The lesson that the foundations for resilience are built during good times was earnestly embraced. Therefore, once stability was restored, the Bank embarked on a comprehensive restructuring and reform of the financial sector. This included the consolidation of domestic financial institutions; the strengthening of corporate  4  BIS Review 12/2009  governance, risk management and the institutional capacity of domestic financial institutions; as well as the deepening of the bond market. These efforts have put the Malaysian financial system in a much stronger position to weather the current global financial crisis. Regional cooperation From the beginning, the Bank has had an active engagement in the region and was from the very beginning part of the SEACEN grouping which is the oldest and most inclusive regional grouping. Starting in 1967, SEACEN has been a valuable regional forum. While it is a group of highly diverse economies, this did not prevent it from being a cohesive grouping. The permanent secretariat of SEACEN resides in Kuala Lumpur since 1979. The Bank is also part of other groupings including EMEAP and the Asian Consultative Council (ACC) of the BIS. Collaborative efforts in surveillance, regional financial market development and sharing of information have been extensive. In Islamic finance, the Bank is a founding member of the Islamic Financial Services Board to promote and enhance the soundness and stability of the Islamic financial services industry. Modernisation of the Central Bank In the 50 years, the Central Bank has also been fundamentally transformed.

Turning first to the economic analysis, according to Eurostat’s first estimate, the quarter-on-quarter growth rate of real GDP in the euro area for the fourth quarter of 2006 was 0.9%, which was above previous expectations. Our current assessment is that the quarterly profile of real GDP growth is likely to be somewhat smoother in response to the impact of indirect tax changes in one large euro area country than had originally been anticipated. The strength of real GDP growth in the fourth quarter is thus indicative of ongoing robust growth in the euro area. Both domestic demand and exports made significant contributions to real GDP growth, confirming the sustained and broad-based nature of the current expansion. The information on economic activity from various confidence surveys and indicator-based estimates supports the assessment that robust economic growth has continued into 2007. Looking ahead, the medium-term outlook for economic activity remains favourable. The conditions are in place for the euro area economy to grow solidly. As regards the external environment, global economic growth has become more balanced across regions and, while moderating somewhat, remains robust, supported in part by lower oil prices. External conditions thus provide support for euro area exports. Domestic demand in the euro area is also expected to maintain its relatively strong momentum. Investment should remain dynamic, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong corporate earnings, and gains in business efficiency.