zeti akhtar aziz : cross - border challenges in implementing basel ii in emerging economies keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the publicprivate dialogue session of the 7th seacen conference of directors of supervision of asia pacific economies, kuala lumpur, 4 august 2005. * * * dr. subarjo, executive director of the seacen centre, mr. karl cordewener, deputy secretary general of the secretariat of the basel committee on banking supervision, distinguished guests, thank you for the invitation to speak at this 7th seacen conference of directors of supervision of asia pacific economies organised by the seacen centre in collaboration with the apec business advisory council, the asian bankers'association and the pacific economic cooperation council. this event is of particular significance as it brings together the regulators and practitioners from the banking industry, to exchange ideas and share experiences on the operational and policy issues involved in cross - border banking, in particular, with respect to the implementation of basel ii. the participation of regulators and industry players from latin america will, i believe further enrich the discussions. it is in our common interest to resolve these issues expeditiously, as the implementation date of 2007 for g10 countries approaches. ladies and gentlemen, in most emerging markets, the banking sector forms the key component of the financial system that drives the economy. in malaysia, despite the increased significance of the domestic capital market, the banking sector continues to be the predominant source of financing in our financial system, as it evolves to offer more innovative financial solutions to meet the more sophisticated needs of customers and investors. the increasingly complex nature of their operations have had a significant impact on their risk profile over the years. the domestic financial environment has also become more competitive, following an intensification of the liberalisation and deregulation process. domestic banking institutions have now also ventured beyond our domestic borders. increasingly, supervisory attention is therefore directed towards ensuring that a robust risk management framework is put in place to support such business expansion and growth strategies. against this background, the call for improvements in risk management through the adoption of basel ii and the discussions on the effectiveness of supervisory arrangements on cross - border banking and financial activities are most relevant. the case of the bcci in the early 90's and baring in the mid - 90's have also brought to the fore the gaps in supervisory oversight activities and highlighted the need for greater cooperation between home and host supervisors. similarly,

skills to confidently make responsible financial decisions at key stages of their lives. we need to promote healthy attitudes towards financial management. and in kofi annan ’ s words, we need to build a bridge to hope for every malaysian who has been affected by the pandemic crisis – not just to tide over the immediate challenges that they face, but to provide for their future financial security. with this in view, this community of practice aims to help fen members and the broader financial education community develop effective responses to meet the challenge of delivering lasting and impactful financial education to society. the community of practice agenda today focuses on two key areas. the first is the measurement and evaluation of financial education and its effectiveness. strengthening measurement and evaluation is a key pillar of fen ’ s strategies to increase the impact of initiatives implemented by fen and its members. this would enable fen members to design more effective and tailored financial education programmes, that also optimises resources, to achieve sustainable behavioural change. by strengthening the focus on outcomes and impact, we can reinforce effective practices and support the continuous improvement of programmes. with this in view, fen is committed to develop and execute an annual measurement and evaluation process for financial education programmes that support the national strategy for financial literacy – to be implemented from 2022. 2 / 3 bis central bankers'speeches the second area of focus today is on opportunities to make better use of data and behavioural insights to advance smarter financial education. a key challenge that we face today is the misalignment between information and resources made available to financial consumers, and the way in which they consume, process and act on such information. behavioural insights can help us close this gap to make better use of the tools at our disposal to bring about positive change. advances in technology are also opening up new opportunities to leverage on behavioural insights to achieve more effective financial education interventions. the ability to gain much deeper and richer insights into consumer behaviour are now possible, and could completely change the way we think about and deliver financial education interventions. the community of practice enables us to tap into a reservoir of knowledge and expert resources to explore new opportunities and ideas, and strengthen existing collaborations to take the financial education agenda forward. as fen continues to grow, we hope to further expand the community to provide thought leadership and strategic insights that will benefit all fen members and partners in our joint efforts to raise the level of financial literacy in malaysia. on this note, let me thank everyone again for taking the time to share your perspectives