This would be in line with the greater concern at all levels to avoid the funds extended through the banking system being used, among other activities, for terrorist financing or money laundering. 8  BIS Review 39/2004  Customer knowledge on the part of financial institutions has a second but no less important dimension. The products offered to financial-services consumers must be tailored to their needs, with the institutions helping them to assess the risks that they wish to and are able to assume. In a context of rapid credit growth like that in Spain, it would seem to be enormously important to help customers assess the commitments they are capable of assuming on the basis of both their present and future circumstances. The challenges I have referred to justify the need for a response by supervisors and regulators. The focus of our concern is currently the promotion of the stable functioning of the financial system, and the need to boost the incentives offered to ensure that it continues to enhance the scope and quality of the services that it has traditionally offered to society. The New Capital Accord is undoubtedly a significant step in this direction and represents a great opportunity for the banks to review, update and improve their capital strategies and risk management systems. It is, therefore, a suitable framework for boosting financial stability. The New Capital Accord proposes a comprehensive approach based on the combined operation of a number of complementary elements and considering a broader set of risks than its predecessor.

Growth in trade between ASEAN and GCC have resumed postcrisis and is expected to receive a further boost with the ASEAN-GCC trade and investment framework agreement and FTA. I therefore urge all parties to work swiftly towards a mutually-beneficial conclusion. Reforming finance to sustain growth 8. The financial sector has encountered major turbulence and headwinds as a result of the financial crisis and has de-leveraged extensively in response to a more risk-sensitive environment. Significant changes in financial regulation are underway. Global regulators under the auspices of the Financial Stability Board, the Basel Committee on Banking Supervision, are working to put fractured financial markets back on a sounder footing. These changes include increasing the quality and quantity of risk-based capital, introducing new global liquidity requirements, and developing a fresh regulatory approach towards systemically important financial institutions. Such reforms should bring about greater stability to the global financial system. 9. These changes will not be dramatic for Singapore-based financial institutions because MAS’ regulation and supervision have been sound, prudent and effective. This has helped our financial system to remain resilient through the crisis. Last week, MAS communicated our long-standing approach in the latest monograph – “Tenets of Effective Regulation” where we reiterated that our approach to regulatory development is outcomefocused, risk appropriate and impact sensitive. MAS’ policies and actions need to be clear and consistent as well as responsive to industry and market changes and economic cycles.