William C Dudley: Opening remarks at the Transatlantic Economy – Convergence or Divergence Conference Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Transatlantic Economy: Convergence or Divergence Conference, Federal Reserve Bank of New York, New York City, 18 April 2016. *  *  *  It is my pleasure to welcome you to today’s conference. Over the past decade, the New York Fed has been working together with the European Commission and the Centre for Economic Policy Research in sponsoring a number of conferences on interdependencies and policy challenges on both sides of the Atlantic Ocean. Today, as in the past, we have a great program with many distinguished speakers from academia, and the private and public sectors. In particular, I would highlight the keynote speech following lunch by Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs. As the two largest economies in the world, the United States and the European Union have a shared stake in the vitality of the global economy. Without growth in both our regions, the global economy will not prosper and we will not be able to provide the conditions to enable our citizens to fulfill their aspirations. Both the United States and Europe suffered large social and economic costs from the financial crisis and the deep recession that followed. We continue to take steps to minimize the risks that we will ever find ourselves in that situation again.

Developing and diversifying the financial infrastructure is another important component of capacity building. In this respect, our Financial Sector Master Plan which was released in 2001 represents a ten-year strategy that charts the development of the financial sector. The focus of the initial phase of the plan is on the development of the financial infrastructure and financial markets as well as capacity enhancement and institutional development, in particular, of the domestic financial institutions, thereby putting in place the pre-conditions for moving forward to a more liberalised and competitive environment. Gradualism has been adopted to avoid disruptive and unstable conditions. The aim is to evolve a more diversified financial system with financial institutions that are efficient, innovative and resilient. The Masterplan places priority on good corporate governance and transparency within an effective regulatory and supervisory framework and a strong structure for consumer protection. BIS Review 8/2004  1  Liberalization of capital account The second factor in enhancing national resilience is the approach to liberalising the capital account. While liberalisation of the capital account has potential benefits, it also carries substantial risks. For emerging economies, where the financial infrastructure is still relatively less developed, the premature liberalization of capital flows could lead to an accumulation of risk factors that could lead to instability and culminate into a financial crisis. The approach for the liberalisation of the capital account in Malaysia has been to adopt appropriate sequencing so that the increase financial integration will not have destabilising implications.