time high levels. along the way, our gains in the monetary sector contributed to the upgrades that both the country and the banking sector received in 2011. indeed, global and domestic challenges notwithstanding, 2011 emerged as another good year for the banking industry : balance sheets kept growing, asset quality continued to improve, and bank profitability continued to strengthen. this is because we made significant headway in improving our risk management systems, strengthening the supervisory process, instituting good financial governance, enhancing coordination among financial regulators, and aligning our accounting rules with international standards. bis central bankers ’ speeches our challenge is to sustain our momentum in pursuing our reform agenda. wisdom has it that the best time to pursue and invest in reforms is during good times. given that 2011 was an even better year for banks than 2010, we are committed to continue our reform process. in this connection, you can say we hit the ground running in 2012. starting this month, stand - alone thrift banks, rural banks and cooperative banks are covered by the basel 1. 5 framework that upgrades them to higher capital adequacy standards. this month also marks the start of higher capital charge on nondeliverable forwards or ndfs for “ net open positions ” – from 10 % it is now 15 %. we now require banks to set aside more funds to cover ndfs to reduce potential systemic risk and curb speculation. for universal and commercial banks, we declared early this month that we are adopting the more stringent standards of basel 3 in 2014, four years ahead of the timeline set by the basel committee on banking supervision. essentially, basel 3 introduces reforms that will improve the ability of bank capital to absorb losses, extend the coverage of financial risks, and have stronger firewalls against periods of stress. similar basel 3 implementation plans have been announced by china, australia, hong kong sar and singapore. ladies and gentlemen, we are able to accelerate our timetable because of the present strong capital position of the banking industry. our confidence also springs from the track record of our banks that have … through the years … shown the maturity and the capacity to undertake far - reaching reforms that ultimately redound to the benefit of our economy and our people. this afternoon, the monetary board approved a new set of enhanced standards on corporate governance in banks, as well as rules to strengthen banks ’ compliance systems. indeed, we continue to reap benefits from years of collaboration between the bangko sentral and the banking community in pursuing reforms to strengthen our

the financial system conducive to sustainable and equitable economic growth. effective insolvency regimes, by saving struggling firms when possible, or by reallocating assets of failing firms more productively, contribute to the smooth functioning of the financial system. they help minimize market disruptions. banks and investors are also more willing to lend when they know they can recover at least some of their investment when businesses bis central bankers ’ speeches fail. entrepreneurs, particularly those involved in small and medium scale enterprises, will be more willing to enter the market when they do not have to put their entire personal resources at risk. effective insolvency regimes enable transacting parties to take calculated risks in their investment decisions. i am sure you will agree with me when i say that such an empowerment to take calculated risks is what fuels innovation. in turn, innovation is that which is at the heart of economic growth. the current philippine growth trajectory is on an uptrend. to sustain this, we need more investments, especially from real money funds from abroad that are accompanied by new technology for innovation. while it helps that the country is now rated two notches into investment grade territory, we should be mindful this alone won ’ t bring in investors. good growth prospects and higher credit ratings are undoubtedly important contributors to improving the investment environment. but they may not be enough to entice the full range of investors to come in, build businesses and create jobs for filipinos. we should always recognize that investment decisions are highly influenced by investors ’ confidence in our domestic legal system, the quality of our laws governing private and property sectors and how effective our laws are upheld and enforced. investors look for consistency and predictability in their commercial affairs. they would want to maximize and preserve the value of their assets or ensure that their claims are upheld, prioritized or equally treated if they become creditors of insolvent debtors. it is their confidence in our legal system that will encourage them to make use of court processes should rehabilitation and insolvency issues confront them. the fria provides us with a menu of remedies for distressed debtors and new approaches to rehabilitation and insolvency. and because it expressly adopts the uncitral model law on cross - border insolvency and accordingly, fria gives foreign creditors in liquidations and rehabilitation proceedings direct access to philippine courts. thus, opportunities for cooperation between domestic and foreign courts and domestic and foreign insolvency administrators