The episodes of market volatility were triggered by relatively small and transitory disturbances in an environment of strong macroeconomic fundamentals and abundant financial market liquidity. Therefore, these episodes do not provide sufficient guidance on how the financial system would perform in the event of a larger shock that could trigger a more material and longer-lasting reappraisal of risks at a less favourable stage of the credit cycle. However, they have served to reaffirm concerns about preexisting vulnerabilities and potential risks. 3. External environment  Let me now turn to the vulnerabilities we have identified in the external environment. Overall, risks stemming from global imbalances have remained broadly unchanged over the past six months. The chart on the left of slide 4 shows that persistently large US current account deficits have not fully accumulated into the net foreign asset position of the US, largely because of exchange rate and asset price changes. Valuation effects – primarily a weaker US dollar – have played some role in containing  BIS Review 69/2007  1  US external indebtedness. Nevertheless, the negative US net foreign asset position still remains very large in historical terms by comparison. Since the previous assessment, concerns have increased about the possible implications of carry trades in the foreign exchange markets, driven by relatively low short-term interest rates in Japan and in Switzerland and very low exchange rate volatility. An indicator commonly used to highlight speculative pressures on exchange rates is the net short non-commercial positions in currency futures.

Yet, challenges remain in ensuring that the data is both complete 4/5  BIS central bankers' speeches  and comparable. These challenges are compounded by an increasing need for data at a more granular and disaggregated level. For example, initiatives by the United Nations Capital Development Fund to survey remittance recipients in the Mekong region helped develop a better understanding of relationships between gender and financial inclusion. Yet such data is not available in many other countries. With the large and increasing size of intra-regional migration in this region, there are opportunities to collect and share remittance and migration data at the regional level to complement global datasets. This could be advanced through existing regional forums, including various forums at the ASEAN level. Without good data, we cannot hope to move very far, or with much confidence in efforts to increase the development impact of remittances. In summary, the notion of proportionate regulation has more than one dimension. It should not be mistaken for lighter regulation, nor should it be informed by considerations of size alone. The world is much more complex and regulators will need to find creative ways to better understand and manage that complexity. This is a paradigm shift in the way that regulation is traditionally approached – to one that is more iterative, more inclusive and more discerning. Conclusion Eleanor Roosevelt once said that universal human rights begins in small places close to home – where every man, woman, and child seeks equal justice, opportunity and dignity without discrimination.