Additionally, controls should be embedded in the system to ensure integrity of input, processing and output. Adequate physical and logical access controls are important since they can protect data, system and resources from unauthorized persons. Finally, a financial institution should provide alternative resources for backup and recovery, and ensure that they can be available during an event of a disruption. All of these matters are about security and confidentiality, integrity and availability which will be elaborated more in the next slide. Security and confidentiality Supervisory objective An objective of IT supervision in security and confidentiality areas is to ensure of IT activities being conducted in a secure and control environment and of data confidentiality and integrity by laws, rules and regulations. Supervisory areas To achieve such objectives, the following points should be addressed by supervisors. Physical security: It is about control for environmental exposures due primarily to mother-nature events such as lightning, storms, flood and etc. Others may be caused by human acts such as  BIS Review 35/2005  5  terrorist, fire, electronic shock and equipment failure. The result of such conditions can damage computer system, equipment and facilities which in turn cause an interruption. Another type of physical security is physical access controls which aim to prevent unauthorized access to computer system, equipment and facilities as well as data. Examples of this type of controls are electronic door locks, biometric door lock, video camera, etc. Logical security: It is data, system and network access control.

Under this new normal situation, the agility of businesses and the economy to adapt and adjust to the challenging environment is critical. There are a number of possible adjustments which can be done including raising productivity and efficiency. In formulating public policy, policymakers are faced with the challenge to strike a fine balance in handling the capital flows and its impact to the economy. Because of the enormity of the flows, a combination of approaches had been adopted by emerging economies to manage capital flows. Even measures regarded as unorthodox at one time are now being implemented. Most countries  BIS Review 162/2010  1  have allowed greater currency flexibility; and many have ended up accumulating foreign reserves. These inflows were typically sterilised by the central banks to avoid pressure to domestic liquidity and price level. Regional market developments Turning now to the second part of my remarks on key developments in the regional financial markets. The ability of regional economies to weather the recent financial crisis has its root in the aftermath of the 1997–98 crisis. Many had use the past financial crisis period to embark on bold financial reforms and restructure their financial landscape. Of particular importance were the successful efforts and policy initiatives to develop the bond market. As a result of these initiatives, the depth and breadth of regional capital markets have reached a level of maturity which can now absorb and intermediate large and volatile flows without posing risks to financial stability.