efficiency must be created and maintained among financial regulators. as we have witnessed in this current crisis, the lines delineating the financial institutions that make up the financial system have become at times blurred, making improved collaboration among financial regulators exigent. second, there must be a conscious effort among regulators to devote more resources to the regulation of the conduct of business. there is often the temptation during a large - scale ( global ) crisis, such the one we are in at the moment, to speak only about systemically important institutions. ladies and gentlemen, i believe we must be careful not to forget the public that ultimately we serve. we must remember that the financial sophistication of the investing public may not necessarily coincide with the pace of financial innovation. this creates a gap that could result in the public not fully appreciating the products and new structures that they are investing in, thereby unduly exposing them to risk. i. the need for information efficiency in discussing my first point, which is the need for information efficiency, i ’ d like to highlight two recent developments in the global financial markets. first, the convergence among different types of financial institutions. and second, the convergence in the framework for financial regulation and supervision. a. convergence among different types of financial institutions the financial crisis in the us, as we now understand it, is partly explained by the relatively loose regulation of entities heavily involved in financial innovation, including the oversight of the sale of these products to the wider public. financial markets have developed in recent years so that the same financial products are sold across different financial sub - sectors – from banks to insurance companies, to securities firms, with several cross - combinations thereof. in addition, the emergence ( through common ownership ) of financial conglomerates that encompass the different types of financial institutions has eroded the long - standing barriers that kept these business lines apart. with these changes, it has become important that financial regulators clearly understand the mechanisms for passing on of risks among these different sub - sectors. let me illustrate. the distress certain insurance companies currently face can be directly traced to their exposure to risks that originated in the banking system, including structured products and derivatives whose underlying assets were sub - prime mortgages. this further highlights the fact that the risks to financial soundness of insurance firms may now also arise from the asset side of their balance sheets, a clear departure from the traditional insurance firm risk management practice that focused exclusively on the underwriting risks associated with insurance liabilities. indeed, the

and our still - positive real interest rate structure, we continue to have the policy space to, should it be needed, respond to sudden changes in the global and domestic environment. 2. on the exchange rate – we will continue to pursue the policy of a market - determined exchange rate. but while we don ’ t expect drastic moves, the market should bear in mind that the exchange rate is no longer a one - way bet. the bsp is carefully monitoring market behavior. so the market would be the wiser if it acknowledges that the bsp has several tools up our sleeve to ensure that market dynamics do not result in misalignments in the fundamental value of the exchange rate. 3. on asset prices – we don ’ t see stretched asset valuations at this time, but we will continue to watch out for build - ups in asset price pressures. the experiences in the us sub - prime and in the european debt crisis have given rise to the “ lean ” vs. “ clean ” debate. we now know that it could be expensive to “ clean up ” after an asset price mess. therefore, the market could expect the bsp to cautiously “ lean against ” such price pressures. the bsp will carefully calibrate policy rates, being cognizant that our first line of defense is still the use a mix of macroprudential tools to address potential excessive risk taking among market participants. just last week, the monetary board approved the introduction of a more comprehensive method of measuring the real estate exposures of banks. this measure will include, among others, not only bank loans but also investments in debt and equity securities, the proceeds of which are intended to finance the activities of real estate companies. the objective is to get a more complete picture of the amount of funds going to the property sector. if you have been observing the bsp, one thing should be pretty clear to all of you by now … the bsp considers any situation with circumspection and addresses it in a gradualist and market - consultative fashion. we always aim to provide clear guidance to the market. i hope bis central bankers ’ speeches over the past few minutes, i have been able to convey to you that the bsp will continue to craft policy with the broader objective of financial stability in mind. the theme that you have chosen for this summit is “ excellence in optimizing your treasury ”. this is a point worthy of discussion. the phrase “ optimizing treasury ” brings