international financial reporting standards, and that two firms of external auditors are to conduct an annual audit. furthermore, sama has required banks in saudi arabia to meet the corporate governance guidance emanating from the basle committee on banking supervision and more recently from the islamic financial services board. in this regard, i should mention that sama is participating in the ifsb technical committee and in various working groups that are developing standards of corporate governance for shari'ah compliant financial institutions. the leadership role played by sama, over the past decades, in promulgating corporate governance standards and in promoting a governance culture has been reflected in the emergence of strong financial institutions and a credible banking system. thanks to these efforts, the institutions and the system have remained stable and steady, despite global economic crises and oil price volatilities. dear audience, we should not rest on these past successes. we must remain vigilant and continue to monitor changes in regional and global markets. we must continuously ensure adopting and implementing best international standards and principles. in this context, i wish to draw to your attention that sama is currently directing the banks in the kingdom towards the adoption of basle ii capital adequacy standard by 1st january 2008. i expect all banks to easily meet the required capital requirements ; and this will be positively reflected on fostering the risk management and corporate governance culture that is deemed essential for meeting the challenges of the forthcoming stage. in conclusion, i wish you a good stay in the kingdom, and wish all success to your conference. thank you for your attention.

market discipline and entailing regulation. second, the widows and orphans argument. these regulations provide protection to poorly ( asymmetrically ) informed clients, based on the view that small depositors and investors cannot assess properly the riskiness of financial institutions they deal with. third, the public policy argument. in free market economies, public policy arguments call for competition and free trade. an example would be anti - trust laws in some countries to prevent monopolisation of certain markets. fourth, the systemic risk issue, which allows the state to prevent the failure of one participant to destabilize the whole system. this justifies the regulation, for example, of the payment system and the banking sector. regulation therefore has two important dimensions that must always be borne in mind. first, regulation is a cost that is like taxation : someone bears the cost of regulation. the public must always ask whether the benefits outweigh the costs. second, regulation has a time element - regulations must change with the times. old regulations may prevent or impede market growth. as markets change, so must regulations. third, regulation should not prevent the effective working of market forces. for example, we should avoid bank failures, but not prevent all bank failures. chairman alan greenspan of the us fed ( 1997 ), said “ our goal as supervisors should not be to prevent all bank failures, but to maintain sufficient prudential standards so that banking problems that do occur do not become widespread. ” what are we regulating? we can regulate products, functions or institutions or a combination of all three. problems arise when we have overlapping regulatory terrain, competing regulatory agencies and confused regulatory objectives. there are also arguments for and against the concentration and competition in regulatory agencies. a good example of a one - stop regulatory agency is the monetary authority of singapore, which combines the regulation of the banking system, the securities market and the insurance industry in one institution. at the other end of the spectrum, the us banking sector is regulated by at least four different agencies, the federal reserve system, the office of the comptroller of the currency ( occ ), the federal deposit insurance corporation ( fdic ) and the state banking commissioners. since us banks are increasingly engaged in securities areas, their functions are also subject to the securities and exchange commission ( sec ) and consumer lobbies. regulation may be based on product types such that each regulatory authority specialises in one financial product. under this framework, a securities regulator will concentrate in