Indeed, monetary policy was getting boring. 5 Monetary policy was unencumbered by financial stability considerations. To be fair, central bankers were not unconcerned about financial stability. But financial stability was seen as the preserve of prudential regulation and supervision. Academic thinking reinforced policy practice: the macroeconomic models central banks relied on did not map clear linkages between financial and real variables. 6 Economists warned that it was difficult to identify a financial bubble. How does one tell if the value of an asset reflected economic fundamentals or speculative fever? So, when faced with potential financial vulnerabilities, it was deemed better to clean up after a bubble had actually burst than to try to lean against suspected bubbles. 7 But beneath the still waters of macroeconomic stability, deadly financial whirlpools were forming. Financial imbalances built up steadily in the advanced economies from the mid-1990s to mid-2000s and culminated in the Global Financial Crisis of 2008/2009. The Crisis sent financial systems into a tailspin and plunged economies into recession. The cost of cleaning up after the bubble had burst proved extremely high. The “clean versus lean” debate has been re-ignited, and within the “lean” camp there are differences over how to lean. Monetary policy has become interesting again. Financial stability: what we know and what we don’t know 8 Following the Crisis, there has been growing consensus that it is important for central banks to pay more attention to financial stability. We know now that macroeconomic stability does not guarantee financial stability.

Moreover, several challenges such as the advent of ASEAN Economic Community (AEC) in 2015, the implementation of the Basel III accord and the rocky recovery of the western hemisphere, remained ahead of us. In this regard, I view that priority should continue to be on strengthening the role of domestic and regional institutional investors. This group of market participants are important players on both the issuer and investor side. Collective investment or asset management companies can be an important vehicle to channel cross border savings for cross border investment. We know all too well that very few non financial single name issuer can succeed in a foreign market if they are not well known household names. But institutional investors such as insurance, pension funds and asset management firms are likely to be able to better intermediate cross border savings and investment. These institutional investors would be able to provide a two way flow and with a better knowledge of regional conditions and a natural home bias, would also be a stabilizing factor during severe market stress. A stronger and broader regional institutional investor will also provide opportunities for diversification as well as alternative saving vehicle that would serve the changing demographic trends. Throughout Asia, we are seeing increasing demand for more sophisticated wealth management services. As regulators we also need to continue to collectively enhance our infrastructure and further harmonize regulatory regimes to support greater cross border activities. Standardized market conventions help promote cross border issuance in our respective markets.