The sector has been restrained by several factors including the large shadow inventory making its way through the foreclosure pipeline, tight underwriting standards for new mortgage origination, and the sharp slowdown in household formation. Although the corporate sector as a whole is now relatively healthy, there still is a significant constraint on the availability of credit to small business. Business investment continues to expand, but at a restrained pace. I presume that this partially reflects uncertainty over the economic outlook, including the risks around the evolution of U.S. fiscal policy and the crisis in Europe. Fiscal policy has already become restrictive as state and local governments have cut expenditures in response to revenue shortfalls. Moreover, we face the so-called “fiscal cliff” at the start of next year. At the beginning of 2013, federal fiscal policy is scheduled under current law to become sharply contractionary, with abrupt increases in taxes and cuts in spending. Businesspeople tell me that the uncertainty about how Congress and the Administration will deal with the fiscal cliff – and our fiscal challenges more broadly – is already inhibiting hiring and investment. The fiscal cliff represents a threat to the recovery that is wholly avoidable. But we will only avoid it if our politicians act responsibly. We need a credible strategy for bringing down the federal budget deficit over time in a manner supportive of ongoing economic recovery. Any plan should start slowly, but build steadily over time.

Under such an approach, individual countries will have the necessary degree of flexibility to tailor national implementation approaches to reflect the specific characteristics of their respective economies, while committing to uphold the essential regulatory and supervisory principles that underpin financial stability. With Asia’s varied experience in weathering financial crises, in developing our financial systems and in implementing the various regulatory reforms, valuable lessons can be drawn from the region to advance the progress and development of our respective financial systems and of the region as a whole. SEACEN has had an instrumental role for more than 30 years in the efforts to share this knowledge and experience widely among its members through providing a platform for such information sharing and through its research, training and capacity building initiatives. Today, SEACEN takes yet another important step forward in advancing this agenda with the launch of the SEACEN Financial Stability Journal. We live in a world in which the management of financial stability is a highly complex undertaking, and its dimensions have continued to evolve in an environment that is rapidly changing. It is hoped that the Journal will contribute ideas, perspectives and insights and thus generate the intellectual dialogue and discourse on financial stability issues. As a region, Asia has many unique perspectives and experiences to share with others facing similar challenges in managing financial stability. I congratulate the SEACEN Centre on this important initiative. I wish it every success and look forward to contributions from SEACEN members and from the other parts of the world.