This includes adequate powers and instruments to mitigate losses to the system in the event of a crisis, restore stability and ensure the continuity of the financial intermediation process. The second is the lender of last resort facility that is provided by central banks to address liquidity stresses faced by financial institutions. Thirdly, is the deposit insurance scheme that provides a guarantee on deposits to protect the savings of small depositors and reduce the prospects for disruptions that could threaten the stability of the financial system. The effectiveness of the financial safety net depends on several factors. They include the capacity of central banks and supervisory authorities to assess risks, the effective coordination between the different components of the safety net, clear communication strategies and a strong and comprehensive legal framework that supports the operation of the safety net. In Malaysia, the Malaysia Deposit Insurance Corporation Act (MDIC Act) which establishes the Malaysian Deposit Insurance Corporation (MDIC) provides comprehensive intervention powers for the protection of depositors. This is complemented by an extensive operating framework developed between the Central Bank and the MDIC which clearly sets out the responsibilities and obligations of both agencies in promoting financial stability and in financial resolution. In the area of consumer protection, amendments to Malaysia's financial services legislation are also being put in place to provide for the establishment, roles and functions of a financial ombudsman to deal expediently and efficiently with disputes concerning financial services between consumers and the financial institutions.

Let me now turn to the challenges arising from greater financial globalisation and the growing importance of international cooperation in ensuring sustainable economic and financial integration across national borders. In this environment regulators are confronted with the challenge of adapting regulatory and legal norms from a nation-centric system to norms that are more reflective of international business and finance. The issue is how to complement the domestic agenda and the international agenda. Regulatory problems arise not only because of the need for domestic regulators – operating within diverse national regulatory norms and cultures – to cooperate and coordinate in the domestic environment but also across jurisdictions. Operational and legal issues in cross-border resolution arise where the regulatory frameworks of different countries do not provide for a common solution in areas such as the unwinding of financial transactions and the enforceability of secured parties' rights to collateral in the foreign jurisdiction. Failure to address such resolution issues promptly, generally within a matter of days, can lead to increased uncertainty and potential crossborder conflicts. Authorities must also have access to information that is not regularly  BIS Review 113/2009  3  exchanged in the normal course of supervisory cooperation. This needs to be supported by consistent requirements for the coordinated execution of regulatory actions. Equally important is an effective legal infrastructure for the mediation of claims against insolvent institutions with international operations Concurrence among regulatory authorities on key elements of effective resolutions would be an important step forward.