with the market and an inclusive process of global consultations will allow us to benefit from the experience of others and, more importantly, facilitate more coordinated policy responses and thus support the orderly adjustments to the new standards. while the evolution of financial stability policies over the recent two years has seen clearer mandates being established for the regulatory authorities, the framework for financial stability both at the national and international levels continue to be a subject of intense discussion. the focus has been on the efficacy of policy instruments needed to preserve financial stability, the structure and design of decision making frameworks and the institutional arrangements and accountabilities in regard to financial stability policies. an important part of this is that, with the accountabilities, is the need to have broad range of instruments and the policy space and flexibilities to achieve the specific financial stability policy objectives. in addition to this, for many emerging economies, an important mandate is also to develop the financial system. for most central banks in emerging economies, this developmental role is integral to maintaining the orderly development of the financial system and hence financial stability over the longer term. intensified supervision and strengthened governance the global financial crisis has also prompted a renewal and further strengthening of supervisory approaches, and intensified efforts to deepen supervisory cooperation across borders. this reflects the growing significance of internationally and regionally active financial institutions. although the risk based supervisory approach is already adopted in many countries and provides the framework for enhanced risk assessments with more informed supervisory judgments, the methods used to determine supervisory intensity may need to be regularly re examined given the continuous pace of financial innovation and changing market conditions. as more jurisdictions move to adopt more principle or outcome based approaches to regulation, ensuring rigorous and proportionate supervision, will become increasingly bis central bankers ’ speeches important to ensure prudent risk taking in the financial system. while compliance will remain important, the nature and intensity of supervisory relations with financial institutions are already seeing a more prominent shift towards more open and engaging interactions that allow both supervisors and financial institutions to develop a more complete understanding of risks confronting the institutions and industry as a whole. this also supports current efforts to strengthen the macro prudential orientation to risk management, both at the system and institution level whereby the assessment of institutional risks is complemented by considerations of macroeconomic developments and collective market behaviors that can have a significant impact on financial stability. the reform measures to enhance the resilience of financial institutions and the supervisory capabilities to identify and assess risks at the macro level are also being reinforced with efforts to

their construction as well as implementation. while these approaches are still untested, this exercise will make an important contribution to deepen our understanding on the relevance of business models and the different regulatory structures and legal systems that have an important bearing on the operations of significant institutions with cross border operations. bis central bankers ’ speeches moving forward, more experience is still to be gained in regard to effective financial stability communication strategy, an element that has not received much attention until the recent crisis. credible financial stability communication strategies, particularly during periods of heightened uncertainties will require appropriate timing and delivery as well as effective coordination among relevant agencies. the effective coordination of announcements on the blanket government guarantee and liquidity measures in malaysia, singapore and hong kong during the recent crisis for instance, had helped sustained the overall confidence in our financial markets. similarly, there are also lessons to be learned in regard to the experience in the communication of supervisory stress test results in europe and the united states. conclusion given the dynamics of the financial markets today, more effective engagements between policy makers and the industry, both within and across borders have never been more important so as to bring about a greater awareness of key financial stability issues, to further sharpen supervisory and management judgements and to promote greater collaboration on multiple fronts. enhanced prospects for greater global financial stability depend on a sustained commitment to these priorities. ultimately, the goal is to strengthen our collective ability to anticipate and respond effectively to developments that affect financial stability, not just in these present challenging times, but through what will likely be an extended period of global adjustments going forward. bis central bankers ’ speeches