to keep the banking system operational, world trade shrank by 20 – 30 % within a few months and unemployment and government deficits went on the rise. the challenges for economic policy and economic thinking the financial crisis forced economists and economic policymakers to reconsider some basic issues : how to get through the crisis, and how to avoid a replay. the challenges are many, but i will pick upon just three of them. the first is to correctly understand the root causes of the financial crisis and to prevent their recurrence. the second challenge is to repair the damage the crisis has done to the public finances, and the third relates to the need to draw the right conclusions for economic analysis. so, the first challenge is to prevent similar crises in the future. the financial crisis taught policymakers many things – perhaps most importantly the holes in our understanding of systemic risk. the concept of systemic risk is not new as such, but the crisis revealed some new dimensions of systemic risk. before the crisis, it was not understood how multifaceted the links are between the global financial markets and that a sufficiently wide disruption could paralyse the markets. global financial markets did not collapse in october – november 2008. but the collapse was so near that such a risk could no longer be tolerated. efforts are now under way on numerous fronts to get systemic risk under control. on one hand, important revisions to the supervision of financial institutions are in process. the basel committee on banking supervision recently published its first consultation papers on the matter. these are truly significant initiatives – as evidenced by the scale of resistance to the proposed changes on the part of banks. another lesson from the crisis is that supervision of individual financial institutions is not enough. financial markets must also be supervised and regulated at the systemic or macro level. macroprudential supervision has already been under discussion for some 20 years, but it is only now that the tools and institutions for macroprudential supervision are being set up for the first time. the eu council has reached an agreement on the establishment of the european systemic risk board, and the european parliament is expected to consider the matter before next summer. there has been lively debate in various fora on the best instruments for controlling systemic risks. this discussion includes the possible role of monetary policy. there is talk about “ leaning against the wind ”. this idea meets with two types of opinions within the central banking community. on one hand, there is wide agreement that monetary policy should take greater account of certain monetary

approach to risk management by instituting a system of guidance as to the appropriate and standard behavior, work practices and ethics to observe in the provision of risk management services, and a framework or benchmark for a professional risk management service. it is also important to have a system of qualification, training and education as well as a forum to share experiences and ideas to improve competency among risks management practitioners. these are our views on the importance of risk profession and sound risk practices employed in the philippines. may i clarify, nonetheless that most suggestions here also apply to non - bank entities. let me re - emphasize that risk management is not merely for compliance, but is a vital aspect of protecting and enhancing an institution ’ s corporate image, gaining competitive advantage and ensuring its longterm viability. thank you.