In the area of strengthening the consumer protection infrastructure, the agenda covers a wide spectrum of initiatives involving infrastructure and institutional capacity development that includes financial education, advisory services, distress management, rehabilitation and putting in place avenues for redress. Recent initiatives include evolving a more effective Financial Mediation Bureau (FMB) to ensure that consumers of all financial service providers under the purview of the Central Bank have recourse to an independent, fair and impartial dispute resolution mechanism. Earlier this year a deposit insurance scheme was introduced to further strengthen incentives for financial institutions to adopt sound financial and business practices and enhance public confidence in the financial system by providing explicit protection on deposits. Bank Negara Malaysia is also currently finalising the details for the establishment of a credit counselling and debt management agency to be introduced early next year, with the aim of providing individuals with credit counselling and assistance in restructuring of their debts. To promote financial education at an early age, Bank Negara Malaysia embarked on an education programme in schools on basic financial knowledge in partnership with the Education Ministry since 1997. Further, in collaboration with the financial industry's associations, Bank Negara Malaysia launched a ten year Consumer Education Programme (CEP) for the banking and insurance sectors. We are now in the fifth year of this programme. Extensive information is being disseminated via the spectrum of distribution channels including newspapers, radio, websites, branches of financial institutions and outreach programmes.

Whether improved prudential regulations, supervisory practices and risk management techniques will suffice to avoid financial cycles in the future remains to be seen. Our experience so far does, however, leave some doubts about this. This brings us to a possible third line of defense that could at least in principle be used to prevent large financial cycles. I am of course thinking about monetary policy The argument is that since we live in a fiat money system, there is no exogenous constraint on the supply of credit except through monetary authorities. If those reactions are geared exclusively to controlling inflation, then the monetary anchor may not counter a build-up of credit that does not immediately lead to inflation in the price of current output. Hence, there is little to prevent the emergence of cycles in the prices of real and financial assets that are not included in the measure of inflation. In addition, experience has taught us that price stability is not, by itself, sufficient to ensure financial stability. So why don’t central banks simply change the way they conduct monetary policy and also try to prevent financial cycles? Well, the conventional view is that they should not. There are some very powerful arguments against a central bank trying to respond to credit expansion and “misalignments” in asset prices that do not lead to inflation in goods and services. First, how do we know that a bubble is a bubble and not a reflection of fundamental values?