Taking into considerations the two points I earlier raised, Bank Negara Malaysia has worked closely with the Ministry of Finance and the Ministry of Energy, Green Technology and Water to establish the Green Technology Financing Scheme (GTFS), a framework designed to improve the preconditions for financial institutions to finance viable and innovative green technology companies. This is achieved through arrangements that help to bridge information gaps between financiers and businesses. These arrangements also involves credit enhancements and financial incentives, to address current market short comings in meeting a legitimate economic need. Also critically important are efforts being pursued to strengthen the capacity of financial institutions, to provide continuing advisory support to businesses that are mutually beneficial to both business ventures and financial institutions. Central to this effort is the certification process to verify that businesses which qualify for the GTFS are not only able to demonstrate the required technical capabilities, but are also commercially viable. Other complementary efforts include education and awareness programmes, organised around the country to inform and update, financial professionals as well as businesses on the latest developments in the green technology sector. Likewise, courses offered by IBBM are designed to equip finance professionals to effectively assess the viability and risk of green technology projects. In 2010, a Joint Action Committee comprising of government agencies and financial institutions was formed to provide an efficient and coordinated platform to tackle implementation issues, such as, on the compliance and monitoring processes of green projects financed under the GTFS.

However, we cannot rule out a significantly deeper and longer-lasting recession than that forecast in the basis scenario. In this adverse scenario of a deep and long-lasting recession, large losses would be possible for banks with a domestic business focus as well as for big banks. Such losses might lead to a depletion of a substantial share of the banks’ current capital reserves. This might in turn impair market confidence in their soundness. Given this risk potential, it is therefore essential that the big banks take all the necessary measures to ensure their resilience to any further significant deterioration in conditions. These measures include another reduction in their risk positions, a further strengthening of their capital base, the preservation of an adequate liquidity cushion and the alignment of their cost structure with the changed market environment. The opportunity offered by the somewhat calmer environment at present should be used to take these measures. The SNB and FINMA will monitor developments in these areas closely. In this respect, the SNB explicitly welcomes the fact that, at their last General Meetings, the big bank shareholders agreed to the creation of authorised capital. This allows the big banks to react appropriately and flexibly to market developments. Regulatory agenda However, if the stability of the financial system is to be increased in the medium and longer term, the authorities themselves face challenges, and not just the banks. Intensive efforts are currently going into the development of appropriate solutions, both at the international level and in Switzerland.