joseph yam : hkma congratulates the central bank of malaysia on 50 years of achievements address by mr joseph yam, chief executive of the hong kong monetary authority, at the ceremony for the 50th anniversary of bank negara malaysia : " 50 years of central banking – stability and sustainability ", kuala lumpur, 8 february 2009. * * * yang amat berhormat perdana menteri malaysia dato'seri abdullah haji ahmad badawi yang berbahagia ketua setiausaha negara tan sri mohd sidek haji hassan dear governors, distinguished guests, ladies and gentlemen, it is an enormous honour and pleasure to be invited to speak at today ’ s ceremony. the honour is a special one because over the years bank negara and the hong kong monetary authority have worked in close partnership on many projects, to the extent that a deep friendship has been built between our institutions : with that friendship has developed great admiration on the part of my colleagues and myself for bank negara ’ s many achievements. the pleasure is not just in having the opportunity to visit once again this beautiful and hospitable country, but also in being able to pay tribute to a valued colleague and dear friend, governor tan sri dr zeti akhtar aziz. governor zeti's strong and inspired leadership of bank negara for most of the last decade has turned it into a first - rate central bank and a great force for good in this region. we are all mindful that we celebrate this 50th anniversary in the midst of intense global financial crisis. this will not – and should not – diminish the happiness of the occasion. indeed, much of the history of bank negara malaysia is the history of timely, productive, and often courageous response to crisis, and examining that history gives cause for optimism in our present circumstances. in my comments today, i shall touch only briefly the current crisis. instead, i shall reflect on the achievements of bank negara during the decade or so that followed the last great crisis – the asian financial crisis of 1997 - 8. as i hope i shall demonstrate, these achievements are more than of merely historical interest. it is clear to any observer that bank negara malaysia has been a driving force in the building of this country. to speak only of its purely central - banking functions, bank negara has fully discharged its responsibilities through keeping inflation under control and maintaining stable interest and exchange rates, despite rapid economic growth. this has been

the major asset purchases of nama are finalized, and the main banks are recapitalized, at least in part with further investments by government. while the scale of the irish measures is larger than those in britain, and the design of the measures different in detail, as is warranted by the contrasting nature and scale of the distressed assets held in the two banking systems, their broad outlines have striking similarities. i am confident that these measures will succeed both in confirming the solidity of the banks, and in further restoring confidence in the finances of the state, free as it will then be of any shadow of prospective commitments to the banks. since the outbreak of the crisis, banks have tended to withdraw from international commitments, reflecting not only a broad upswing in what is often termed “ home bias ” in finance, but also the intensified pressure to deleverage – a pressure which has been considerably reinforced by the decisions of the european commission, concerned to prevent state aid to banks from distorting banking markets. in line with these trends, the new management of hbos has recently moved to retrench its irish operations, closing its retail branch network here, a decision which is understandable though disappointing. i am glad to have been reassured of the determination of ulster bank – the rbs subsidiary – to remain in ireland for the long haul. i feel sure that this commitment will be rewarded over time, and i would like to take the opportunity to emphasize how much we welcome the presence of british and other foreign banks providing financial services in ireland. wage competitiveness if, on the other hand, we are to seek contrasts, we need look no further than to wage, price and exchange rate developments. clearly, wage competitiveness is a key to restoring economic activity and reversing the rise in unemployment. this aspect of competitiveness deteriorated significantly in ireland during the boom, and, given the fact that euro - area inflation will continue to be low in the years ahead, recovering wage competitiveness in the short run must depend largely on containing and indeed reducing nominal wage rates – as indeed has already formed part of budgetary strategy. though tough, this should be somewhat less painful than might appear at first sight, given the fact that inflation in ireland has been negative now for well over a year – quite a contrast with the uk, where inflation currently exceeds the official target. even indebted households may, for the present, be better able to absorb nominal wage cuts to the extent that most floating mortgage rates