turalay kenc : stocktaking of international financial architecture remarks by mr turalay kenc, deputy governor of the central bank of the republic of turkey, at the “ stocktaking of international financial architecture ” conference, organized by the reinventing bretton woods committee ( rbwc ), shanghai development research foundation ( sdrf ), research institute for banking and finance, china ( pboc ) and korea institute for international economic policy ( kiep ), shanghai, 26 february 2016. * * * over the last two decades the world has witnessed substantial increases in the trade volume to global gdp ratio, sharply grown international investment positions and significantly deepened production supply chains in the most part of the globe. as a result, monetary and financial policies across countries have become much more correlated. the conference organizers rightly asked the most crucial question whether the international monetary system ( ims ) is still sufficiently stable in this current environment with a growing interconnectedness. in addition to this heightened interconnectedness, the global economy and financial markets face the challenges of the unconventional and unusual monetary policies in the advanced economies as well as diverging monetary policies of these countries, uncertainty in commodity prices, the risk of china ’ s economic hard - landing and the unintended market liquidity consequences of the recent financial sector reforms across the world. large asset purchasing programs of the major central banks have depressed global bond markets with decreasing long - term yields as well as short - term yields and their negative nominal policy rates further destabilized bond markets and in general financial markets. heightened volatility in global financial markets can be associated with the presence of very low and even negative rates rather than the underlying macroeconomic and external imbalances. in these circumstances, any change in interest rate differential across countries is likely to create greater impacts than otherwise. if this interest rate change takes place in the largest and the most significant economy in the world, then the impact will expectedly be further magnified. the fed ’ s start of interest rate normalization has demonstrated that its impact on the global economy and financial markets indeed has been large, giving rise to significant capital outflows from emerging market ( em ) economies, large adjustments and volatility in exchange rates as well as widened em spreads and interest rates. the adverse effects of the fed ’ s interest rate normalization has been on average larger than those occurred in previous two financial turmoil episodes, namely the eurozone sovereign debt crisis and the us tapering tantrum. however

##ing in the advanced economies, more moderate growth in china and continued volatility in the global financial markets. for the last two decades, malaysia has been becoming more integrated with the regional and global economy. the recent conclusion of the asean banking integration framework and trans - pacific partnership agreement, if properly sequence and implemented, provide further opportunities for malaysian companies to expand abroad. but expansion beyond our shores poses new challenges as financial institutions will navigate unfamiliar territory. the operational environment will be different. the business model will require remodelling. board members are therefore expected to familiarise themselves with the economic, financial and social environment of foreign markets if they are to be effective and successful. bis central bankers ’ speeches along with higher expectations, there has also been a noticeable increase in the absolute demand for financial institution directors in malaysia. since a decade ago, the number of directors in the malaysian financial sector has increased significantly. this can be attributed to several factors. one reason is the increase in the number of financial institutions arising from the establishment of new islamic banking and takaful entities within existing banking and insurance groups. besides that, financial institutions have also progressively strengthened the composition of their boards. this was largely driven by the need to bring more diverse perspectives and skills to the board to meet the growing demands placed on it, and to better prepare for board succession. in the process, we also saw independent directors forming a majority on boards of more financial institutions, including some of the largest domestic financial institutions in the country. it is important to emphasise that this growing demand has not been just about numbers ; it is more importantly about the quality of talent that boards must have to perform their role effectively. fide forum and icilf – working together to increase their impact and influence it is against this backdrop of growing demand that fide forum has stepped in to offer financial institutions a platform to connect with potential directors from both within and outside malaysia. the directors register achieves this in two ways. firstly, by identifying board - ready individuals who already have the necessary skills, knowledge and experience. and secondly, by initiating into the talent pool individuals who have the calibre to serve on financial institution boards, but require development in certain areas, such as those specific to the banking or insurance industry. by significantly widening the supply sources, this initiative is in many ways a game - changing initiative to strengthen the talent pipeline for financial institution boards. the directors register complements the education programmes that have already been introduced for financial institution directors under ic