To its credit, the insurance industry has taken important strides in rising to the challenges faced. Generally, Bank Negara has been encouraged by the positive response of the industry to new regulations that further strengthen corporate governance and risk management standards and promote the fair treatment of consumers. Of course, some companies have been more progressive than others in absorbing the regulatory principles within their companies. But overall, our supervisory interactions with the industry have shown that the industry as a whole has made good progress in lifting standards of financial and business practices. This is encouraging as ultimately, both the industry and Bank Negara have a common interest in promoting an efficient and stable insurance market in Malaysia. At Bank Negara, we are continuing to strengthen our regulatory and supervisory capabilities as well as sharpen our focus. As those from Malaysia would be familiar, we are now into the fourth month of the Bank’s new regulatory and supervisory structure. The new organisational structure for the regulatory and supervisory functions within the Bank were realigned back in November last year to move from the previous sectoral approach to regulation, to one that will integrate the Bank’s regulation of the different financial sectors under its purview along functional lines. As a result, the functions previously under the former Insurance Regulation Department have now been assumed by the newly established Financial Sector Development Department, the Prudential Policy Department, the Consumer and Market Conduct Department and the Financial Surveillance Department.

Már Guðmundsson: Fault lines in cross-border banking Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, delivered at Les Encontres Économiques, Aix-en-Provence, 9 July 2011. *  *  *  My comments relate to cross-border banking and are motivated and informed, on the one hand, by the rise and fall of the Icelandic banks, and on the other hand, by research and policy work that took place at the BIS, during and after my tenure there. The financial crisis revealed major fault lines in cross-border banking. Some emerged at the global level, some at the EU/EEA level, and some at the national level. I would like to use my 10 minutes to take these in turn. The main fault line revealed at the global level is the operation of cross-border banks with large foreign currency balance sheets featuring significant maturity mismatches, but with limited lender of last resort facilities in terms of foreign currency. The nature and magnitude of this phenomenon were not well understood before the crisis. In this connection, let me stress that I am referring to maturity mismatches in terms of foreign currency and not currency mismatches, which was much better understood and somewhat better regulated, due to the experience gained during several past emerging market crises. Some studies still confuse these two phenomena, however, when analysing this latest international financial crisis. Maturity mismatches are, of course, the bread and butter of modern banking, although they make banks vulnerable to refinancing risk and runs.