In addition, robust internal  BIS Review 40/2003  3  controls which are designed to provide qualitative standards are also necessary to complement the quantitative analysis of risk and provide a check and balance in the overall risk management practices. The Malaysian experience Let me now take the opportunity to share with you Malaysia’s experience in addressing some of these issues. The blue print for the development of the financial sector in Malaysia is outlined in Financial Sector Masterplan that was released about three years ago. The Masterplan is all about determining the future directions of the financial system and to define the financial structure that is most appropriate to our requirements as our economy moves to the next stage of development. It therefore provides the direction and common purpose for all the relevant parties in the financial sector, the industry, the market participants, the regulators, and the government. In emerging economies, the role of the government and the regulator is important in particular to prioritise policy goals, build the infrastructure, provide the legal and supervisory framework, and in addressing market failures. The key emphasis of the plan is to move toward a more diversified and balanced financial structure with a strengthened institutional framework, enhanced market infrastructure and practices, and an appropriate regulatory environment in line with the transformation that has taken place. The Asian crisis highlighted the vulnerability associated with fragmented financial systems and the risk of excessive reliance on the banking sector.

(2011), “The Effects of the Great Recession on Central Bank Doctrine and Practice”, speech delivered at the Federal Reserve Bank of Boston 56th Economic Conference, Boston, Massachusetts, October 18th. 3  For the case of Chile, see Cowan and De Gregorio (2007), and for a review for a broad set of countries, see Magud et al. (2011). 4  For further discussion on exchange rate intervention in emerging market economies see De Gregorio (2010). BIS central bankers’ speeches  5  Blinder, A., and R. Reis (2005), “Understanding the Greenspan Standard”, in The Greenspan Era: Lessons for the Future, Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. Cowan, K. and J. De Gregorio (2007), “International Borrowing, Capital Controls and the Exchange Rate: Lessons from Chile”, in S. Edwards (ed. ), Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, NBER and The University of Chicago Press. De Gregorio, J. (2010), “Monetary Policy and Financial Stability: An Emerging Markets Perspective”, International Finance, 13:1, pp. 141–156. De Gregorio, J. (2011), “Price and Financial Stability in Modern Central Banking”, speech delivered at LACEA-LAMES Conference, November, Santiago, Chile. Magud, N., C. Reinhart and K. Rogoff (2011), “Capital Controls: Myth and Reality – A Portfolio Balance Approach”, NBER Working Paper N°16805. Ostry, J., A. Ghosh, K. Habermeier, M. Chamon, M. Qureshi and D. Reinhardt (2010), “Capital Inflows: The Role of Controls”, IMF Staff Position Note, SPN/10/04. Tinbergen, J. (1952), On the Theory of Economic Policy, Amsterdam: North-Holland. 6  BIS central bankers’ speeches