in a series of unknown events, such as whether it may bring even bigger moral hazard risks? an enterprise may think if it defaults on a loan, the debt servicing responsibility may be transferred to the local government that may help to restructure the loan. this may lead to moral hazards in financial discipline. according to the general rule of market economy, the defaulter may face risks of going bankrupt, and the debt cannot be restructured without consent of the creditor. second, the reform is heading for lesser government involvement in enterprise management. if the practice in the above case was to be promoted as a successful experience, it might lead to deeper involvement of the administration in enterprise management. would this be a desirable outcome? in addition, the reason why local government was invited in disposing of the npls may be that it can influence the judicial and enforcement institutions. but is this indeed a good thing? the third example concerns the need for judicial specialization. in some cases, when a rumor surfaces that an enterprise is in trouble, local court officials will quickly go to the local offices of securities firms or commercial banks in other cities or provinces asking that the enterprise ’ s accounts and assets be frozen. if the staff of these institutions does not cooperate, they are accused of obstructing law enforcement. for example, recently officials from one local high court came to the people ’ s bank of china and asked that the accounts of a local government of another province be frozen. many similar cases continue to arise and underline the need for the establishment of a specialized court to adjudicate complex financial issues. a fourth example is of bankruptcy dictated by government policy. in such cases, the state - owned enterprises must first pay their historical debts and entitlements to employees. according to government policy, an enterprise may sell its land rights to raise money to make payment even if the land rights have been used as collateral for other loans. if this is not enough, the enterprise can begin disposing of its assets to satisfy its obligations. in this case, the enterprise must first dispose of assets not used as collateral. after these assets have been sold, the enterprise then may sell assets used to secure loans. accordingly, in these cases banks recoup on average less than 1. 2 percent of their loans, many times lower then they expected. if priority is given to employee entitlements over secured debt, and such payment order and conditions be generalized and promoted to apply to all enterprises

order to fulfil the new requirements. but all our commitment will result in more transparent and more stable markets which will better serve all market participants in the future. 4. transparency is the crucial cornerstone of each regulation transparency is a very important issue within the entire regulatory process around otc derivatives markets. supervisors but also market participants need more reliable, transparent bis central bankers ’ speeches and accessible data on the derivatives markets. and they will profit a great deal from the reporting obligation to trade repositories established under both emir and dodd - frank. we expect reporting to trade repositories to work out next summer. the necessary technical details will be confirmed by the european commission soon and the registration approval process by esma will also start. but mifir, too, will increase transparency since it requires pre - trade transparency for derivatives traded on organised trading venues. the future findings from the data gathering will be helpful for further reviews of the regulation and possibly new regulatory efforts. 5. closing remarks european and national legislators have made good progress in regulating the otc derivatives markets. but further efforts have to be taken to complete the process embarked upon in the light of the g 20 commitments. the dialogue between regulators and market participants therefore must be continued and intensified. thank you for your attention. bis central bankers ’ speeches