that they could conveniently receive and make payments in any currency they wish in a quick and efficient manner. at one time, the lack of banking relationships made it necessary for bnm to established bilateral payments arrangements with central banks in many other developing economies to facilitate payments for trade between malaysia and those economies. the expansion of correspondent banking has now made such arrangements largely redundant. the globalisation of finance has allowed malaysian corporates to tap global sources of funds to support their investments and operations in other parts of the world, hence broadening their economic opportunities. it has allowed malaysian fund managers to invest in other markets to diversify their investments and increase the yields to their unit holders. it has allowed foreign funds to invest in our financial markets, adding depth and liquidity to these markets. it has allowed foreign financial institutions to operate in our markets and our financial institutions to operate in foreign markets. therefore, our engagement with the global financial system brings real benefits to the economy. the risks in global financial integration however, along with the benefits, there are also risks from the growing financial integration. a more integrated global financial system has a tendency to amplify financial shocks and transmit them throughout the system. as alan greenspan, the former chairman of the us fed, once put it, “ these global financial markets, engendered by the rapid proliferation of cross - border financial flows and products, have developed a capability of transmitting mistakes at a far faster pace throughout the financial system in ways that were unknown a generation ago. ” 1 alan greenspan, understanding today ’ s international financial system, 34th annual conference on bank structure and competition, federal reserve bank of chicago, 7 may 1998. bis central bankers ’ speeches this could not have been better illustrated then how the financial crisis in the major economies spread to the rest of the world through the network of financial relationships. the consequent conflagration in the global financial markets had a significant negative impact on economies around the world. for emes, the subsequent actions of the policymakers in the crisis - affected economies have created additional significant policy challenges in trying to manage the cross - border contagion in the form volatility of their exchange rates and financial markets. malaysia was not spared from this volatility. we have experienced the contagion from what was happening in the major economies. for example, in the aftermath of the crisis in europe, when the european banks were shrinking their balance sheets and pulling back from their overseas lending, concerns were raised about

me that malaysia will over time become even more integrated with the global economy and financial system. this is necessary if malaysia is to grow and prosper. we need global markets and we need foreign investment. so far, we have done a credible job of ensuring that the malaysian economy and financial system evolves in response to domestic, regional and global developments. but, as i have sought to highlight in my speech, globalisation, particularly financial globalisation, also brings difficult challenges and risks. and those challenges are not likely to go away. therefore, maintaining our focus on ensuring the resilience and competitiveness of our economy and financial system will serve us well as we sail the stormy global seas. bis central bankers ’ speeches