Therefore, the measures to revise the capital adequacy framework for Zambia enhances the resilience of the sector to both internal and external shocks by improving the quality and quantity of the capital available for commercial banks;  3)  Introduction of the policy rate: the policy rate was introduced in order to provide a benchmark rate for the banking industry on which pricing for lending products can be based. It also promotes transparency in the price discovery mechanisms in the banking sector while minimizing information asymmetry particularly that associated with the credit markets;  4)  Statutory Instrument No. 33 on Bank of Zambia currency regulations: This measure was introduced with a view to reinforcing the use of the Zambian Kwacha as the legal tender in the Republic of Zambia. The increased use of foreign currency cash in our economy has implications for the effectiveness of the conduct of monetary policy given that foreign currency cash is outside the control of the central bank; and  5)  Currency rebasing: Since 2006, (except in 2008 when there were challenges arising from the global financial crisis) Zambia has enjoyed positive economic variables. For instance, overall inflation has been single digit and the country has continued to record favourable balance of payments surplus. During the recent past, inflation has declined to single digit levels such that in December 2011 it closed at 7.2%. This low level of inflation, coupled with favorable macroeconomic conditions, provided an opportune time to rebase the Zambian currency.

This underscored how important it is for Boards of Directors to understand products and carefully weigh the risk-versus-return paradigm. Here in Malaysia, parallels have also been drawn with the 1997 Asian Financial Crisis, but interestingly the similarities are arguably few in nature. Correspondingly, the regulatory and policy response at the time was also suitably crafted towards addressing relevant issues and to achieve specific objectives. Today, the consolidation of the banking sector and the significant advances in risk management infrastructure and practices are also firmly in place and institutionalized. Payoffs from these efforts are evident as Malaysian financial institutions are now on a stronger foundation to venture into new businesses and countries, undertake more complex risks and withstand shocks. Their enhanced capabilities are now backed by stronger balance sheets, with the risk-weighted capital ratio of the banking sector at 13.4% and net non-performing loans ratio of 2.2% as at 31 March 2009. Our financial institutions have also continued their lending activities despite the global slowdown. Total aggregate outstanding loans have grown by 12.0% to RM727.0 billion during 2008 and by 11% yoy as at end-March 2009. Dealing with financial risks – from regulatory perspective On the regulatory front, Bank Negara Malaysia has and is now in the process of conducting another series of stress tests to gauge, from a capital standpoint, the collective soundness of the banking sector in absorbing potential losses. Complementing this is the liquidity stress tests conducted to assess specifically the capability to withstand market wide liquidity shocks.