economy. second, we all know also that any regulation may have unintended consequences. one of those, of course, is to create incentives for regulatory arbitrage. it is therefore crucial that the reforms be applied fully and consistently across jurisdictions. it is also important to make sure that a significant part of financial intermediation does not shift to the unregulated ( shadow ) financing sector, as this would not help reduce the likelihood of disruptive financial crises. finally, increasing robustness is a necessary but not sufficient condition to get safer financial systems. another important element is to ensure that risk remains at acceptable levels and carefully managed. this is, so to speak, one specificity of our approach in this country. we believe in strong and efficient supervision. we don ’ t think that bigger cushions are a substitute for competent supervisors. we are strong supporters, in our jargon, of the “ pillar 2 ” approach, whereby the supervisor is in charge, at any single moment, to check the adequacy of capital buffers with the effective level of risk in the system. needless to say, we also strongly support the development of macro prudential tools allowing authorities to detect and prevent systemic risks. given that all economic cycles are not simultaneous, to be fully efficient, those tools should be set and implemented at each jurisdiction ’ s level and not a regional one, in order to take into account national cycles and the level of risks of individual economies. overall, i can assure you we are very keen to monitor in real time the economic impact of financial regulation. for the first time, economic and systemic assessments have been made of the new projected basel 3 framework. we will continue to update them permanently. a good example of our constant vigilance relates to projected liquidity ratios, where the systemic impact and implications for monetary policies are being thoroughly reviewed at this time. * * * to conclude, let me emphasize that policy makers are fully aware of possible macro consequences of regulatory reforms and will be eager to limit the economic costs. beyond broad effects on growth, it is also clear that the new regulations should neither derail financial systems nor favor some particular business models over others. bis central bankers ’ speeches yet, there was, and still is, a need to move from a financial world of excessive risk taking and heavy regulatory arbitrage to a new system of better quality capital and increased risk capture. an implementation of the basel iii package endorsed by the g20 will provide the

monetary board including dr. vicente valdepenas, jr. ; atty. raul boncan, sr. ; mrs. juanita amatong ; atty. nelly favis - villafuerte ; mr. alfredo antonio ; and socio - economic planning secretary romy neri. let us also acknowledge our three hardworking deputy governors, in alphabetical order – nesting espenilla, diwa guinigundo and andy suratos ; assistant governors jun de zuniga, vic aquino, dolly yuvienco, eve avila, tessie hatta ; and finally, all the other officers and staff of the bangko sentral ng pilipinas! you all make me proud to be a central banker! marami pong salamat sa inyong lahat! mabuhay ang bangko sentral ng pilipinas!