetary and financial cooperation among central banks in the Asian region has also served to strengthen regional surveillance and crisis management arrangements, as well as in the supervision of financial institutions with cross-border operations in the region. As Asia rises and expectations increase, the two billion Asians now at the margins of the consumption economy will radically transform global demand and supply for limited  2  BIS central bankers’ speeches  resources.